2023-11-18 11:52:02
40% of companies do not have a Succession Plan defined, according to the Study ‘Succession and Good Governance: Keys to successfully address Succession Plans that promote the sustainability and competitiveness of our companies’ written by Antonio Núñez, Senior Partner at Parangon Partners and Luis Huete, professor at IESE Business School.
The Study, which is based on a survey of more than 3,320 CEOs, directors and senior managers of companies in the country, has shed light on the lack of preparation in business succession in Spain. The work highlights that four out of ten companies have not defined a plan to guarantee a smooth transition and successful in senior management.
Likewise, the report highlights the lack of review in 48% of companies that have a Plan. Antonio Nuñez explains that “among the companies that have established a Succession Plan, almost half do not plan to review it periodically, which could leave them in a vulnerable position in the event of unexpected changes.”
Finally, the Study reveals that in the last decade, More than 50% of companies have changed their CEO in the last three years. This underlines the need to adequately prepare for succession in key executive positions.
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Professor Luis Huete comments: “The succession processes of key people in companies must be defined and clear, contemplating emergency, immediate and intermediate successors. It is essential to take into account both performance and cultural fit when selecting leaders. Avoid the paradox of reaching a leadership position by demonstrating results orientation, when you need a long-term vision and the ability to build teams.”
The Study also highlights that CEO succession can have different objectives, with strategic renewal being one of the most important, as the new CEO is expected to bring new perspectives and approaches to address constantly changing challenges and opportunities.
Keys to successfully addressing a good succession plan
Detailed transition planning: Define the duration and scope of the transition, establish key milestones, and determine how responsibilities and knowledge will be transferred.
Focus on company needs: The Board of Directors should clearly understand what the company needs before discussing candidates, focusing on “what” is required rather than “who” will fill the position.
Identification of requirements and competencies: Define the requirements and competencies necessary for the CEO position and other key positions.
Other Key Positions in a Succession Plan: An effective succession plan should address not only CEO succession but also other critical positions in the organization, including general managers, division or business unit leaders, region managers, and critical specialized positions.
Contingencies in the Succession Process: The succession process may encounter internal resistance from employees or members of the management team due to loyalty to the outgoing CEO or uncertainty about the new leadership.
Succession Plan Review Frequency: It is recommended to review the Succession Plan at least once a year or when significant changes occur in the organization. According to the survey, 48% do not plan to review it.
The responsibility of leading the Succession Plan: It falls to the Board of Directors, especially the Appointments and Remuneration Committee, the succession committee or a committee specialized in leadership and talent.
The Importance of Internal Candidates: Studies have shown that promoting internal candidates can have fewer negative impacts on a company’s performance and stock price compared to hiring external candidates. This underscores the importance of developing individualized development plans for internal candidates.
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