100 years’ succession plan displayed in all its glorious splendour on the balcony of Buckingham Palace at the weekend. Family ties to one side, could there be a helpful stability that comes with the open knowledge about who might succeed into a key leadership position? At the very least that it will be someone who has been prepared, who ‘gets’ the culture and direction of travel and, importantly, knows the key players and their strengths and weaknesses. Such a person can plan for ongoing improvements and put their own leadership stamp on a business without feeling the need for immediate, wholesale change and ‘cullings’ à la Machiavelli.
There are other, tangible reasons for assuming internal succession and investing in developing leaders to ensure they are ready. According to the regular Strategy& ‘CEO Success Study’, internally appointed CEOs tend to outperform outsiders, and maybe unsurprisingly therefore also have longer tenures and stronger shareholder returns.
Even with this evidence, much of the UK still seems to work on the basis that the devil you don’t know is better than the devil you do, with around half of top UK businesses looking to external candidates. It’s a high risk strategy given the market impact of a mis-step. In 2022 when a news article published uncertainty around whether UK company Future’s CEO was to stay, the company was felt to be underprepared and stock fell by 15% on the day after publication.
There are of course occasions when a business really does need a cultural shift to deliver sustainable improvement and even support its very survival. In such a case an external appointment can usefully act as a transformation trigger, setting the expectation for change and driving progress. This option can still be catered for in active succession management.
The message is an often repeated one, that failing to plan is planning to fail.
In order to get a decent fix on the stability of the organisation’s leadership it is crucial to directly integrate personally tailored leadership development plans and coaching with ongoing and ‘live’ discussions on future business needs and potential successors – planning for succession rather than a succession plan. It’s the only way if you want to do it well and in a way that is anywhere near meaningful.
