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Sobering statistics on organizational success.

Sobering statistics on organizational success

Research spanning 10 years into succession planning reveals that organizations lacking effective succession management are five times more likely to disappear, and three times less likely to enjoy ‘organizational success’, than those with robust practices.

Talent-management consultancy AM Azure Consulting analysed the business capability and succession-management practices of organizations from the corporate and public sectors in 1998. Ten years later, it reviewed the organizations that took part in the original research.

Only 60% of the organizations had survived with their original ownership, and only a quarter emerged from the last decade in better shape than they entered it.

The research demonstrates that positive succession outcomes shaped success and a lack of proper succession planning contributed to decline. But some aspects of succession management did not seem to make much of a difference.

Organizations that had invested in an infrastructure of high-potential assessment, general management training and development, succession reviews and information technology did not see significant gains in organizational performance. The existence of a ‘good’ process was not an indicator of positive organizational outcomes.

In contrast, organizations that had made more senior executive appointments from within, managed retention actively, and built flexibility within their executive cadres were more likely to survive and succeed.

Other key drivers of survival and success included: the development of specialist expertise to build high levels of technical know-how; a targeted management-development strategy to focus effort selectively on key individuals rather than any attempt to build capability throughout the management ranks; the use of job moves and coaching to accelerate development (rather than training or business education); and personal time and commitment from the top team in succession activity.

In this context, the example of Microsoft is instructive. Kirkpatrick (Fortune magazine, 7 July 2008) reveals that boss Bill Gates planned his retirement over a decade to ensure a smooth transition. In consequence, his successor, Steve Ballmer, has a seasoned group of lieutenants who should be able to ensure that the company continues to achieve healthy profits and revenues, despite the threat to its long-term growth from Google and Apple in an increasingly web-driven world.

The AM Azure Consulting research also looked at the impact of leadership. Overall evaluations of general leadership effectiveness in 1998 did not predict organizational outcomes by 2008. But low levels of visionary and entrepreneurial leadership did reduce the chances of survival over the last decade. And organizations with higher levels of leadership capability in trouble-shooting and the management-of-people processes doubled the chances of succeeding.

One major problem confronting modern leaders can be the poverty of feedback they receive about the true state of the organizations they lead. Research by Grint and Scholes, (Ivey Business Journal, July/August 2008) among chief executives of leading service and manufacturing companies in Finland, the Netherlands, Portugal, Sweden, Switzerland and the UK reveals not only that poverty of feedback is an endemic problem for chief executives, but also that the problem gets worse with time.

When a manager is relatively low in the organizational hierarchy, people are willing to provide him or her with honest feedback because the manager is perceived to have little influence over them. Once the manager has ascended the hierarchy and become perceived as useful or dangerous, the quality of feedback he or she receives often reflects the interests of the provider more than the receiver and the information may shift ‘from constructive dissent to destructive consent’.

This could be one of the factors contributing to the fact that, while in the mid-1990s almost three-quarters of chief executives died in office or retired, today the majority are being asked to leave their job.