Succession planning may sound like a dry business term. But in reality, any company that wants to survive long-term can’t afford to ignore it — or do it poorly. Talent management software is often used to facilitate the process. However, engaging in succession planning involves a lot more than the technology you use to accomplish it.
In order to reap results, you first need to understand what it is, why it matters and the key ingredients you need to be successful.
Here’s an overview of what we’ll cover:
- What is succession planning?
- Why is succession planning important?
- 4 key tips to get it right
- What to avoid
What is Succession Planning?
By definition, succession planning is a development process that focuses on training talent to take over leadership positions when current leaders retire, move on to another company or depart for any other reason.
The most typical application of succession planning is preparing to replace the organization’s CEO. And the reason is the huge expense associated with being unprepared. In such cases, the lack of a succession plan costs $1.8 billion on average, according to one study.
It’s true that laying a strong foundation for the future starts with the top level. However, CEOs and other executives aren’t the sole mission of succession planning. It also plays a central role in cultivating replacements for lower leadership positions such as managers and supervisors.
In this way, it seeks to ensure the long-term health of the company at every level. Assuring smooth leadership transition is vital to a company’s continued prosperity, especially in a time of complexity and uncertainty in the business environment.
Why is Succession Planning Important?
Whether you’re a family-owned business or a mega corporation with offices around the globe, you need to invest in future leadership — much like a professional sports team uses draft picks and minor league affiliates to ensure they can remain competitive for years to come.
The reasons are complex and multifaceted:
- The increasing retirement of baby boomers
- The war for talent leading to labor shortages
- Critical skill gaps widening as technology and work culture continue to evolve
Despite the overwhelming agreement among executives that leadership issues are a high priority, only about 14% have enacted a strong succession planning process for their businesses.
Furthermore, among those companies that do claim to pursue a succession plan, the failure rate of newly assigned leadership is alarmingly high. Up to 40% of new CEOs don’t meet expectations within the first year and a half.
A significant number of failures in the process are due to the process itself. Traditional approaches that embrace narrow and inflexible strategies can’t be expected to succeed in a business environment that’s broken all conventional rules of operation.
Companies that do succeed have understood it’s more than just maintaining and updating lists of candidates. Such a process will never reveal and correct critical skills gaps, which can lead to inefficiencies, result in higher costs and even derail your strategy for success.
Given this landscape, the challenge will continue to become more difficult to overcome. Succession planning can act as a roadmap to help your company navigate a path toward longevity.
What Benefits Can You Expect?
A strategy can help your organization identify which areas need the most attention. Perhaps you already have several strong candidates to take over the CMO role, but no one’s on track to step into the CIO seat. Having that visibility is key.
Finding these skills gaps allows you to focus training in the appropriate places. It also ensures you provide development to the talent most suited for filling those gaps.
Succession planning can bring additional benefits as well:
- Save time and money due to fewer hiring needs
- Establish a standardized process for leadership development and replacement
- Retain the knowledge of workers who retire or move on
- Be prepared for the future and react to changes more effectively
- Boost performance by identifying weaknesses
4 Key Tips to Getting it Right
As mentioned earlier, scrambling to fill a vacant role at the last minute is like playing with fire. Planning may seem like unnecessary preparation at this stage in your business.
But as the boy scouts say, “Always be prepared.” You’ll do your company a favor by getting a head start.
Here are four tips that can help direct you as you begin your succession planning:
1. Start With a Strategy
Seems obvious — you can’t effectively plan and put a program into motion without an underlying strategy, after all. So the question then becomes, what does that strategy look like?
Start by identifying your organization’s needs, goals and values. You can then align those with your succession planning to ensure your strategy takes you in a direction that’s compatible with what your business does and stands for.
A second consideration is the scope of your plans.
Maybe you’re a small business and just need to ensure there’s a successor to hand the reins to. Or maybe you’re a large enterprise with offices in seven cities around the globe and have a host of complex needs. Whatever the case, your organization’s business needs will determine the extent of your plan.
The scope should consider both the present and the future, according to Deloitte. Your business will evolve, so it’s important to keep your succession plan flexible so you can adjust to changes as they come.
So what roles are best to include in the scope? Deloitte suggests looking at roles that are both hard to replace and will have a higher impact in terms of value.
Another piece of the puzzle is to evaluate your current talent. Today’s employees will form the foundation of your succession planning (don’t forget to look outside as well — more on that in a bit). Knowing which employees are your top performers can help direct your efforts.
Finally, as you put a strategy into place, it’s helpful to consider what metrics you’ll use. Again, the exact metrics should reflect your company’s situation, but here are a couple suggestions to get you started:
- What’s the potential? Asking this for each employee gives you a better picture of where and how they can contribute as their career progresses.
- What would losing someone cost? This goes beyond the raw numbers. Look at the overall impact — everything from skills to knowledge.
- How are employees performing? It’s important to know how well each employee is doing his or her job. Measuring performance also helps you locate top performers, who may be the best qualified to become leaders down the road.
2. Focus on the Entire Organization
A strong process should involve the whole organization.
The idea that leaders can only come from a select few positions at the top is dated and counter-productive. Talent development, especially leadership development, is as relevant to candidates in middle management as for those at the top.
You never know where the best talent may come from. Why limit your pool of candidates and potentially miss someone lower in the ranks who would be a perfect fit?
Succession planning should be ongoing and flexible enough to fill positions at every level. Only then will all employees feel empowered and motivated to track their own course for development and potential career moves.
A key part of succession planning at the organizational level is being open and clear about your plans and vision. A lack of transparency will fail to engage employees and can undermine confidence.
Employees will be more invested in their development if they understand their position in the succession system and the requirements for moving to a higher level. That calls for clear communication.
However, it’s equally important to balance expectations. Being transparent doesn’t mean you’re guaranteeing anything. When discussing future opportunities with employees, be clear that you’re not making promises. Otherwise, employees can get false impressions and become frustrated if things don’t pan out as they expected.
3. Develop a Talent Pipeline
The individual contributors and lower-level management of today are your leaders of tomorrow. However, the qualities required to lead well are evolving and require greater attention.
Furthermore, you won’t need to fill just one role with one set of responsibilities. A diverse, multifaceted approach is required. For that reason, cultivating a healthy talent pipeline is essential.
For leaders at any level, it’s no longer sufficient to be skilled in only one area of the business or to have been a loyal employee for many years. Future leaders need a wide array of skills, each different depending on which role they’re preparing to fill.
There are a few things you should keep in mind as you focus on creating a robust pipeline.
- Lay a solid foundation. Your company has full control over whom it hires. Start your talent pipeline off on the right foot by hiring with both short- and long-term goals in mind.
- Communicate. Feedback is critical to progress. Without it, employees won’t have any idea if they’re performing up to expectations. It also helps show the areas they need to work on.
- Go beyond training. Some things can’t be learned from going through a course. That’s where mentoring can make a difference. A structure that involves mentoring where appropriate enables your current leaders to personally invest in promising employees. This helps your talent gain those intangible skills and qualities that don’t come from answering questions on a quiz.
- Use a focused approach. You should have a clear understanding of what each employee wants. Not everyone will be interested in becoming a manager or executive. Targeting the ones who want or are willing to become leaders ensures you make the best use of effort and resources.
- Don’t forget about lateral options. For those who aren’t a good fit for a leadership role, consider offering other development opportunities that keep them engaged. They can continue to grow, contribute and have value even if they’re not scaling the corporate ladder.
- Plan for diversity. Diversity and inclusion (D&I) issues are top of mind today. The best way to facilitate long-term D&I at your company is to start building from the bottom.
Talent management systems play a vital role in the development of your pipeline. Top Employers Institute notes that “increasingly sophisticated career and talent management software … has made succession planning at all levels less of an art and more of a science.”
These systems have tools that make the entire process easier to manage. For that reason, it’s paramount to ensure the system you choose can support your process and needs.
For a list of some key features to look for, check out our talent management requirements checklist.
4. Consider All the Factors
Training leaders for the future can be a huge undertaking, especially if you’re building everything from the foundation up. It’s important to thoroughly evaluate it from every angle.
Here are some questions you can ask to help prepare:
Who will be in charge of the process? Typically, this is the realm of the HR department, along with key executives (CEO, CHRO, etc.) and a Board of Directors if relevant.
What’s our timeline? Some positions may require years of experience and expertise. It’s best to identify these positions and the time it will take to prepare qualified replacements.
How will we deal with resistance? If managers or other leaders aren’t on board, you’ll need to be prepared to handle that. Employees might also resist the disruption. Change is hard, so it’s important to plan how to address resistance.
Do we have the tools we need? For example, you’ll have to invest in training or career development programs if you don’t already have any in place.
Are we committed to succession planning? Successful execution starts at the top floor. Leaders need to take an active interest in developing their successors.
How much time can we invest? A half-baked approach won’t work. You need to make sure you can devote enough time to do it well and see the ROI.
What to Avoid in Your Planning
While building a strategy is critical, it’s also equally important to avoid pitfalls during the process. Here are a few you should be on the lookout for:
- Failure to prepare. You need everyone on board in order to properly implement your plan. This includes high-level leaders down to managers. Communicating the strategy, plan and overall goals will help set everyone up for success.
- Unconscious bias. Too often, it’s easy for leaders to want their replacements to be clones of themselves. But that can lead to rejecting talent with true potential while focusing on those who aren’t necessarily equipped to do the job.
- Too narrow of a focus. Don’t confine yourself when looking for talent to nurture. Be open to including talent outside your organization or those in roles that aren’t next in line based on their position. The goal is to find the best fit, not rigidly follow a set of processes.
- Lack of action. While having a plan is essential, it can’t make a difference unless you put it into action. There needs to come a point where you transition from simply planning to actively developing your talent according to your succession plans.
The Wrap Up
It’s difficult to ensure the long-term vitality of your business if you don’t adequately prepare. A strategy acts as the foundation for succession planning, which in turn acts as the foundation of your business amid a volatile and uncertain environment.
Start building that strong foundation today so it can last well into the future.
Where is your company at with succession planning? What tools do you use? Comment below to share your thoughts!