Best practice: Internal succession planning for top-level management positions

Succession planning is becoming increasingly important in many companies, as changing leadership requirements and volatile market conditions call for more flexible and resilient talent management at the top. We examine the solutions we see in practice and identify areas where succession processes still need improvement.

Who wouldn't want access to a diverse and carefully curated pool of promising leaders with an in-built understanding of the company’s culture? In a volatile market environment characterized by disruptive change, resilient companies need targeted succession planning more than ever. But building a talent pipeline that continuously “fills” such a pool is not a fait accompli.

In practice, we see four approaches of good succession planning that HR strategists in companies are actively promoting.

What do the “future mandates” for top executives look like? In large DAX-listed companies, the structure and requirements profile of executive team positions are increasingly under scrutiny. The question now being systematically asked is: what kind of skills do we believe will be critical to successfully fulfil this role in 3 to 5 years? And how can we build these skills over time? 

Benefits of this approach: 
Ideally, such an assessment process triggers changes in the entire talent pipeline at an early stage. For example, internal development opportunities for today’s and tomorrow’s board members can be realigned to meet the future competency profile. In addition, talent development can begin earlier, resulting in a larger pool of talent to choose from instead of relying on “the one candidate.” 

Risks of this approach: 
If the future role profile differs from the competency profile of current board members, they must recognize that they themselves may not be able to fulfill the future role. If competency profiles within the board of directors differ from one another, that could be an advantage, not a cause for concern. The most important question when putting together “new” and “old” board members is: “Is there a cultural fit?”

In fast-moving markets, experience-based knowledge quickly becomes obsolete. This makes the potential of leadership talents to adapt to change, learn new things, and shape transformation increasingly important. 

Many companies in our network are working to define the following questions: ‘What do we mean by potential?’ ‘Who has potential?’ and ‘How do we make potential measurable and assessable—not least when comparing internal and external candidates?’ 

Benefits of this approach: 
Potential becomes a decisive indicator of whether or not a talent is included in the assessment and development process for top management positions. This reduces the risk of overlooking “diamonds in the rough.” 

Risks of this approach:
Making potential measurable is a challenge at first – traditional skills and experience are easier to measure and more established as assessment criteria. In our experience, it is important to set up a transparent assessment process that is tailored to the needs of the company. 

Talent lists for C-level succession should always include a combination of internal and external talent. We see more and more companies moving away from traditional, static talent lists. Companies are looking for ways to make their talent pools more agile – without alienating candidates who are eventually “weeded out” of the talent pool. 

Best practice here is to make membership in talent lists or pools time-limited from the outset and to link it to specific offers and requirements for the listed candidates. It also pays to create multiple talent pools: for example, a pool for immediate CXO succession and a broader talent pool with the company's top 300 talents. Transparent requirements and framework conditions should be defined and clearly communicated for all pools. 

Benefits of this approach: 
By continuously addressing leadership skills and potential, an agile “talent first” mindset becomes part of the corporate culture. The talent development process becomes more dynamic – and it becomes clearer to everyone involved that traditional “ladder careers” with narrowly defined development paths are a thing of the past.

Risks of this approach:
Where clear and transparent decision-making criteria are lacking in the dynamic selection process, this can lead to uncertainty among leadership talents. In addition, it is necessary to identify attractive alternative development paths and make appropriate offers. 

Many companies have recognized that the final transition into the CXO role is a particularly critical moment in the succession process. The path to success does not end with the winning candidate’s start date – on the contrary. Best practice here has proven to be the establishment of an agile support and feedback process that helps companies quickly identify problems during the onboarding of new CXOs and take early countermeasures – for example, by continually adapting support offerings.

Benefits of this approach:
Companies that provide their CXOs with intensive support in their new roles and assist them in their further development create an environment that makes continuous learning and adaptability part of the leadership model. 

Risks of this approach: 
Support and development opportunities should not only be designed for “newcomers” to the board but should also focus on the development potential of the entire management team – otherwise there is a risk of imbalance.

Best practice cases show that companies are currently fundamentally questioning and recalibrating succession planning tools and processes for C-level management positions. On the one hand, they are reassessing the requirements for management positions and their future viability. On the other, they are focusing more strongly on the potential of internal as well as external candidates and developing models to further develop and adapt talent lists in a more agile manner.