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Succession Planning—Most important, often overlooked
“Boards always say they don’t spend enough time on succession planning,” says Stephen Wallenstein, That’s true, according to the 2008 What Directors Think study, cosponsored by PricewaterhouseCoopers LLP and Corporate Board Member, which shows that just 53% of directors said they are effective at planning for management’s succession. Forty one percent stated they would like to spend more time on succession planning. So why don’t they? “If you were to sit down with a board during the course of annual planning exercises and listen, talent and human capital will always be at the top of the list. If you talk to these same people [on a random day], there are half a dozen very critical business items, with human capital taking a back seat to immediate concerns. On a daily basis it is pushed to the back burner but when you take a big picture look it’s a top issue,” according to Tom Kolder. Despite having critical issues to deal with on a daily basis, boards still must focus on succession planning, meeting internal candidates, and talking about succession regularly, as a process, to make the idea less awkward for the current CEO. “It’s imperative to make sure the next generation is going to be as strong or stronger than the current group,” Kolder stresses.
What should boards be doing to plan succession? Wallenstein suggests that board members “get to know internal candidates who are potential successors. Be involved in professional development, and make sure there’s a succession plan. He concedes that management often resists that very thing. “It’s hard because there are hard questions to ask. Have a process in place. A process is less threatening [for the CEO].”
While each of these seven hot buttons is time consuming and complex, directors need not panic. Overall, says Gazzaway, “It’s important to note that there is room for improvement in corporate governance but the vast majority of companies are well run. In tough times, boards are doing a good job and making good decisions.” And there is a silver lining in spite of the added concerns. “Speaking quite generally, director jobs, even though they have become more difficult in certain respects, are fundamentally still the same,” Morphy points out. It’s true. Board members are responsible for overseeing management, asking the right questions, and making the best decisions they can make. Doing their fiduciary duty remains the board’s constant role.
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