Earlier this year I attended the Outcomes Conference where I heard Dr. James Galvin give a presentation on Successful Leadership Transitions. In that session, he said that 27 to 46 percent of leadership transitions fail. That’s 1 out 3 leadership transitions that just don’t work. Can your staff handle that stress? The most expensive hire you can ever make is hiring the wrong person so your back-office succession planning best practices must focus on leadership first.
The Importance of Good Leadership
Good leadership matters. As an organization, your emotional intelligence is vital to the succession planning process. People work for people. “People are definitely a company’s greatest asset,” says Mary Kay Ash, CEO of Mary Kay cosmetics. “It doesn’t make any difference whether the product is cars or cosmetics. A company is only as good as the people it keeps.” I think back to every organization that I’ve ever been in or a part of and that sentiment is so true. People are so important. Relationships with people are what bind us.
“Engaged employees are present emotionally, physically, and psychologically,” says Stuart Levine. “Their creativity and enthusiasm strengthen the organizational mission. They drive expectations for themselves to higher levels of achievement. The leader’s charge is to create the climate and the culture where people can feel valued, aligned and productive. This is a true test of leadership strength.”
Good Leadership Can Be a Two-Edged Sword
It goes both ways; positive and negative. If you have a leader in place that is amazing, your team is more likely to be happier and at least 11 percent more productive than a leader who is terrible according to a working paper from the National Bureau of Economic Research. Think about the current leaders at your organization and their staff, how happy do they seem? How well do they work together? A change from one leader can be welcomed or cause stress. A study by Everest College showed that more than 80 percent of Americans are stressed about their jobs, and 75 percent of people said the most stressful aspect of their job is their immediate boss.
Turnover can impede a healthy functioning business. According to a CAP study, the average cost for replacing a midrange staff person is 20 percent of their salary and up to 213 percent for leadership roles. Over time, this can have serious financial repercussions.
Disney has suffered epic succession planning failures. For example, in 1995 former CEO Michael Eisner faced pressure from the Disney’s board of directors to name a successor following the death of president Frank Wells. “Eisner cast aside his presumed replacement, Jeffrey Katzenberg, and instead hired super-agent Michael Ovitz away from the Creative Arts Agency to be president,” writes Oliver Staley, Business and Culture Editor at Quartz.
“The decision proved triply disastrous. Katzenberg, who had run Disney’s movie division, sued to enforce the terms of a contract that promised him 2% of Disney’s revenues, which eventually cost Disney nearly $270 million. After years of ruling CAA, Ovitz struggled to adjust to Disney’s culture and being Eisner’s No. 2; he left after 14 months, with a $140 million golden parachute. Finally, shareholders revolted, first suing Disney over the size of Ovitz’s severance package and later forcing Eisner from his position as Disney chair in 2004. He stepped down as CEO the following year.”
The Purpose of Succession Planning
The purpose of succession planning is to have a plan in place when someone within your organization leaves. This could be a career change, retirement, or an immediate life altering situation. Most of the time you can’t predict what’s going to happen, so having a succession plan in place can help work through the chaos when something unexpected happens.
You have risk management processes in place for vital processes within your organization – you should also have risk management processes in place for top talent. Be prepared before chaos happens. Download our eBook "Succession Planning for the Back-Office" to get a clear understanding of the importance of having a plan for your back-office if unexpected changes happen. In it, you'll learn more about:
- The Purpose of Succession Planning
- The Importance of Good Leadership
- Culture Really Matters
- What You Need to Know About Hiring Millennials
- Hiring from Within
- Succession Planning for the Back-Office
- Post-COVID Succession Planning
- Red Flags to Watch Out For
- What’s Next?
Deloitte reports that while 86 percent of leaders believe leadership succession planning is an “urgent” or “important” priority, only 14 percent believe they do it well. Similar to buying accounting software, succession planning is a function that you only do a handful of times in your career. It is realistic to feel that you don’t do it well if you don’t do it often. We can help. Contact us today.