Having the right corporate leaders is crucial, says Lucy McGee

Recent events have shown only too clearly that recruiting the wrong leaders can be catastrophic. Robust senior management selection is crucial to a company's health, and has an enormous impact on its risk profile. Like many issues with a strategic risk impact, this one is about choice. Where organisations leave themselves with no job-ready internal candidates, they may face constraints on growth, delays in execution and competitive erosion.

Going outside an organisation to find talented individuals can make sense, especially where the organisation stands to benefit from new technology, an infusion of ideas, or a fresh perspective. But, in general, most CEOs like to fill positions at general management level and above from within.

The reasons for this preference are many. Insiders can take on new responsibilities more quickly than outsiders, because they know the organisation's people and strategy. If people do not have to wait around to see who the new executive will be and what changes he or she will make there will be less organisational disruption and exposure to risk. Opportunities for promotion are created, thus increasing retention. And the organisation saves money, because it is almost always cheaper to promote from within than to recruit from outside.

Nevertheless, many CEOs are unhappy at their organisations' inability to fill vacancies with internal candidates. Looking down the ranks, they conclude that their succession management efforts, whether formal or informal, are not working.

My own organisation has identified 14 traps that ensnare CEOs in this area.

Trap 1: Believing that simply having a succession management 'system' will lead to success Many systems in use by medium and large organisations are hopelessly out of date. For instance, many organisations where managers are asked to nominate individuals as their replacement and rate those individuals on their readiness to assume roles, fill only about a third of the management positions which are targeted. Jobs, organisational strategy and everything else tend to change too fast for this approach to be successful. It is the CEO's job to set meaningful, measurable goals for the succession management, and to assign people to monitor their effectiveness.

Trap 2: Thinking they know all the high-potential people in the organisation CEOs often delude themselves into thinking that they have a good feel for who the up-and-coming people are, when in reality they do not. They fail to look through the entire organisation, and base their selection of candidates for acceleration management solely upon their personal knowledge of them. This can give senior managers, such as lawyers and accountants who regularly meet the CEO, an advantage over talented but less visible line managers. CEOs also rely heavily on chance observations. For example, a CEO might observe a manager making a presentation and from that make hasty decisions about his or her potential – not the approach they would take were they to view such decisions as part of their organisation's strategic risk.

Trap 3: Believing in the accuracy of an internal nomination system Many large organisations determine their list of high flyers by asking senior executives to nominate people. This process has three common problems:

  • the criteria for selection are not clear
  • the standards vary
  • some nominators are more conscientious than others.

    An increasingly difficult challenge for organisations is to tap the international talented – not just the high profile individuals working in international assignments. Often, organisations want individuals whom they can move from one country to another, and eventually tap for senior executive positions in the home office. Finding these individuals across international borders is challenging. It is important that previously unknown emergent leaders from newly-acquired segments of the organisation be afforded the same recognition as their colleagues from the parent organisation.

    Trap 4: Being fooled by an individual's excellent experience record - or the lack of it Not all potential leaders have access to the choicest jobs and developmental assignments. Nor do they all have opportunities to take on significant responsibility early in their careers or the chance to hold highly visible positions. Too often, individuals with a high degree of innate skill get stuck in organisational silos, or are trapped by managers who do not want to lose key contributors, and thus miss early development opportunities. Meanwhile, other less skilled, individuals may benefit from holding broader, more important assignments, and bolster their CVs. This makes them attractive to decision makers who rely solely on achievements to date. To level the playing field, the evaluation of individuals with high potential should be based on core skills. These include results achieved, interpersonal skills, self-development orientation, support for and modelling of, company values, leadership, business acumen, entrepreneurial ability and motivation.

    Trap 5: Treating all individuals with high potential the same As many organisations have discovered, a one-size-fits-all approach to developing leaders does not work, is ridiculously expensive, and can lead to retention problems. Individuals' needs must be diagnosed and their development structured accordingly. Individuals with high potential want more than anything else to feel their knowledge and skills are growing and that they are becoming increasingly valuable to an organisation. Research shows that eight out of 10 would prefer to do this with their existing employer where possible, rather than 'company hop'.

    Trap 6: Developing people who can only handle last year's problems An effective succession management system will produce people who can handle the organisation's future strategic risk and other challenges, which are often very different from those facing the current executives. Thus the organisation must take care to define the executive of the future. Over the past decade, effective leadership has come to be portrayed in terms of competencies, roles, experiences, tasks, personality traits and values. These can be honed down to: what one knows; what one has done; what one is capable of, and then the executive derailers - the personality traits that might cause an otherwise effective leader to fail. With the exception of the last, these executive descriptors must be specific to each organisation and tied to its strategy.

    Trap 7: Assuming that once an individual commits to a development plan, it will be implemented. The greatest pitfall of succession management programmes is the lack of follow-through of development plans. Highly talented people are not generally very good at prescribing development actions for themselves. They do not know the options open to them, and many of the best strategies are outside their control. They are even worse at implementing their self-development plans. Conflicting pressures from job and home can cause development to be set aside. Ideally, a development planning discussion should be combined with the setting of development-related job objectives at the start of each new assignment. Given their knowledge of the tasks they must accomplish, the timeframe in which they will be expected to work and the support they can anticipate from above, these individuals can realistically determine which of their development needs can be met.

    Trap 8: Assigning responsibility for running the succession management system to the HR department While HR can manage, facilitate, handle paperwork, act as a catalyst and provide expert advice regarding assessment and development, for an organisation to be successful in optimising the development of its high potential people, the CEO must exert ownership over the succession management system. A management committee that is equally committed to the process must support the CEO. With the CEO involved in, and owning, the process, he or she can force tough decisions to be made and ensure managers are compelled to part with their star performers. The CEO can also ensure that no middle and senior management positions are filled without at least considering people from the 'high potential' list.

    Trap 9: Assuming that short term issues are more important than succession management Just as strategic risk issues can never be relegated, neither should succession management; the two are intrinsically entwined. While short-changing the succession management process by not committing time to it is a common problem, acting on the temptation to cut back on the development of employees with high potential during a bad business cycle is even more detrimental. They will be critical when the next upturn arrives.

    Trap 10: Not getting to know the individuals with high potential in the organisation, and failing to support their development Effective CEOs get to know their organisations' people with future leadership potential. When visiting regional or overseas offices, they make a point of talking to them and seeing them give presentations. Serving as a mentor to such people is another excellent opportunity for a CEO to get involved. While having the CEO as a mentor can make the individual feel valued, it also gives the CEO a chance to walk the talk.

    Trap 11: Thinking that diversity can be mandated Many CEOS are frustrated by the lack of diversity in the ranks of individuals designed for high-level positions. Once a succession management system is in place, diversity goals must be set and aggressively reinforced through the action of the CEO. Accelerated development can be assured by the CEO's participation in placement decisions. CEOs and other senior executives know they must communicate the organisation's need for diversity. Their involvement in planning the development of individuals with high potential sends a stronger message than can be delivered by any speech.

    Trap 12: Excluding high potential individuals from development decisions It is important to ensure that an individual understands what he or she is supposed to gain from a job assignment or training experience. Ambiguity can be avoided by involving the individual in the selection of development assignments. Also, by allowing individuals to have some say in their assignments, organisations are better able to accommodate the demands of an individual's personal or home life.

    Trap 13: Not letting people learn from their mistakes It is important to let people learn from their mistakes. Otherwise, good people are lost and an organisational culture of fear can develop, which stifles creativity and discourages bold decision making. When a person makes a wrong decision, that poor judgment must be considered as part of an individual's total performance and his or her ability to learn from mistakes. It is part of the risk factor. Fostering an atmosphere where talented people can make mistakes and put them down to experience is an important trait of any successful succession management programme.

    Trap 14: Being impatient CEOs and other senior leaders often become frustrated and give up on their succession management programmes when they fail after an unrealistic period to yield a number of people who are ready to fill positions. But, as with any programme relating to a strategic goal or developed in response to strategic risk, it takes time for results to be evident. People, even bright people, need time to grow and develop.

    Staying ahead in the race
    To ensure that the right people are deployed in, and are ready for, the right leadership roles, CEOs must be involved and stay involved, or else jeopardise the risk profile of their organisations. They can delegate neither the attention required to grow their own strategic leaders, nor the support that the system demands.

    Lucy McGee is head of marketing at global human resource consulting firm Development Dimensions International. Tel: 01753 616031, E-mail: lucy.mcgee@ddi-europe.com