Succession Planning Doesn’t Get The Priority It Should
Succession planning is a very delicate subject and has to be handled with extreme care and confidentiality for the outer world, but should be run thoroughly and religiously internally
Photo Credit : Ritesh Sharma
Succession planning in banking and financial services is still at a very elementary stage. While everyone talks about it and wishes to be more prepared, much before the eventuality occurs, and I believe this occupies the mind space of the boards of these institutions, the fact of the matter is that it doesn’t get the same priority as it should, and somewhere down the line, gets lost among other priorities. What is equally noteworthy is that most of these institutions have a strong second line of command and stable leadership teams with decade plus experience of working together. They have been exposed to varied business cycles, sticking through thick and thin; and this is the best position to be in for an industry to be more prepared and meticulous around the whole subject of “succession planning”. Yet, when it comes to the obvious choice of selecting a prince/ princess to usurp the king/ queen’s place, most of these institutions tend to be on the defensive and find themselves unable to handle the subject as effectively as they should.
One is not sure if it is to do with not disturbing the apple cart and managing status quo for as long as one can. Or if it is the board’s lack of confidence in entrusting the job to someone else who may be a little raw to begin with, and hence may not be able to give the best shareholder returns. Or simply that no one from the next rung is ready enough as he or she was not groomed for the role at the right time, which again begs the question that why is this not getting addressed in the first place. To me, the most logical bit, apart from the above mentioned, is the fact that, with there being such a huge supply-demand mismatch for talent at leadership levels in banks and financial services, the best amongst the next lot are always attracted and poached to breeding grounds such as non-banking financial companies, insurance, etc., for CEO roles, or they take up larger roles in diversified financial services houses. This leads to a constant churn amongst the top management of top banks. It is a classic case of the prince/ princess or the rightful heir saying “if you don’t make me the king/ queen, I will change my kingdom”.
Succession planning is a very delicate subject and has to be handled with extreme care and confidentiality for the outer world, but should be run thoroughly and religiously internally. It’s very important that the most potential candidates internally are identified much in advance, and put through rigorous assessment centres and development programmes, so that they are as ready as they can be. This also gives an organisation a great chance to build a strong leadership pipeline. And in cases where organisations are not very sure if the incumbent exists within the system (for example smaller/ mid-tier organisations), it is best to go out and search very discreetly, at least 18 months before the tenure of the incumbent CEO is about to expire or if you feel a change may be necessary soon. Identify your top two to three candidates who you want to engage further, identify your best candidate for the job, and onboard the person at least 12 months before the completion of the tenure of the incumbent. We were involved in over half a dozen succession plans last year, and a few more are in the process. We have extensively worked with organisations in this area. What goes a long way in building a strong organisation is when the new leader gets aligned to the strategy and the ecosystem before he/ she occupies the corner room.
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