By Marc Timmerman and Josefine Ehlers Davidsen
There is significant leadership turnover in today’s world: In 2015, 17% of the largest 2500 public companies changed their CEO, which is more than in any of the previous 16 years1. That is a substantial number of new CEOs, and for 22% of those brought in via succession planning from 2012 – 2015, it was a first-time experience, compared with just 14% from 2004 – 2007. Furthermore, there is a major cost in the cases of a forced turnover: In 20142, PwC estimated a $1.8 billion decrease in shareholder value compared with businesses that go through a planned turnover. Though there has not been research done since, there is no sign of change – the practices and misunderstandings around succession planning and leadership integration still endure.
Leadership integration is an essential part of succession planning – proper integration of the new leader into the position, into the team and into the organisation are essential. Failing in this area is not inexpensive – consider the cost of a severance package, the negative impact on the brand or the damaged credibility toward stakeholders and the organisational ecosystem.
Some organisations consider succession planning a responsibility of the HR department or simply a management reflex. In other organisations, leaders must have a successor pre-selected and succession planning is integrated into organisational processes. Sometimes rationalisation of the succession decision is done using formal high-potential criteria and a popular tool like a 9box grid. This process can be effective, but only if the emotional aspects of succession planning and the replacement of leaders are taken into account. Properly managing the process of succession and of the successful integration of a new leader is crucial – and not just at a financial level.
Leadership succession is likely one of the oldest existing rituals in leadership. It is a tribal process dating from the times when we were living in caves. It is familiar to any culture and has been practiced throughout the ages. But when we look at tribal ritual and even Greek tragedies like Oedipus Rex or The Oresteia, it seems that we have not evolved as far as the underlying emotional and ego-related dimensions of the succession process goes. When it comes to transition of power, a variety of interpersonal dynamics and potential conflicts are at play and can still lead to bloody scenes and archetypical powerplays.
The following examples are actual descriptions of succession planning gone wrong:
The emotional and psychological aspects behind succession planning are an essential part of success versus failure. To date, this has essentially been ignored in management literature.
If you want to succeed in succession planning at an executive level, the organisation must be considered as a conglomerate of interconnected ‘systems’ which determine all interpersonal relationships. The role of the CEO (system 1) interacts with a Board of Directors and steers/leads a senior or executive leadership team (system 3) in which there could be a successor (system 2) for the CEO function. While each of us has a unique personality as a part of this systemic interaction, we become constrained by the interconnections between the systems in which we work. When we take on a new position, we find ourselves in a new or unknown system of existing relationships that must be accounted for. When a new leader is appointed, it is not just his/her personality and capabilities that will predict success, but also his/her fit into the new system and acceptance by the interconnected systems. The different characteristics of individuals involved in the succession planning will play out within the limits of the existing systems. The dynamics between the involved systems in the organisation will play out as an enhancer or inhibitor of the personalities and capabilities of the individuals at play. When we look at the organisation through a systemic lens and see it as a conglomerate of interconnected systems, we get a clearer view of the risks and potential blind spots that can unfold in the succession dynamics.
Properly managing the process of succession and of the successful integration of a new leader is crucial – and not just at a financial level.
Therefore, to be successful in executive succession planning, you must take into account three important systems inside the organisation:
Succession planning literature tends to pay attention to just 2 of the 3; The third system – ‘the court’ in our example – is very often forgotten. The most common derailers as a consequence of this oversight are:
All three systems are crucial to analyse and understand in order to integrate a new leader in an effective manner, and to practice successful succession planning. In the following, you will find psychological insights into important aspects of each system, with a particular emphasis on the third system with the goal of helping you to better define your succession planning strategy and enabling a more successful implementation.
An important theme in the psychology of a leader who is stepping down is their legacy – or the desire to leave a mark with her/his personal heritage and values. The wish to leave a legacy can result in a cloning reflex: the existing leader looks for someone who acts, thinks and behaves in the same way as him/ her, so the leader can be confident that his or her legacy will be untouched.
An example is a leader searching for a successor who went to the same business school or has the same professional profile and who commits to sustain the current strategies, business and leadership models.
Another theme is an individual’s need to feel unique: the king or queen wishes to feel that he/she is one of a kind and that they have made a unique impact on their surroundings, and that they have realised things no other individual could have done in the same successful manner. This phenomenon is often reinforced by the unbearable thought of being replaceable. This is one of the main reasons why many CEOs or business owners have a hard time giving up their position.
The leader can further be emotionally and mentally unprepared to stop leading. There is an anxiety about the emptiness that awaits them.
Finally, some leaders give their “court” (direct reports) so many privileges and/or have allowed weak allies into their court for political reasons – the result of which is a totally dependent court where the king/queen has absolute power and autonomy, making sure that they remain uncontested in their position.
In order to guide the old leader in a successful succession planning, there is a need to support that leader through different channels. The Board of Directors can prepare the process of succession and departure. The family can help prepare the person for living a different life by listening to his/her worries and personal anxiety, asking about expectations of the future, and finding out what is important to him/her. Trusted advisors outside the organisation and trusted peers can give advice on going through a process of major change and relinquishing influence in the organisation.
The new leader will wish to make a mark. Imagine walking into a new position with a brand new strategy, kill chain and business model on the first day. This very often results in a considerable lack of buy-in from team members, and the new leader can rapidly lose credibility and support. The successor further sends the signal that he/she is more intelligent and capable than the rest of the team who have potentially been around for a longer time. The new leader thereby risks disrespecting team members and creating distance and antagonism. This is one of the reasons why the first 90 days are so critical: building trust with the direct and indirect systems and listening to and learning from all the key people connected with the new leader is key.
Furthermore, timing is essential for the internal candidate. She/he needs to prepare mentally and emotionally for the succession of power. Leading your former peers and colleagues can be a hazardous adventure if there has not been enough time invested to build acceptance among the people who will now be led by a former peer. Also, new direct reports may be the very people who also wished to be considered for that top position. The question is: Will they be an ally or will they become a political enemy and potentially rebel against the new leader?
The ‘court’, as described earlier, refers to the system of people surrounding the leader. This includes the Board of Directors, direct reports and close influencers. The dynamics between the court and the new leader also make the first 90 days essential to the success of the leader. Based on our experience as well as the Conscious Competence Ladder, which well reflects the system 1 thinking described by Nobel prize winner Daniel Kahneman in “Thinking Fast and Slow”, the new CEO must explore the following perspectives to be certain that she/he understands the context and complexity of the environment that he/she is stepping into:
The new leader must acknowledge that he/she does not have a clear view of the full context in which he/she is taking part. A new leader can gain increased self-awareness and better navigate in a complex environment when taking into account the model of the Conscious Competence Ladder which defines a learning process that can be applied when a leader enters a new team. To increase the chance of a successful integration, the new leader must be aware that he/she steps into the organisation as being ‘unconscious incompetent’.
When entering a new team, taking a new job or studying a new field, there will be skills that a person does not yet know that they do not know. Becoming aware of current blind spots – going from unconscious incompetence to conscious incompetence – will make it meaningful for a leader to explore and ask questions to his/her team members, other people in the organization and peers. The leader cannot know which blind-spots will occur, and should therefore not make assumptions, but rather ask questions and be open to new information. The leader integration process increases the chance of building strong relationships with direct reports and key stakeholders, and therefore speeds up the process of developing from unconscious incompetence to conscious incompetence and from there to unconscious competence.
The psychology of the crown prince or princess shows that there can be a need for advice and sharing of learnings from the former leader. It is important to set a time limit to these. Otherwise, the leader who is stepping down can end up having continuous informal influence.
Mentoring can further guide the new leader on the potential and weaknesses of the court. This role can be filled by HR who, among other mentoring efforts, can guide the leader on how the culture has developed up to that point, and how members of the organisation and direct reports are speaking of and experiencing the new transformation. This role for HR is most appropriate in organisations where HR is an influencing Business Partner rather than a purely operational support unit.
It is not only the old king or queen who potentially worries about succession and possible loss – the court members may also feel this way. The court is, without doubt, the system that has been least studied, thought about or involved in succession planning. Yet the court can be the reason for a succession failure.
Some court members behave and think in terms of survival. They can survive by securing their positions, their privileges and their power base. There is a risk that they will strive for stability of their own strategy and their own relationships. Some court members can potentially represent a risk to the position of the new leader if they themselves tried but failed in becoming the new leader. Others might lead a coalition of defiance towards the new leader and thereby influence through informal leadership.
By understanding an organisation as a web of networks, and taking these networks into account, it is possible for a new leader to successfully become integrated into the leadership position.
Suffice it to say, the first encounters of the new leader with the court are very sensitive. It is a context in which there are many interests at play, and there is a crucial need for a guided process to integrate the new leader, for the future decisions not to be blocked and for avoiding any political tumult that could harm the business.
Take, for example, an organisation where all the Heads of Business were replaced because there was a refusal to accept the new CEO. In this specific case, the CEO replaced them with less competent leaders from one level down. To keep their place of influence, based on their newly gained status, the new HoBs became dependent on the acceptance from the CEO, and thereby driven by personal interests rather than the organisation’s best interest.
The world today is extremely dependent on relationships and interpersonal systems – it is “an era of networks” as described by the tech entrepreneur and author Peter Hinssen, Author of “The Day After Tomorrow” and “The Network Always Wins”. Investing time and energy on a nowcast and to become interpersonally familiar, in a guided and facilitated manner through integration of the new leader, will 1) help assimilate the existing court with the new leader and 2) support the new leader adapting to the court. It is a worthwhile investment to take the time to build awareness and knowledge on both sides of the table in order to build and strengthen internal relationships. By understanding an organisation as a web of networks, and taking these networks into account, it is possible for a new leader to successfully become integrated into the leadership position.
The integration process follows a logical track beginning with analytical elements and information about the strengths and weaknesses of both the team and the new leader which makes it possible to anticipate pitfalls.
After the introductory process of uncovering the current status, a New Leader Integration Center will be scheduled. As part of the New Leader Integration Centre, there will be a deep dialogue between the current team of direct reports and the new leader.
An important dimension of the dialogue is the integrated centre of gravity which is recommended to be linked to the vision and the strategic imperatives of the organization. When bringing these subjects into a forum where there is space for sharing questions and potential worries about the future, it will build a foundation for a new common narrative, trust, alignment of the team and even stronger relationships. It is a chance to explore how the involvement and decision making was unfolding with the team before the new leader was hired, e.g. did the former leader make decisions without involving the team or was she/he more consensus-driven? Moreover, the dialogue will create opportunity to consider how much input or support the new CEO will need, what type of communication style the new leader has and how willing this person is to delegate and empower.
Having a successful new leader will give the organisation a significant competitive advantage compared with the large number of organisations whose leaders struggle in their new positions
Having a successful new leader will give the organisation a significant competitive advantage compared with the large number of organisations whose leaders struggle in their new positions – A new successful leader will strengthen the brand and the position in the market, as well as protect the integrity of the organisation. A well-executed succession planning and New Leader Integration process will build resilience, cohesion and momentum for the new leader and the direct reports. It will successfully take the organisation closer to executing their vision.
(1) “Are CEOs Less Ethical Than in the Past?”. PwC, D. Aguirre, P. Karlsson & K. Rivera, 2017.
(2) “The $112 billion CEO Succession Problem”. PwC, D. M. Aguirre, G. L. Neilson & P. Karlsson, 2014.