What HR professionals need to know about succession planning.
A blog post by Denise Redmond, SHRM-SCP, Rutgers University
An organization’s success and the ability to meet its goals and objectives is heavily reliant upon Human Resources deploying a well-defined talent management strategy which includes attracting, acquiring, developing and retaining the best talent in the job market. While it starts there, it certainly doesn’t end there.
What happens when an organization has early or unexpected departures within the leadership or key roles? What happens if there are unanticipated shifts in the organizational direction that require a new set of competencies? What’s the plan then? Can the organization survive the unexpected? Can it endure the knee-jerk reactions?
That answer most often would be yes – as many global organizations would attest. In fact, a recent survey conducted by Aberdeen Group showed that nearly 35% of the more than 500 executives at best-in-class companies were operating without succession management plans. Why? Lack of time for planning, belief in fluidity versus rigidity of a plan, lack of hierarchy in job structures were some of the top reasons. Viewed through their various lenses, all are extremely valid. However, what are the potential costs or risks to not implementing against business priorities? Do those costs and risks outweigh some of the perceived challenges and beliefs?
Succession Management Risks
Lack of an effective succession management program can adversely affect an organization in a variety of ways. Three major risks are discussed below.
Vacancy: According to a 2015 Aon Hewitt Global Risk Management Survey, attracting and retaining talent is among the top five most critical risks organizations face today and yet only 15 percent of North American companies surveyed by Harvard Business Review said they had enough successors in the pipeline for key leadership positions. Whether the vacancy is due to insufficient attention given to internal skill development, the extensive process of identifying external talent or the inability to attract the proper talent, unpreparedness creates a significant burden on current resources and staff. It also has devastating effects on the internal as well as the external perception of the brand and ultimately the beliefs surrounding sustainability of the organization. For example, when a key player leaves an organization all the knowledge, experience and relationships that person possesses can create a void. Not having a succession management plan to proactively address this risk opens an organization to disruptions in operations and employee relationships and can create uncertainty about the future.
Capacity: According to Willis Towers Watson 2014 Global Workforce Study, career advancement and development opportunities are among the top factors influencing employee engagement and retention. If an organization doesn’t have a succession management plan in place that identifies critical roles or proper stretch assignments for high potentials it will be opening itself up to employees facing challenges they are completely unprepared for thereby hampering contributions and growth as well as exposing itself to both the direct and the indirect costs of engagement and/or retention issues. The same risks occur if an organization has limited growth opportunities and/or doesn’t communicate potential career progressions. Companies with succession management plans are grooming talent and placing employees in stretch positions that offer real opportunities to learn and prepare for the next big challenge. If an organization isn’t doing that, it’s running the risk of losing its best people to organizations that are.
In a 2017 Human Resources Today article about succession management, Donald Delves, director of executive compensation at Willis Towers Watson, a global professional services firm, maintains that succession planning can serve as an incentive for employees. Recognizing they have growth opportunities with a company “keeps people engaged and motivated, and retains them,” he says. “It keeps them at the company if they’re looking elsewhere.”
A 2015 survey cited in same article validates Delves’ statement with results finding 94% of employers said that succession plans have a positive impact on employee engagement; 62% of employees noted that working for a company with a succession plan in place would make them feel “significantly more engaged” than working for a company without one; 90% of millennials said working at a company with a clear succession plan would “improve” their level of engagement.
Portfolio: Consider a company that is positioned for expansion and is looking to invest in an additional location. Does it have the employees who have the skills and experiences to deal with the ambiguity that could surface at a new location? Does it have to acquire the talent from outside the organization wherein assimilation would become the challenge?
According to Aon Hewitt, a human capital and management consulting company, there are elements embedded into a formal succession management process of top companies. Top companies focus on “advancing leaders by evaluating and addressing competency gaps, readiness, feedback, and development. These factors make succession planning more than a one-time activity. It’s fluid, making it an actionable and accountable process specifically designed to advance leaders—and ultimately, the financial position of the organization.” Organizations that have bench strength or a pipeline of key talent address challenges with speed and efficiency. They respond to market opportunities more successfully and create a more sustainable future.
So pause and reflect on what best practices are driving your company performance and what might be missing that could generate additional success and company sustainability. Succession management should be at the top of your list.
Denise Redmond SHRM-SCP, (link to Denise’s profile page) is an Instructor Advisor at Rutgers School of Business – Camden Executive Education. She teaches three Human Resources certificate programs – Professional Certificate in Human Resources Management and Human Resources Essentials Certificate These online certificate programs are self-study with one-on-one support and coaching. Upon successful completion, participants can add the Rutgers University Human Resources certificate to their resume.
For more information about these Human Resources certification programs, contact us or click on the program links below.