Leadership succession has become an issue for FTSE 100 companies, with skills gaps on their boards—and technology the most widespread knowledge deficit.

A survey conducted by consultancy New Street found that as many as 68% of the UK’s top 100 companies have flagged CEO succession planning as an issue to shareholders. Meanwhile, more than one in ten—13%—say their boards are in of need technology skills.

According to Colin Mercer, New Street’s managing director, there could be two issues at stake: a failure to listen to HR and a business environment in which boards are forced to fight fires rather think long term.

“Having succession plans and programmes to develop the leadership skills of employees are the hallmarks of strong businesses. We find that businesses where HR has a voice at the top table are more likely to have more advanced succession plans,” says Mercer.

“In the current climate, boards have so many short-term decisions to make that successions is still unlikely to be a pressing concern.” He points out succession remains a big issue because quick turnover of key leaders can “lead to operational issues and loss of strategic direction”.

That may herald a significant problem for many companies who find themselves facing the need to make radical changes to their business models post-pandemic that may require a different kind of leader. In the first half of this year CEO turnover figures for the FTSE 100 hit record highs perhaps, in part, prompted by the changing needs of companies.

Writing in the Harvard Business Review, management expert Dan Ciampa points out that at the height of the 2008 financial crisis, 2,000 US companies replaced their CEOs. The pandemic may prove a similar force for bringing in new blood.

And that’s because the pandemic is driving new business needs, says Ciampa. Instead of working for “aggressive expansion,” post-pandemic companies may need to “cut product lines, rein in costs and rebuild confidence both internally and externally”.

“That scenario requires a different leader than the type the board had been envisioning just a few months ago,” he writes.

CEOs and succession planning

Of course, the problem may be sitting chief executives failing to confront the issue with necessary urgency. According to Kieran Moynihan, founder of leadership consultancy Board Excellence, some sitting CEOs see succession preparation as a threat to their own position and actively work to subvert succession preparations.

Others default to a view that no internal candidates are fit for the role, suggesting an outsider will be needed—when an examination of the management team could reveal quality candidates simply in need of nurturing.

In both cases strong chair and non-executive teams will need to either resist “stonewalling” or make a proper assessment of internal candidates, says Moynihan.

“For me the buck stops with the board chair when it comes to CEO succession planning. He or she has a critical oversight and stewardship responsibility to discharge.” He adds that chairs should ensure succession plans are in the best interests of the company and “not skewed or non-existent to serve the best interests of the CEO”.

But then there is the technology skills issue. As business has become more reliant on tech, in various forms, so the debate about whether boards should have a tech expert has become ever more urgent. Covid has only served to underline the issue.

One issue why boards may have failed to bring techies on board could be expectations. Jacqui Ferguson, a non-executive with 30 years’ experience in tech industries, says she is still considered a “young NED”.

“There are plenty of talented people out there but as a relatively youngish industry—remember the internet only came to the fore in the early 90s, and smartphones in the late 90s—boards need to adjust their expectation on the age/experience profile required,” she says.

Not all boards are in that position, but many cling to an old-school notion of what a non-executive may be. These remain challenging times for boards.