The daily pressure of closing the deal may explain why so few real estate executives feel the industry has a handle on succession planning, says Debra Barbanel, head of real estate at Russell Reynolds Associates, an executive search firm. In recent surveys by the Urban Land Institute and Russell Reynolds, only 11 percent of 253 major real estate executives surveyed said the industry is adequately prepared for CEO succession. Yet succession planning and leadership development are essential for the ongoing prosperity—and even viability—of a real estate company, says Barbanel, one of the coauthors of the study.
What are the basic steps a real estate firm should take to begin succession planning?
Begin by asking the people in top positions—CEO, CFO, COO—to write job descriptions for their successors as part of their annual goals. You could also ask top executives to assess internal candidates and decide what experiences and skills they need to move to the next level.
A company might also want to involve its board in crafting a job description for a future CEO. This description should reflect where the company is now and where it is going. It should also describe the requisite skills needed to implement that strategic vision of the future. For example, many consumer-facing real estate companies in the retail, multifamily, and hospitality sectors are incorporating digital media into their business plans. These companies might want a future CEO with a high comfort around technology. In the survey, we found that only 28 percent of succession plans at real estate companies addressed specific capacities required for future success.
What other qualities should a job description for a future CEO contain?
Studies have shown that when you compare successful CEOs to other leaders in a company, CEOs are more forward thinking, more intrepid, and more willing to take calculated risks. They are also terrific team builders. Top CEOs are sensitive to the needs of others and value their ideas. At the same time they’re pragmatically inclusive; they will honestly analyze others’ ideas, but they aren’t afraid to be the decision maker.
How can board members or other company leaders encourage a CEO to focus on succession planning?
Every CEO we surveyed felt that succession planning was essential, but the reality in real estate industry is that the deal of the moment takes precedence. Boards, strong HR professionals, or others in the corporate suite can encourage the CEO to plan for succession by emphasizing that an effective plan will preserve the CEO’s legacy and protect the business and the team that he or she has built. Having a plan in place also boosts company morale.
What mistakes do real estate firms make in hiring for the CEO job and other top leadership positions?
Because real estate is such a small world, companies often hire based on a referral from a friend rather than initiating a well-planned search. The hire may be a wonderful person, but may not be right for the position. Another mistake that firms make, especially smaller ones, is trying to fill a position too quickly. It takes time, thought, and dialogue to get the people component right. If you do make a new hire or give a promotion, assess how that promotion worked out one year later.