In February 2005, after six years as chairperson and CEO at Hewlett-Packard, Carly Fiorina was relieved of her leadership position. During her tenure, the company lost a third of its market value. HP had recruited Fiorina from Lucent Technologies in 1999 to help establish itself as a leading-edge company. Unfortunately, the resulting cultural fit did not meet the objectives of HP shareholders and its board of directors.
While hiring outsiders for critical roles has long been considered risky, internal hiring is hardly risk-free. When Coca-Cola CEO Robert Goizueta died unexpectedly, the succession path seemed clear. It was already widely known, for instance, that Goizueta had personally groomed Coke's CFO, Douglas Ivester, to take his place. Yet, despite Ivester's unquestionable financial expertise, critics questioned whether he had the leadership skills required to command a global enterprise. Two years later, Ivester resigned.
The loss of any manager or non-manager whose skills and knowledge are vital to the organization will negatively impact performance.
Similar scenarios can occur among any of an organization's critical positions. Mention succession planning to most people and the CEO and similar executive positions come to mind. Yet, in practice, the loss of any manager or non-manager whose skills and knowledge are vital to the organization will negatively impact performance. Here are a few examples of what can happen when a critical post falls vacant:
- Important decisions either are delayed or made by others with less knowledge and expertise.
- Investors, management, and co-workers lose confidence that the affected part of the organization will sustain the expected level of performance.
- Competitors may exploit a particular staffing shortfall to challenge marketplace confidence.
These and other factors exert strong pressure on companies to fill critical posts promptly when they fall vacant. But, if no qualified candidates are available, the risk such vacancies cause will be all the greater.
Finding Talent Amid Growing Scarcity
When organizations do not have viable internal candidates to fill critical positions, they are forced to take interim measures while they search the external marketplace. They also face the often-substantial time and economic costs that executive and specialized talent searches require. Moreover, they expose themselves to the additional risk of hiring someone whose abilities, leadership qualities, and personality traits they have not had sufficient time to carefully evaluate. And arguably, without talent assessment and succession planning in place before recruitment efforts begin, how will organizations even know if they're looking for the right people, talent, and skill sets?
To compound matters, the difficulty of finding and recruiting highly qualified individuals is projected grow noticeably during the coming decade. The U.S, Bureau of Labor Statistics projects workers in the prime age group (ages 25 to 54), who comprised 71 percent of the U.S. workforce in 1992, will represent only 66 percent by 20121.a decline of more than seven percent. This significant drop, a result of the aging baby-boom segment of the workforce, will enable employees in the prime of their careers to be increasingly selective about the jobs they're willing to accept. Conversely, for employers this will make the task of finding qualified and experienced talent increasingly difficult. Thomas Davenport, a consultant in change management at Towers Perrin, says, "It's clear that demography is a force that's causing organizations to think more about succession planning. Those that do will clearly have the upper hand."
Succession Planning Close Up
In a recent Harvard Business Review article, "Developing Your Leadership Pipeline," co-authors Jay Conger and Robert Fulmer say, "succession planning as traditionally conceived and executed is too narrow and hidebound to uncover and correct skill gaps that can derail even the most promising young executives."2 The authors add that, "Whereas succession planning generally focuses on a few positions at the very top, leadership development usually begins in middle management." Davenport concurs. Succession planning, he says, "should extend deeper into the organization.every key position, whether managerial or not, should be included."
