The results were similar for leaders in all six regions polled including North America, South America, Europe, Asia, New Zealand/Australia and Africa. Most disturbing is the fact that #66 “Developing direct reports and others”, ranked as the second lowest of the ten weakest competencies. Yet, we know that this skill is fundamental to effective leadership and critical to the long-term health of any organization. South American executives rated the highest on this point, but even they had this competency scored at #55 out of a possible 67.

My team and I see leaders challenged with this competency every day, as we help them work through their executive talent review process. They struggle to make insightful, clear assessments of their people. That lack of insight and clarity makes it is very difficult to guide the development of others. We also know that even the toughest leaders are often hesitant to “Confront their director reports” (#62). The ambiguity around their assessment of performance weaknesses is frequently at the heart of their reluctance to tackle such issues head on.

After carrying out talent reviews with senior executive teams in dozens of corporations, we estimate that about 10% of executives are naturally strong at assessing and developing their people. While, another 10% are tone deaf to talent management and never really get good at it. In our experience, the remaining 80% of executives can be taught to develop strong talent management skills.

They can learn how to initiate and participate in candid, robust discussions with their peers and their boss regarding managers in the layer or two below them. And they can be guided through a process that will teach them how to properly conduct talent reviews that ultimately benefit everyone concerned.

Source: “The World is Flat … and So Are Leadership Competencies” by Kenneth De Meuse, King Yii Tank, Kevin Mlodzik, and Guangrong Dai. A Korn Ferry International Research Foundations paper. This survey research was conducted in 2008 and 2009.

1. Ending the CEO Succession Crisis, Ram Charan -  Harvard Business Review February 2005.

Article Link: http://hbr.org/2005/02/ending-the-ceo-succession-crisis/ar/1

Charan says that most boards are not doing a good job of CEO succession planning. He makes the point that the Board should drive CEO succession planning, while the CEO should provide consultation. He stresses the fact that the Board and company leaders need to develop a deep pipeline of leadership talent over many years to have a chance of producing some strong CEO succession candidates. He suggests that the Board define the 3-4 non-negotiable skills, experience, or know-how that they will look for in the next CEO. Charan goes on to say that the Board should conduct a rigorous process to assess internal and external candidates and the Board and the HR Committee should spend significant time on leadership development and succession planning every year.

2. CEO Succession planning: The Big Hand-off, Theresa Tedesco, Financial Post magazine, October 29, 2009

Article Link: http://www.nationalpost.com/news/succession+planning+Hand/2159505/story.html

In this article, Tedesco uses the results from numerous surveys and refers to well known stories to support the idea that boards are not prepared for CEO succession. Like Charan, she too says that boards need to take control of the CEO succession process, devote more time and due diligence to the issue, and not rely too much on the incumbent CEO to lead the process.

3. Holes at the Top: Why CEO Firings Backfire, Margarethe Wiersema Harvard Business Review December 2002.

Article Link: http://hbr.org/2002/12/holes-at-the-top-why-ceo-firings-backfire/ar/1

Though this article is focused on the poor track record of boards in hiring a new CEO after firing the old one, a key point Wiersema makes applies to all CEO successions: the need for the Board to understand the strategic position of the company and identify the key skills that will be needed in the next CEO.  Wiersema cites some good examples of boards that did not do this and so, as a result, picked the wrong CEO.

4. Changing of the Guard, Geoffrey Colvin – Fortune January 8, 2001

Article Link: http://money.cnn.com/magazines/fortune/fortune_archive/2001/01/08/294478/index.htm

This is the story of how the GE Board picked the successor for Jack Welch.  Though it contains much of the Welch zeal and colour, this article makes several points that all boards would do well to apply in their own succession process such as:

• The Board started the succession process many years before the succession was expected to occur.
• The Committee and the full Board spent many hundreds of hours identifying and tracking over time a long list of possible internal candidates, and winnowed that list down over the years.
• The directors spent many, many hours getting to know the candidates through direct observation and lengthy debate.  They saw the candidates in the formal boardroom, at board social outings, and in their organizations
• The Board was very deliberate about the job experiences each candidate needed to develop in order for them to be stronger succession candidates

There were a few ideas put forward that particularly stayed with me, which I thought were worth sharing.

For example, Bob Posen, Chairman Emeritus of MFS Investment Management and senior lecturer at Harvard Business School, made some very powerful comments about the responsibility directors have to get involved with the businesses they oversee. Posen said,  “Directors should spend more time on each board they sit on, and the additional time should be devoted to going out and seeing the business.  They should visit the business not in an organized field trip with the whole board, but they should go alone and they should talk to people in the organization.” He also said, “The most important responsibilities of the Board are:  #1 – pick the right CEO   #2 – Executive compensation.”  These last comments were, of course, music to my ears.

I was also struck by a few of the statements made by David O’Brien, Chair of the Royal Bank of Canada and EnCana Corporation. He said, “Canadian boards are healthier than US boards in the way they are able to challenge management.” He went on to say, “The Chief Risk Officer, Internal Auditor, and CFO should have direct access to the Risk and Audit Committee and should be able to raise any issues they think are important.”   I think the same should be true of the Chief HR Officer.  The senior HR executives should have a direct working relationship with the Chair of the HR and Compensation Committee.  He/she should have time alone with the committee without the CEO present, and everyone should understand that it is his/her duty to discuss issues fairly and openly with the committee.

I also liked one of the suggestions made by John Thompson, Former Chair of the TD Bank Financial Group. He said, “The Board should receive a dashboard every month showing  red, yellow, green on each of the various risk factors.” Why not also do this once a quarter for the board on all of the key goals and objectives for the CEO and the organization – a dashboard showing green (on target for successful completion), yellow (some progress made, but may not fully meet deadlines) and red (risk of not being accomplished on time, or at all).

Finally, one of my mentors, Purdy Crawford, Counsel with Osler Hoskin & Harcourt LLP and former Chair and CEO Imasco Limited, said, “Many boards and CEOs now realize that the Board is the boss of the CEO. ….this is a shift in the balance of power and was not always so.”   I agree that this is an important shift and one that many boards have not yet made.  Boards tend to be very comfortable with the role of advisor – when they discuss strategy, operating results, major initiatives, and risks.  They are also comfortable and more competent now in the role of the watchdog - auditing the financials and making sure all affairs are being done ethically.  But many are still uncomfortable donning the “Boss” hat – when it is time to evaluate the CEO’s performance, provide performance feedback to the CEO, and discuss whether the CEO has the right skills to lead the company through the next few years. In Purdy’s words, “One of the biggest risks for many companies is the quality of succession in the long term.”

There doesn’t seem to be a lot of guidelines or rules to follow regarding blogging. However, I have learned a couple of things. A business blog is primarily a place to voice one’s opinion and share ideas and information and it presents an opportunity to create a meaningful dialog between the blogger and their audience.

This blog will be a place for me to:

• Communicate my thoughts on current events related to my areas of expertise.
• Create a resource that will contain excellent articles on the subjects of CEO succession planning and executive talent review.
• Review books I’ve been reading on talent management or governance topics.
• Share some insights gathered from my personal experiences. For instance, I am off to France in the fall to teach a course on CEO succession planning at INSEAD.  No doubt I will learn a thing or two about the European governance environment that will be worth talking about.

My old website had a resource called “Recommended Reading”, where I posted short reviews of books I’ve read and provided links to articles that I felt were worthwhile passing along. Since I plan to continue providing you with such a resource, I thought I’d use some of my first few blogs to migrate over my old favourites. All articles and book reviews will be catalogued by category for easy access.

And since a dialog is a two-way conversation, your comments are always welcome. Please feel free to add to the discussion whenever the spirit moves you. I’d also love to hear about anything you’ve read or heard lately on the subject of CEO succession planning or talent management that would enlighten me and add value for other readers.