Why Your Company Needs a Succession Plan
[J-TAO Report] Succession planning is not an intuitive part of many companies' future planning strategies. Although it makes sense to plan for future leadership and critical position transitions as best as possible, developing a succession plan when organizations have limited knowledge about the succession planning process or are unsure about current potential successors can be tough.
Succession planning provides a head start for organizations that feel they have team members who can potentially play larger roles in the company when the time is needed. Taking the time and spending the energy and resources on a solid, evolving succession plan pays off in ways that many companies do not fully understand until the act of transitioning key roles occurs.
What is succession planning?
Although succession planning is identified in many ways, the practice is typically described as a focused process for identifying, developing, and preparing future leaders and subject matter experts (SMEs) to maintain a proverbial "pipeline" of probable next-gen leaders. This process, typically, is mostly an internally focused one. That is, succession planning is generally a program that identifies current employees within the organization that it desires to further develop (e.g., train, coach, mentor, etc.) for future leadership or key roles in the company.
Research shows most companies don't have a succession plan or program to develop one in place. A study by the Furst Group found that more than 50% of companies admit to not having a succession planning program. Further, as the Furst Group study highlights, when you factor in that close to close to 40% of the U.S. workforce retired in 2020, not having succession plans in place has many companies scrambling to be prepared for the future.
The succession planning process varies, but it's generally a 12 to 36-month process of preparation and development. During this process, there should never be any guarantee or promise to an employee of a future promotion or move into a key position. What this process does is identify an employee for learning new skills and training that positions them for possible advancement down the road. [Looking for human resources software that can help with succession planning? Check out the HR software we think is best for small businesses.]
How to develop a succession plan
Succession plans can be as simple or as complex as you desire. It is important to not let perfect be the enemy of really good.
ProSky, a provider of predictive intelligence for hiring managers and human capital professionals, offers a five-step method for initiating a succession planning program. Take one step at a time, and do not be afraid to add or remove steps that you feel best position your organization for long-term success.
- Identify important (or critical) positions. Most companies do not create a succession plan for every single position (although some do). You are best served selecting all of the essential SME and mid-to high-level management roles to initially focus on.
- Assess all organizational employees. Next, you want to develop simple assessments that help leaders identify potential candidates for advancement within your current team. Remember, you are not "anointing" your next CEO right now – you are simply identifying candidates with promise and whom the organization may select to invest time and treasure in.
- Select current team members. When succession planning falls apart, it is usually at this step when it is time to select employees for development as future leadership. Identify and enhance your training and development tools, both internally and externally, and allow time and space for the identified personnel to train and be mentored A major deficiency that companies commonly overlook is creating time for employers to seek outside training courses, mentor sessions, and so on. This is an investment in your selected team members, and it needs to be recognized as such through planning and workload (re)distribution.
- Create your program and begin development. Now is the time to create, with the help of your HR team, or an external HR specialist, the tools and development methods that you can use to develop your selected team members. This should be through a combination of internal (e.g., managerial/SME job shadowing, mentoring, retired company manager-led coaching, etc.) and external resources (e.g., workshops, conferences, external coaching resources, webinars, books, etc.). Do not overlook small resources, nor should you be afraid of spending money on larger, more comprehensive learning models and resources.
- Evaluate and duplicate. All organizational programs, regardless of their focus and purpose, should be evaluated constantly. You should always look for improvement, advancement, development, etc. Your succession planning program is, without a doubt, no different. As you see it working smoothly, continue repeating this program initiative again and again. It is also advised to include succession planning within your organizational strategic plan.
Lastly, here are some helpful do's and don'ts that G&A Partners has shared with its clients. One of their recommendations, as we have also shared, is not hesitating to look outside your company for new or additional talent. This practice can enrich your overall succession planning endeavors.
Why is having a succession plan important?
When it comes to senior roles and key positions within the organization, not knowing how future transitions of leadership will be handled can be unsettling and potentially calamitous to the organization. Many of these possibilities include:
- Industry-specific talent shortages. Within many industries, there is fierce competition for leadership and top talent. If you are not maximizing your own talent and bringing in new talent, there is a likely threat that you will be outmaneuvered by your competition who is.
- Identifying skill gaps and training needs. Leaders and HR teams need to be constantly identifying and assessing the talent and resource needs within their organization. As the industry and marketplace evolve, the company, thus the workforce, need to evolve as well.
- Retaining institutional knowledge. "Knowledge continuity" is a term that refers to what is lost when turnover is extensive and replacements are solely brought in from the outside. Internal succession offers a richness of company knowledge and history that allows for more efficient planning and progress as age-old organizational (and industry) knowledge is passed from one to another throughout transitions or a "changing of the guard."
- Increasing morale and retention through employee-investment. Sparkbay reports that when employees see that there are opportunities for advancement within the organization they work for, they stay longer and work harder. Specifically, 94% of employees said they would stay with their employer longer if the company invested in their professional development.
What if a company has no one of interest to develop?
This is the case in many companies, large and small. Although there may be a desire to develop an actionable succession plan, in some organizations, there could be only a few or no employees of interest (or who do not have the ambition, interest or talent) to develop over time for the company's future needs.
This issue is both a present challenge, as well as a future staffing challenge, that must be overcome. If you are a small business, the challenge could be as simple as having too small a team, with few human resources in which to select from for development.
Many small family run/owned companies fall into this category, which is further complicated as, much of the time, family members are preselected to take over whether they have been properly trained, mentored and prepared or not.
As is often the case with organizations with a small number of employees and limited resources, there is a dearth of viable candidates. To develop a pipeline of potential future talent, reach out to networks, boards and other industry-specific resources to expose industry professionals to your company and its brand. This practice will make word-of-mouth recruitment of someone external much easier if you have done the work ahead of time within your network.
Some companies initially bake future external hires into their larger succession plan for the company. This practice ensures that new professionals with new ideas, perspectives and ways of thinking are being added to the company's corpus.
If you are a larger company with this challenge, there are more available options. If you cannot identify any future SMEs to fill in when current SMEs depart from the company, then you have a hiring and workforce development problem. You should spend time carefully assessing which key team members are presently performing well and who is not. The time to make personnel corrections to your team is now. Do not wait until critical employees depart your organization to realize that you should have worked harder on staffing your team's pipeline with top talent.
If you have a senior leadership concern (e.g., director level, C-suite, executive, etc.), then a similar approach should be carefully reviewed by the senior leadership team (with the guidance of HR). At times, this challenge can be solved by looking externally. Regardless, take internal candidates of interest, who lack skill sets or experience in important areas, and invest in external training and development opportunities so you can honestly assess their ability to proceed in leadership if and when needed.
Additionally, if you have a team of directors and none of them are able to, based on their skills, move to the next level, then carefully and wisely prune your director-level team and bring in new team members whose capacity is far more diverse and capable for the company's future needs and desires.
How succession planning fits into 'career pathing'
Career pathing is a broader term applied to a company's overall approach to training and development for its employees. Although not all companies have a formal career pathing program, it, too, is a wise idea to implement.
Chances are that your company's top talent is looking for additional training, mentoring and opportunities for growth. If your employees cannot find these opportunities within your organization, they will leave for one that can provide them with the chances for growth they are seeking.