Growing Leaders

Research shows that well over 50% of companies promote their CEOs from within.

Such companies understand a central tenet of business--that a well-crafted succession plan vastly minimizes disruption when the CEO leaves expected or not.

If good succession planning makes so much sense, why isn't it more common?

Sometimes, a board must go outside to shake things up.  Another reason succession planning isn't deliberate is more emotional and awkward.  Succession planning requires boards to talk candidly about what qualities are missing in the current CEO and the timing of his or her departure, and it compels the current CEO to chime in without seeming defensive.

There are over three million small, privately-held companies that have been around for three generations.  The vast majority are controlled by people who are nearing retirement age, and the next generation will soon be stepping up.  Knowing how to balance these disparate perceptions of ‘work’ and ‘career’ is exactly the kind of value coaching can bring into the equation.

But that’s a very tricky proposition according to an interview that I had with Family Business Strategies.  Here is one part of that interview: 

“It’s hard for people to let go of their dream, of their ‘baby’ which they gave birth to and grew, and they want to maintain some kind of control over that. It would be ideal for the older generation to bring in a coach to work with the next generation, but the son or daughter may be very apprehensive of bringing in someone of dad’s choosing to help them with their life."

There is potential danger ahead when a C-level executive moves to a new leadership position.  The brutal reality is that executives have less time than ever to prove their worth.  40% to 60% of high-level corporate executives brought in from outside a company will fail within two years.

Recruiting from the outside is a risky strategy.  The most successful companies develop their own leaders. 

The Harvard Business Review states “top performers who join new companies…are unusually slow to adopt fresh approaches to work, primarily because of their past successes, and they are unwilling to fit easily into organizations…” 

Furthermore, a recent study of 1,000 U.S. companies showed annual turnover among senior managers jumps dramatically when a new CEO takes the helm, especially when he or she comes from the outside. There’s a 17% turnover with a new CEO appointed from within the firm, as opposed to a 25% turnover among all executives with a new CEO from outside the organization.

Volatility increased in the C-Suite as management turnover was way up in 2006....rising 68% to 28,058 changes from corporate directors to vice presidents.  CEOs came and went at a 30% higher rate and CFO churn rose 23%.