Inviting Chaos

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How succession planning can go wrong

The Walt Disney Company is one of the largest, most successful companies in the world. And yet, when Bob Iger announced he was stepping down as the company’s CEO in February of 2020, Disney struggled with one of the most common, confounding challenges every business faces – succession planning.

Iger’s successor, Bob Chapek, was an internal candidate who served as Disney’s parks chairman. Chapek was Iger’s personal choice to replace him, and Iger remained as executive chairman of Disney’s board. In his new post, Chapek reported to Iger and the board. The result was rocky, and by November 2022, the board had fired Chapek and restored Iger to the CEO position.

Succession planning is a critical component of any company’s strategic planning. It plays an essential part in the long-term stability of an organization and has an impact on a company far beyond the C-suite. Christine Greybe, president, leadership consulting for DHR Global, said well-managed succession planning not only ensures leadership continuity when an executive transitions out of a role but also helps an organization develop a talent pipeline to fill critical roles while providing career development opportunities for high-performing employees who can serve to increase retention.

“Succession planning is a proactive and planned approach to people management, which aids in ensuring leadership continuity, employee development, risk mitigation, and maintaining a competitive advantage,” Greybe said. “It also reduces uncertainty/ambiguity about the future direction of an organization.”

When succession planning is ignored or done poorly, it can lead not only to short-term struggles but also to profound, enduring consequences.

“Succession planning is so important because if things don’t go well, people’s jobs are lost, families are impacted, communities are hurt,” said Elizabeth Ledoux, founder of The Transition Strategists. “It can just have this big ripple effect that affects everything.”

MISTAKES WERE MADE
Despite its importance, poor succession planning afflicts companies of all kinds, and the examples of high-profile missteps are numerous. For example, Greybe points to past succession-planning struggles at such major companies Blackberry, Segway, Lehman Brothers, and Hewlett Packard.

In the case of Hewlett Packard, Greybe said the company’s board of directors fired its CEO in 2010 without a successor. Their handpicked replacement was the former CEO of SAP and proved to be a poor fit, lasting for just a year, she said. The result was stock prices dropped significantly; HP missed out on growth, innovation, and market share in the tech industry, losing out to companies such as Apple, IBM, and Oracle; and key talent left the organization, according to Greybe.

In the ongoing case at Disney, Greybe said the company “promoted from within a candidate about whom there were serious reservations.” Meanwhile, Chapek was replacing a longtime leader who didn’t even leave Disney – and, in fact, continued to be Chapek’s boss.

“Now, Disney is taking a hard look at external options in addition to reconsidering its incumbent leadership,” Greybe said. “Iger will have to be ready to fully step aside for the right replacement rather than sitting on the sidelines again critiquing his successor.”

OVERLOOKED OR NEGLECTED
Greybe noted succession planning is understood to be one of the chief responsibilities of a board of directors.

“A failure to prepare for a shift at the CEO role is quite simply bad governance, as it leaves an organization unprepared to appoint someone qualified for the role in a timely manner,” she said. “It also sacrifices an unparalleled opportunity to develop internal candidates further as a way to continue to maximize their value to the organization, retain critical talent, and ensure viable internal successors exist in case a change in [leadership]is necessary.”

Ledoux said one primary reason succession planning isn’t prioritized is leaders feel too preoccupied with their current concerns to contend properly with the future.

“People are busy running things and to sit down and look at a road out can be hard,” Ledoux said.

Greybe said succession planning often receives insufficient attention for a variety of reasons, such a focus on immediate objectives, resource limitations, and concerns about disruption or resistance from current leadership.

“Its neglect may also be influenced by complexity, a lack of definite accountability and complacency under strong leadership,” Greybe said. “To overcome this, organizations must acknowledge the short- and long-term advantages, develop leaders, and create a culture that supports talent development, resulting in less risk from leadership gaps and more seamless leadership transitions.”

Longtime influential leaders sometimes can prove reluctant to plan for a future that doesn’t include them. In some cases, they have no plans to leave behind the leadership of a company – especially if they’re also a founder of the company – instead preferring to work hard well past traditional retirement age.

“We’re also living longer, healthier lives,” Ledoux said. “So, what I’m seeing is the age of the person who’s transitioning is going up. And it’s particularly hard to let go when you’ve built something.”

Greybe said simple awkwardness can be a powerful obstacle to an honest discussion of succession planning, particularly if leaders don’t see an urgency to passing the baton.

“In many ways, planning for the future requires a clear-eyed discussion of what an organization is doing well and in what ways it needs to do better,” Greybe said. “These are delicate discussions to have when the incumbent CEO often is also the chairman of the board.”

MASTERING “THE GOOFY DANCE”
The succession process can resemble “a goofy dance,” Ledoux said, adding there’s a danger of a leader leaving too quickly, leaving the successor with an insufficient runway to properly find their footing in charge, but there’s also a risk of a leader lingering too long during the transition.

“You have the person who’s leaving but still wants to kind of be around, and then the person coming in is trying to engage but doesn’t want to step on the other person’s toes,” Ledoux said. “And so, the successor’s waiting for the person transitioning to get out, and the person transitioning is waiting for the successor to engage. There’s this kind of neutral zone where it’s really messy and there are mistakes that get made in communication. When that happens, there’s a reduction of trust and a belief then gets built that it’s not going to work when, in fact, it is working, and you just have to keep going and get through this rocky road.”

Another common mistake is starting the process too late or relying only on an emergency succession plan, Greybe said. In addition, organizations sometimes fail to consider the future needs and challenges of the business during the succession planning process and neglect to select talent who can lead through evolving conditions, she said.

Ledoux said grooming someone to take a top leadership spot means giving them opportunities to lead.

“Even if you have somebody who’s coming up, and you believe they’re ready, unless they’re actually doing it, there probably are some missing pieces,” Ledoux said. “When the person who’s transitioning actually leaves, it’s usually pretty hard on that successor. So the business really suffers, and so do all the employees and the people around it.”

Greybe said among the more common mistakes in succession planning is failing to consider the possibility of outside candidates for a role.

“While it’s most often appropriate to promote from within given the higher success rate of internal candidates, it’s still critical to benchmark those candidates’ skills vs. options on the outside,” Greybe said. “The best talent isn’t always the most readily accessible, and an even playing field should be given to assess who is most qualified to lead the organization into its future challenges.”

inviting chaos

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