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Most U.S.-Based Companies Unprepared for Executive Transitions, Executives Say

June 08, 2021, 07:05 AM
Filed Under: Industry News
Related: Survey

Fifty-seven percent of executives say their companies don’t have documented plans in place for executive transitions, despite nearly 90% agreeing that succession planning is more important today than ever before. And efforts to preserve an outgoing leader’s personal legacy – if elevated at the expense of effectively transferring institutional memory to the incoming leader – can complicate an effective executive transition.

These are among the key findings of a survey of 160 C-suite executives in the United States, undertaken by History Factory to interrogate how they think about and execute succession planning and why they find leadership transitions so challenging. Such insights have rarely been so important.  After a brief pandemic-era dip in what had been the highest executive turnover rate in more than 20 years, CEO transitions have rebounded sharply.  

To position an incoming executive for success, the survey results suggest that corporations need to more effectively transfer institutional memory, that is, the organization’s combined experiences, processes, data, expertise, values, and information, from one generation of leaders to the next.  This transfer of institutional memory should be at least as important as the emphasis on the outgoing leader’s legacy, which often receives greater attention.

  • Ninety percent of executives agree that documenting the history and experience of the company for the next leader is very important or important. Its benefits include smoother onboarding of new executives, reassuring employees and customers during a transition, providing a playbook for new executives facing familiar challenges, and positioning the company as a M&A target.
  • But fewer than half of executives say their companies have taken steps to formerly pass on their companies’ institutional memory to new leaders, such as recording outgoing leaders’ stories or accomplishments for transition purposes.  
  • Sixty-four percent of executives say they’ve completed plans to reinforce their personal legacies, and 92% say their organizations largely support these activities.  
  • This creates problems for the next leader – 70% of CEOs agree that a CEO or founder’s legacy can led to transition issues, especially if the outgoing CEO has served for a long time or if the company is family-led.  Eighty-four percent of respondents agree that a CEO or founder’s legacy often overshadows the skillset and experience of her or his successor.

“The good news is that executives are clear-eyed about how the rapid pace of change makes effective succession planning more important — and that passing along institutional knowledge is crucial,” said Jason Dressel, President of History Factory. “But for too many companies, that understanding isn’t translating to concrete plans, and legacy is too often viewed as an individual, and not an organizational, priority.”

The tech industry reported the most pronounced challenges with succession, legacy and the use of institutional memory.  While 84% of tech executives (versus 63% overall) strongly agree that succession planning is important, only 18% said it is important to pave the way for the future leader (compared to 43% overall). Meanwhile, 62% of tech executives believe that tech companies face more skepticism regarding transitions than companies in other industries. Sixty-seven percent (versus 52% overall) believe that a longer tenured CEO complicates the transition to a successor.

Greentarget, a national research, market intelligence and communications firm, conducted this survey in February and March 2021 on behalf of History Factory, which for more than 40 years has shown leading brands and corporations that their heritage isn’t just about the past. One hundred and sixty C-suite officers based in the United States, including 50 CEOs, responded to the survey from companies representing 15 industries. Thirty-five respondents hailed from the tech industry, the largest industry representation.

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