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Your Succession Plan May Not Work! |
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Thursday October 28, 2009
Topic: Employee Management
Reference: Galinsky, Adam, Gunia, Brian, Sivanathan, Niro. "The Insider Succession Trap." Forbes.com:October 22, 2009. Http://ww.forbes.com/2009/10/22/insider-succession-planning-leadership-ceonetwork.
Once a CEO steps down that organization usually moves quickly to replace the person with someone from the same industry and normally within the same company. The rationale is frequently based on a need to shorten the learning curve, reduce cycle time, or to maintain the integrity of the firm. Succession planning is typically based on these key principles. That is one of the reasons for example that healthcare professionals only hire other healthcare professionals and bankers only hire other bankers. On one level this fascination for replicating prior experience seems to make some sense, in that there is a familiarity with skill sets, backgrounds, and accomplishments. Previous successes can translate into future successes in some respects. However, every situation is different and the way forward may not be based on the way back. It turns out that prior experience can and does impact decision frameworks in a way that may not be so positive. In the referenced article the commentators make this clear by demonstrating that replacing a poorly performing executive with an insider makes it harder to develop future success. Replacements tend to participate in an escalation of commitment (waste more resources on poor opportunities) or becomes victims of vicarious entrapment by investing in failing projects because of a previous psychological commitment. This psychological commitment cannot be addressed with mere geographic distance or periods of time, but rather it requires a whole different outlook and framework. Usually, this means that you have to get an outside person who is not likely to tie into past mistakes. [O]ur research reveals that despite the natural inclination to opt for an insider with connections to the old boss, a failing leader is often better replaced with a completely unrelated outside party." Psychological connections are hard to overcome and people naturally gravitate to them. To me this says something significant about succession planning, recruiting, and analyzing investment decisions. At a bare minimum, you have to take this psychological impact into account and work to overcome it through planning, discussion, and candidate selection. This is a breakthrough that I will use. How about you? Let me know your thoughts on how best to improve this whole area.
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