The real estate industry has already been weakened by the ongoing housing crisis, but a new report reveals that a significant lack of succession planning among CEOs could also damage companies.
A survey of executives at roughly 235 real estate firms revealed that if there was an immediate need to replace a CEO today, many are not prepared to name a new leader, which can have significant implications for the future of businesses. The study, conducted jointly by the Urban Land Institute and Russell Reynolds Associates, reveals that 89 percent of survey respondents lack sufficient succession plans. Of the small handful of firms that have a plan, only 48 percent review them annually.
Additional findings show that only 28 percent of succession plans incorporate specific capabilities that are required for a CEO to be successful, and only 22 percent have established a formal written document that names a successor. The study’s authors said the findings are disturbing and should serve as a “wake-up call” to companies.
“Senior executives need to be implementing and providing the leadership programs necessary to attract, motivate, and retain the best and brightest minds in real estate,” said ULI chairman Peter Rummell. “Individual companies and the industry in general can benefit by acting strategically, proactively and decisively to plan for who’s next, and to cultivate those with leadership qualities.”
The authors surveyed companies of all sizes and structures, ranging from corporations to family-owned businesses. The latter category is especially vulnerable to disruptions that result from a lack of succession planning, as many family-owned companies that pass business assets to heirs also must consider gift and estate tax law
when making decisions.