The Hardest Part of Succession Planning Is Telling the Truth

Every company has a steady performer who has gone as far as their ability allows. Yet on the succession chart, that person is rated ready to move up.

That gap is common. Companies build succession plans on the readiness ratings managers give their own teams, and those managers have understandable reasons to be generous. The fix is to design the review so leaders can give an honest rating without risking a relationship or their own reputation.

In a succession review, leaders name the people on their teams who could step into key roles and rate how ready each one is. The executive team reviews those ratings, and for the top roles, the board does too. Neither group wrote the ratings, so their decisions depend on how much they trust them.

Why Leaders Rate Their Own People Too High

A leader nominating candidates is rating people they have worked beside for years. Telling a room of peers that a long-time team member is not ready can feel like a verdict on the relationship and on the leader who developed that person.

Tenure makes it worse. People treat someone who has held a role for decades as the natural successor, and nobody expects that to change. The leader keeps rating that person as ready even if their performance starts to slip.

Leaders commenting on candidates from other teams face a different worry: that the candidate or the candidate's boss will hear what they said. A favorable comment does not have that risk.

McKinsey's article on CEO succession names a fourth reason: similarity bias, the tendency to judge people more favorably when they seem to share your background or style. The article shows how an outgoing CEO can end up choosing a successor whose career and leadership style mirror their own. A leader rating their own team makes the same kind of judgment.

All four pressures favor a generous rating. Asking leaders to be more honest won't help, because they don't think they're being dishonest. The review itself has to change, starting with the questions.

Break Readiness Into Separate Questions

A single readiness rating asks a leader to sum up a person with one label, and "not ready" is a hard label to put on a loyal team member. Separate questions let the leader say a person isn't ready for the next role while still crediting their performance and values.

Six questions cover what a succession decision needs:

• Performance. Is the person delivering in their current role?
• Potential. Could they handle more responsibility and more complexity?
• Readiness. Are they ready for a specific next role, and which one?
• Role fit. Do their strengths match what the role needs now and will need later?
• Values. Do they lead the way the company needs its people led?
• Willingness. Do they want the next role, and can they take it, including a relocation?

Separating performance from potential makes it easier to give honest answers. A leader can rate someone as a strong performer who isn't ready to move up, and everyone in the room hears the praise along with the limit. That person is in the right role, and the company wants to keep them, so the right move is to make sure they know how valuable they are. Separating the two also helps in the other direction: leaders can flag someone with long-term capacity who is struggling in a role that doesn't fit.

Protect the View From Other Teams

Leaders who work alongside another team's candidates often see things the candidate's own boss misses. The company needs that view to judge its bench accurately. Leaders will describe what they see only when they trust that no one will repeat it. The executive team builds that trust by setting one rule before the review starts and making sure everyone agrees to it: nothing said about a candidate leaves the room.

Add More Raters

Tenure and similarity bias are hardest to catch when one leader rates each candidate alone. McKinsey's remedy at the CEO level is a succession committee the board forms well before anyone announces a departure, so no single person's view decides the choice. Below the executive level, the same idea means several people rate each candidate.

One practical method is a single sheet, filled out by half a dozen to a dozen members of a leadership team, rating people they work with, even those who report to someone else. A safety manager, for example, gets ratings from peers in other departments as well as from their own boss. Several raters are most useful for long-tenured candidates, whose bosses may have treated them as next in line for years. Peers who work with them every day judge them on their current work instead.

Test the Ratings Against the Results

The last check uses data every business already has, such as the P&L and turnover numbers. I call it rating the rater: comparing a leader's ratings with the results of the business unit that leader runs. A business unit that is losing both money and key people is unlikely to have many people ready to move up. When a leader rates their own candidates ready anyway, the executive team challenges those ratings, and the leader has to show the evidence behind them.

A forced distribution, which requires a set number of low ratings, would be simpler to run. But leaders would change their numbers without anyone discussing why, and the discussion is where leaders see what they missed in their own ratings.

Three Questions to Ask About Any Rating

Before accepting a leader's readiness ratings at the next succession review, ask three questions:

• Did the leader rate performance and potential separately?
• Has anyone outside the leader's team rated these candidates?
• Do the business unit's results support the ratings?

If the answer to any of them is no, the executive team should test those ratings before building a plan on them.