I recently hosted a webinar on the HRD’s role in managing leadership risk. It’s a subject I feel strongly about and something that’s been under the leadership team radar for far too long.
Why discuss leadership risk? Leadership risk is the risk that senior management, either individually or collectively, do not have, or fail to apply, the capability and motivations to deliver the expected performance. This was the topic of our discussion.
What I found most interesting about the opportunity to host a webinar was gathering feedback from HRDs on approaches to leadership risk and succession in their own organisations.
Here I share some of the findings of the webinar that provide a snapshot of how leadership risk is managed, or not, in some of the UK’s largest firms. Thanks to all of those who attended the webinar and contributed to the discussion.
None of the non-executive directors chairing FTSE100 risk committees have held an HR role in the past. With this in mind we must question understanding of the implication of people risk at board in the majority of companies and question the impact this has on understanding how well the risk mitigation strategies are implemented and monitored. Surely this is an argument for strategic CHRO as non-executive director?
Our experience tells us that many companies continue to conduct an annual process to manage their talent and succession review. This starts with the identification of the top 100 or 200 roles in the organisation. At a divisional level the 9 box talent model (or equivalent) is used to assess current talent. This data is then rolled up to group level. Typically career development plans are put in place for the high potentials identified. The process is renewed annually.
How effective is your succession strategy?
Some companies have demonstrated a move away from the nine box grid with a focus on the skills collectives required at leadership level. Others take a simpler approach and identify executive team confidence in the incumbents and their roles, based on now and the future.
Most HR professionals state there needs to be a mentality shift in their business leaders to take a group view of leader and develop more robust succession strategies. We hear of a difference between supply and demand, in terms of the calibre of future leaders.
What is your organisation’s biggest succession challenge?
Few companies have defined ‘what’ makes their existing leaders good; there is a lack of defined competencies. Few companies have based their views on a future led view, they are replacement planning not succession planning.
Where competencies are defined these have yet to work their way into the overall leadership development programme to ensure future leaders can be developed against the organisation’s strategy.
In addition, we know that average CEO tenure is decreasing. In 2000, average CEO tenure was about 10 years, but by 2012 it had dropped to 8.1 years. So with this in mind, who applies the future view? Who succession plans against the business needs of the future (versus replacement planning of the current incumbent)?
Do you incorporate external succession pools against your business and mission critical roles?
Leadership development drives the internal succession pool. Taking a strategic approach to HR, rather than HR operations, incorporates the external view as well. Using external leadership risk intelligence provides insightful intelligence to make informed decisions around your risk in a meaningful interaction with the market.
To be class leading succession should be a continuous and proactive process. By working in this way companies can engage future leaders ready for the business challenges of tomorrow. Only this approach will give the CEO control over their leadership human capital for tomorrow.