Developing a candidate for a CEO position is different from developing someone for a managerial position. When a high potential employee announces his/her disassociation, it not only dilutes the organizational deliverables but also creates a domino-effect leaving leadership voids all along the succession line. Comparing internal ‘high potentials’ with generic benchmarks along many dimensions is a process that creates fragmented profiles rather than individual portraits and those dimensions reflect only the personality traits and not the skills required for a CEO (Rothwell, 2010). Such surprises can be taken care by nurturing leadership talent or in other words through succession planning.

Many organizations do a decent nurturing of middle managers but meaningful development stops well below the apex. It is important not just to identify high performers but to recognize and retain them with the help of development processes. It’s very important to retain your high potential candidates. Ram Charan in his article in HBR (2005), points out that Colgate’s global growth programme mandates that all senior managers retain 90% of their high potential candidates or be ready to lose some compensation. If any such candidate resigns from the company from any part of the world, the CEO, the COO, the president all are alerted within 24 hours and move immediately to retain that person.

Now here, some of you might ask, why only ‘internal’ performers for top positions, why not consider ‘external’ performers? Well, external candidates are in most cases a greater risk because top management cannot know them as well as they know their own people. Outside candidates might be chosen for a particular job that they do well- turn around the company or restructure the portfolio but they might not be able to lead a highly complex organization and thus would become a savior rather than a CEO. If not selected wisely or forced to exit a company by the board, outsiders can have a devastating effect on employees, partners and strategic position. External candidates might opt for a new team, new style thus disrupting the continuity, momentum and morale of the employees as they would be obsessed about who will get the next pink slip (Charan, 2005). Such mess up with the outsiders can hinder companies from focusing on competition. Bringing outsiders can also be very expensive, since even poor performance is rewarded with rich severance packages. Researchers believe that internal candidates remain the future CEOs-of-choice (Luby and Stevenson, 2016). It has been observed that most of the time succession planning fails because it remains a mechanical process that’s too narrow and reactionary to uncover and correct skill gaps and is entirely separated from organizational efforts to transform managers into leaders (Conger and Fulmer, 2003). Succession planning is not done in months but it takes years to find a successor (Harrel, 2016). 

Rothwell (2010), suggested a path/framework which can be used by organizations to nurturing leadership talent within organizations:

• Selecting possible key positions for which to prepare the individual: Begin by targeting a set of key positions in the organization for the individual. In most cases, this should be done only after a significant dialog has taken place between the individual and an organizational representative.
• Considering the likely time during which the individual must be prepared: Time affects what kind of—and how many—developmental activities can be carried out. When individuals are slated for rapid advancement, there is little or no time for preparation. There is thus a need to prioritize developmental activities. That should be done, of course, even when time is ample.
• Diagnosing learning needs/competency-building needs: The gap between individual’s present knowledge and competencies and the required ones must be identified. Determining this difference is to ask the key position incumbent to review the individual’s present work requirements and performance against the requirements of the incumbent’s position. The next step is to recommend planned developmental activities to narrow the gap between what the employee already knows and can do and what he or she should know or do to perform in the key position.
• Specifying learning objectives based on the results of step three: Learning objectives are the outcomes or results that are sought from planned developmental activities. Learning objectives should always be stated in measurable terms.
• Specifying learning resources and strategies needed to achieve learning objectives: Learning strategies are the means by which learning objectives are to be achieved. Strategies answer this question, ‘‘What planned learning activities will help narrow the gap between what individuals already know and what they must know to meet future key position requirements?’’ Learning resources are what must be provided to achieve the learning objectives. Resources might include people, money, time, expertise, equipment, or information.
• Specifying evidence of accomplishment: Accomplishment of learning objectives can be tracked by providing clear, measurable learning objectives and regular feedback about the learner’s progress to the learner and to those interested in the learner’s development.
• Specifying how the evidence will be validated: Validation process can be done by either a knowledgeable expert, such as a key position incumbent, or learner will be interviewed to demonstrate results etc. needs to be taken care of.
• Reviewing the contract with consultants: Before the individual development plan is approved, it should be reviewed by knowledgeable experts. In this context, experts and consultants are meant to have broad meanings. Experts and consultants might include seniors, board members, incumbent, family and friends, academic experts etc.
• Carrying out the contract: Some means must be established to ensure accountability and to monitor results during the individual’s development plan’s (IDP) time span. One way to do it is by planning quarterly IDP review meetings with representatives from each major area of the organization so that they can report on the progress made in their areas.
• Evaluating learning and outcomes: The organizations must ensure that the results (learning outcomes) are measured against intentions (learning objectives and needs). There are several ways to do that. One way is to establish periodic developmental assessments. A second way is to provide a checklist on the IDP form to indicate whether learning objectives have been achieved.

While the above steps by Rothwell clearly lay down a plan to develop the internal talent, it will be wide of the mark if I say that internal candidates are never a problem. There might be some unwanted aspects of internal talent. For example, at times an insider can emerge from his/her closeness to the top management, hence, the selection process may sail through a slack due-diligence process; thus, might not be tested for appropriate skills. According to Charan (2005), Sometimes the social networks and psychological ties of insiders may complicate the efforts to change the overall organizational culture. Additionally, due to changing economic and social landscape, individuals from functional areas may not have the required skill of leading the whole organization. 

To address these issues, it would be important to build a coaching culture and create a learning mindset, where constructive feedback is given and embraced in a ‘non-detrimental’ environment. Open communication and an aligned reward system also play a very important role in setting shared goals and maintaining the continuity of high performers.  

Reference:

Charan, R. (2005). Ending the CEO succession Crisis. HBR

Conger, A.J. and Fulmer A.R. (2003). Developing your leadership Pipeline. HBR

Harrel, E. (2016). Succession planning: What the Research says. HBR

Luby, V.; Stevenson E. J. (2016). 7 Tenets of a Good CEO Succession Process. HBR

Rothwell, J. W., (2010). Effective succession planning: ensuring leadership continuity and building talent from within 4th ed. American Management Association. New York. USA. Pg: 127 HBR