Succession in the Friendly Skies

 -  6/30/10

In order to ensure its future, United had to keep talent taxiing on the runway, ready to take flight when needed.

In order to ensure its future, United had to keep talent taxiing on the runway, ready to take flight when needed.

In today’s business environment, where every company decision is transparent to employees, stockholders and even the media, the margin for error when it comes to strategic leadership development is narrowing.

Getting an executive team assessed and groomed for CEO succession is not easy, but it’s no longer optional. In October 2009, the U.S. Securities and Exchange Commission issued Staff Legal Bulletin No. 14E, a CEO succession mandate recommending greater transparency and shareholder disclosure about the management of succession risk “so that the company is not adversely affected due to a vacancy in leadership. … We now recognize that CEO succession planning raises a significant policy issue regarding the governance of the corporation that transcends the day-to-day business matter of managing the workforce.”

A survey by PricewaterhouseCoopers published in January 2010 said that 40 percent of board directors are dissatisfied with their companies’ management of succession planning. But the picture gets more complex when organizations consider a few other macroeconomic factors like the impact of an overall diminishing workforce on their management succession and the succession options for critical players in the organization, like actuaries in an insurance firm or critical care nurses in a hospital. An Egon Zehnder study published in late 2009 cited a 30 percent shortfall of management-level players in the workforce and a whopping 50 percent drain on overall talent.

Therefore, developing effective leadership using a consistent talent management program at all levels across the organization — not just in the C-suite — can return significant short- and long-term business value and viability. Further, companywide leadership development requires the effective — and consistent — execution of many processes. Talent management technology applications help to provide the enabling platform. One case in point is the success that United Airlines has achieved with its succession planning initiative.

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