I must confess that I am in doubt here. My HR heart can very easily understand the benefits for companies in having a structured Succession Planning Process. I see Succession Planning as a strategy for passing each key leadership role within a company to someone else in such a way that the company continues to operate after the incumbent leader is no longer in control. Succession planning ensures that businesses continue to run smoothly after the business’s most important people move on to new opportunities, retire or pass away. Therefore, it makes sense.
My HR mind, on the other hand says something else. Truly, I have not experienced many Succession Planning Processes work as intended. Various studies tell us, that while about 60-70% of companies do conduct Succession Planning, the actual execution of said plans is often more uncertain. It seems like overall succession structures and procedures are in place but when it comes down to reality companies have difficulties in actually following the prepared procedures.
I cannot stop thinking about HR’s role in this. Are we good enough and persistent enough to challenge the CEO and the top management group about what they want? Do we know how the concept of succession planning fits into our company’s strategies? Are we good enough to understand the challenges working with Succession Planning? Are we good enough to design and implement solutions that are efficient for the business and easy to work with? If we can answer a positive yes to those questions, then Succession Planning can be very successful but if we fail to deliver on those questions, I would not recommend going into this area.
Some Important Considerations
So, if we in HR are capable of delivering a Succession Planning product that the whole organization can benefit from a number of things need to be in place.
Not surprisingly, there is not just one approach that can be applied to every company. The first step is to determine what is important and valued by the organization’s culture and also any current and emerging threats facing the organization. The core leadership competencies needed to achieve the company strategy must also be identified. These competencies should be integrated into the organization’s performance management process, training and development activities and into the compensation system.
Before the process can get up and running, buy-in must be gained from all levels of management, starting with the CEO or/and top management group. While the CEO “owns” the succession plan, HR is responsible for developing a process that fits into the culture and unique management practices of the organization. Additionally, all individual managers and executives must be held accountable for developing their replacements and the leadership pipeline. Given that strong leadership is a strategic driver of success, many companies have elected to tie a manager’s demonstrated ability to develop others into his or her performance appraisal.
The Benefits of Succession Planning
In a very practical sense, developing and retaining leadership talent is both a strategic and economic necessity. By filling positions internally, you can reduce the time needed to reach proficiency, limit hiring costs, and eliminate turnover resulting from a poor fit with your organizational culture. With a formal succession plan in place, managers have a 360 degree view of the available, well-groomed, and trained resource pool within the organisation to choose from for any open position.
For the employees there are some obvious benefits:
- When employees are aware that they have been groomed for a certain key role, they have a sense of expectation and satisfaction for what lies ahead of them in the event of a vacancy for the said position. It boosts their self-esteem and encourages them to be more efficient in performing their responsibilities in the current role.
- Knowing the organization's plans for your next potential opportunity—and that there is one—reinforces your desire for career development and career opportunities. This development is one of the areas that employees want most from their employer.
- Employees take interest in identifying the key skills and experience required to scale up to fill in for a certain potential role when an opportunity presents itself. With this awareness within employees, they are better prepared for progression whenever the opportunity shows up.
- It adds to the individual value of an employee if he or she is competent to fill in for the next potential key position in the company. Hence, if succession planning is formalized, it gives more visibility to the employees in the company. Managers are aware of the key employees who qualify for a certain key position. This would not be possible in an informal system though.
Next, are business results. Future viability and performance requires “the right people in the right place at the right time.” So you must continually develop qualified pools of candidates ready to fill critical positions and ready to step in when there are unplanned losses of key leaders. Costs and organizational risk continue to go up for external searches. Even if you find someone with the right credentials, you may not recognize the lack of culture fit. Filling leadership positions internally cuts down on hiring costs, ramp-up time and lost productivity.
Effective succession planning provides enhanced and targeted employee development, which leads to improved employee morale and engagement, increased workforce productivity, and expedited goal achievement. And with so many leaders planning for retirement, proactive knowledge transfer enables organizations to identify and capture the skills and competencies of retiring employees so they can develop qualified successors and facilitate smooth transitions. Proactive and effective succession planning prepares an organization to manage many kinds of resource crisis. All this means a significant return on investment and better business results.
The new world of Succession Planning
Now, we have seen that Succession Planning can add value to the company but effective succession planning requires significant company investment and a senior management that understands and is committed to individual development. In today’s ever-changing business environment, where lifetime employment is not necessarily desired and certainly not taken for granted, high-impact succession planning helps high potential talents build their repertoire of leadership and managerial skills, and is a useful way to retain these important players. It also assures that there is a pool of talented leaders to pull from as businesses maneuver to respond to market opportunities.
Some experts have a different view on Succession Planning. They claim that focus on a specific person(s) to fill a specific job role is limited because it is too narrowly focused. Instead, they want to focus on identifying overarching skill gaps across the organization and creating talent pools based on the skill gaps critical to the company’s success. Rather than starting with a job to fill or a person to replace, this perspective begins by defining the critical skills the company needs to thrive, such as risk management, business acumen, and strategic planning. The employees are then assessed against those skills to identify individual gaps. Next, the data is use to create a skills gap matrix of the company as a whole. This makes it easy to identify major gaps in the company and focuses training and development in the right areas.
With a focused development plan, a more qualified workforce and more diverse talent pools for succession are created. Instead of training one or two people to perform in a specific job role as defined by the talent pool, this new approach focuses on training people in critical skills areas that can span multiple job roles.
Hot or not?
Effective succession planning requires significant company investment and a senior management that understands and is committed to individual development. In today’s ever-changing business environment, where lifetime employment is not necessarily desired and certainly not taken for granted, high-impact succession planning helps high potential talents build their repertoire of leadership and managerial skills, and is a useful way to retain these important players. It also assures that there is a pool of talented leaders to pull from as businesses maneuver to respond to market opportunities.
A growing number of companies look to external candidates to fill vacant leadership positions. For instance, in 2013, organizations filled 66% of positions with external candidates and only 26% with internal candidates, according to a survey conducted by the Society for Human Resource Management. In some cases, an external hire may be the best new leader, but industry knowledge, internal relationships, and the characteristics of proven leadership may be more important than locating a superstar talent elsewhere.
In all cases, you need carefully to consider why you want to build up a Succession Planning Concept and whether your company has the right skills to do so.
To find out more about how PPI can help your HR professionals step up to the challenges of successfully implementing Succession Planning contact Gerry Buckley at the PPI Network at firstname.lastname@example.org