Making sure succession plans are fit for purpose
It’s not enough to simply formulate succession plans and leave them on a shelf. Boards need to make sure any necessary updates are made to take into account changing circumstances and best practices. Our research finds that most do: two thirds of respondents say their board reviews its succession plans once a year, with just 6 percent saying they do so every two years or less frequently. Fourteen percent say they do so on an ad hoc basis.
Fifty-eight percent of respondents at small-cap companies say their board conducts an annual review, fewer than do so at mid-cap firms (81 percent), large caps (68 percent) and mega-cap companies (75 percent). Notably, a quarter of those at small-cap companies say their board conducts reviews of succession planning on an ad hoc basis.
The results are broadly similar between North America and Europe, although 71 percent of respondents in North America say their board reviews succession plans each year, compared with only 64 percent of those in Europe who say the same.
The Covid-19 pandemic, particularly in the months before vaccines became widely available, raised the prospect of senior executives and board members suddenly being unavailable in unprecedented numbers on a temporary or permanent basis.
According to our research, almost a third (29 percent) of respondents at mega-cap companies say their board revised its approach to succession planning as a result of the pandemic. This compares with 17 percent, 19 percent and 8 percent among those at small caps, mid-caps and large-cap companies, respectively. It should be noted that, globally, more than a fifth (23 percent) don’t know whether this has been the case.
The most frequently cited changes made due to the pandemic are that plans are now reviewed more frequently and now cover emergency successions, each of which is mentioned by 56 percent of respondents whose board has revised its plans. These are followed by plans now including new skills requirements (44 percent), plans now applying to more junior positions (36 percent) and companies starting to use outside advisers on succession planning (24 percent).
