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TheImportanceOfSuccessionPlanning.docxThe Importance Of Succession Planning, Now More Than Ever
By Kara Dennison, SPHR, CPRW, EC,
June 25, 2024
Forbes
For organizations to succeed in a competitive market, they must plan ahead. One aspect of planning often gets overlooked, but it has big implications for organizational continuity and success: succession planning. This strategy involves identifying vital business roles and creating a talent pipeline. The goal is to ensure a smooth transition when key leaders or employees leave.
Succession planning is important for all businesses, of all sizes and industries, but it is especially true now. The world faces new challenges and uncertainties, starting at the beginning of the post-pandemic era. Without a long-term strategy, businesses risk business continuity and talent management, leaving them open to risks.
The Relationship Between Global Crisis and Succession Planning
The events of the past few years have shown the importance of agility, resilience, and future-readiness in organizations, especially as the COVID-19 pandemic forced many businesses to handle tough situations. Many businesses that survived faced supply chain disruptions and the ongoing talent crunch. These pandemic-related changes have also altered the attitude towards work. Workers now look to retire as soon as they can or quit for better opportunities. This has led to more employees leaving, triggering the Great Resignation or the Turnover Tsunami. Almost 48 million quit in 2021 and 4.35 million more in 2022. CEOs aren’t immune. 1337 CEOs also left for greener pastures in 2022, an increase of 1.8% from 1314 recorded in 2020.
With the market’s high turnover, companies must improve their bench strength at all organizational levels, including management and executives. Succession planning is necessary to achieve that.
Succession planning helps leaders plan for the future. It also helps them keep top talent and provide a career path for high-potential employees. This, by effect, increases retention, engagement, and productivity. Additionally, it increases transparency from the top down, fostering buy-in at all levels.
Succession planning creates a diverse talent pool. It helps cut recruitment costs and stop knowledge loss. These impact the bottom line. Contrary to what’s expected, most companies don’t have a succession plan.
A 2020 survey by the Institute of Corporate Productivity found that about 70% of leaders have rescheduled or delayed leadership programs. Companies that don’t prioritize leadership programs until someone leaves or retires and without a succession plan may find that this delay or lack of planning may backfire in a fast-changing world like ours. If unexpected turnover occurs, productivity will be lower, causing talent shortages and big revenue drops.
Why Succession Plans Are Key For Businesses Today
Succession planning is an important piece of any forward-thinking business. As a leader, you don’t want to leave gaps when skilled people depart. This can have devastating effects on your organization's efficiency and bottom line. A strong succession plan will help your organization be flexible for any eventuality. A succession plan also helps the careers of the leaders and the high-potentials within the organization. Here are some top benefits:
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Ensuring Business Continuity:
While all employees are important, not everyone can easily be replaced. When those occupying highly specialized roles decide to leave, it might cause a huge strain on the organization’s bottom line and knowledge retention. Depending on the complexity of the job, it can take up to 1-2 years for a new hire to fully learn and excel in that role. So, it's even more important to practice succession planning.
By finding and training future leaders for key roles. Organizations can prevent long disruptions to operational processes during transitions.
Mitigating Talent Shortages:
The continued talent shortage has made it hard to attract and keep top talent. Effective succession planning allows organizations to grow and keep high-potential employees. This cuts the need for costly external recruitment and lowers the risk of talent gaps.
Fostering Employee Engagement and Retention:
In 2022, less than 1 in 3 U.S. employees were engaged at work, leading them to look for new jobs. A good succession plan can boost employee engagement. It shows commitment to developing and growing employees' careers. As a result, it boosts motivation and loyalty. This ultimately cuts turnover rates and costs of bringing on new hires.
Driving the Growth Goals of Organizations:
The business landscape changes fast. Organizations must be proactive and adaptable to stay competitive. Succession planning ensures a pipeline of diverse, skilled leaders. This helps organizations navigate change, drives innovation, and responds to changing market demands.
Facilitating Knowledge Transfer:
Losing knowledge is a big risk. It happens when experienced employees retire or leave an organization. Effective succession planning involves capturing and transferring institutional knowledge. It ensures that crucial information and expertise are not lost during transitions.
The Succession Planning Process: A Successful Approach
In order for succession plans to be successful, businesses must take a practical approach to adopting them. The steps may vary by organization, but, a full succession planning process usually has five stages:
Identifying Critical Roles:
The first step is to find the roles and positions that are critical to the organization’s success. These roles are key to the organization's operations, strategy, and long-term growth. This may involve working with business experts or consultants to help gain an outside perspective.
Analyze attrition rates and see the impact of vacancies in these roles. Start by looking at the organization generally. Then, break it into departments. Then, narrow down to specific positions in each department. When taking this inventory, gather data including details like job profiles, qualifications, and background.
Assessing Internal Talent:
Once critical roles are found. Organizations must assess their talent to find high-potential employees. These employees can be groomed for future leadership or specialized roles. This may involve performance evaluations, talent assessments, and identifying development opportunities. When you identify these employees, interview them and their leaders to learn their areas for improvement. Find out if they are interested in the proposed roles. By so doing, you build a talent pipeline, which ensures there are candidates ready to step up in the future.
Developing Talent Pipelines:
This focuses on knowledge transfer. Based on the assessment, organizations can create plans for identified successors. The plans are tailored to nudge them in the right direction. This may include mentoring programs. Also, job rotations and cross-training. And educational opportunities and exposure to executive decision-making. Endeavor to build a culture where knowledge is shared, rather than being held by one individual. More-tenured employees should work with potential successors.
This process accomplishes three things: It reduces knowledge loss, boosts junior employees’ morale, and makes it more likely they'll stay. Lastly, it tests the senior employees' ability to train, which gives them better leadership skills in the long run.
Implementing Succession Plans:
Talent pipelines allow organizations to execute their succession plans. They help with knowledge transfer. They also help with on-the-job training and smooth transitions when key roles become empty. If a talent gap occurs, your best HR leaders can then use the right resources to work with internal recruitment teams. They will make a plan to advance or attract top talent.
Monitoring and Evaluation:
Like most HR plans, succession planning is ongoing and requires regular monitoring, evaluation, and adjustment. Organizations should track metrics, including retention rates, internal promotion rates, and the success of successors in new roles. This data can inform future iterations of the succession planning process.
Overcoming Challenges in Succession Planning
The benefits of good succession planning are clear. But, organizations often struggle to run successful programs. Common obstacles include:
1. Lack of Senior Leadership Buy-In: Succession planning often fails due to a lack of commitment and support from senior leaders. About 70% of succession plans fail within two years due to this lack of support.
2. Resistance to Change: Some employees or leaders may resist succession planning. They fear changes or threats to their positions. Good change management and open communication can help alleviate those fears and show those leaders their place within the succession plan.
3. Limited Resources: Succession planning can be resource-intensive. It needs dedicated time, staff, and money. When trying to implement complex succession plans for critical roles, organizations must prioritize them and allocate enough resources to ensure success.
4. Inadequate Data and Metrics: Robust succession planning relies on accurate data and metrics, which range from talent assessments to performance evaluations and organizational needs. Investing in the right tools and tech is key. They help capture and analyze this data. Without them, companies will hardly make a good succession plan. The plan must be resilient and inclusive.
Most organizations can reduce risks by finding and developing a pipeline of talented leaders and key employees. This will also keep the business running and keep employees engaged and loyal. Succession planning will drive long-term success even if challenges may exist. However, organizations that prioritize succession planning and use HR professionals' expertise will be better prepared to navigate change. They will also be able to adapt to market demands and thrive in a competitive business world.
In Uncertain Times, Succession Planning Is More Important Than Ever
April 23, 2022 | Kathryn Tyler
Website: Society for Human Resource Management
In a previous HR position for a global mining company, Cady O'Grady, SHRM-SCP, discovered that half of the company's employees—sales and administrative personnel, technical experts, and executives—were eligible for retirement within three years.
Specialized talent was hard to find in the mining industry in 2008; O'Grady and her leadership team had been concerned about the shortage of new talent for a while. And although the company had made some progress filling positions, challenges remained. Among them: Fewer college students were majoring in mining, and regulatory and environmental requirements on companies were discouraging people from pursuing jobs in the industry.
O'Grady and her team ended up looking to similar industries—steel and paper services—to find individuals with transferrable skill sets so the company could then grow its own talent.
"The people strategy was more challenging, but it was well worth it," O'Grady recalls. "We had the opportunity to think more innovatively, and we were very successful in that process."
Nevertheless, the situation taught her the value of having a succession plan in place, she says.
A High-Stakes Game
Succession planning is a bit like chess in that business leaders and their HR teams must assess the board with an eye on the next move—and the next five moves thereafter. If one piece falls, they must develop a winning strategy using the pieces that remain.
Many organizations don't think about succession planning until someone retires or dies.
"Then the company is operating in a crisis situation, which leads to poor decisions," says Mary Kelly, chief executive officer of Productive Leaders, a Dallas consultancy, and co-author of Who Comes Next? Leadership Succession Planning Made Easy (Productive Leaders, 2020).
In today's environment, where many employees are retiring as soon as they become eligible and workers of all ages are jumping ship after a rough period characterized by pandemic-related changes, having a succession plan is more important than ever.
"Ten thousand Baby Boomers retire daily, and somehow companies are surprised by this," Kelly says.
In 2021, almost 48 million workers quit their jobs, the highest number on record. In addition, a near-record 4.35 million U.S. workers quit their jobs in February 2022, according to the U.S. Bureau of Labor Statistics.
Also last year, 1,337 CEOs left their posts, an increase of 1.8 percent over the 1,314 CEOs who did so in 2020, according to Chicago-based outplacement firm Challenger, Gray & Christmas Inc.
Jackie Anderson, HR director at RMI, a 180-employee transportation and warehousing company in Mattawan, Mich., has been watching these trends closely—even though her employer is family-owned and operated.
Assess Roles
In an August 2021 survey of 580 members of the Society for Human Resource Management who were actively working as HR professionals, 56 percent said their organization didn't have a succession plan in place. Only 21 percent reported having a formal plan, while 24 percent said their organization had an informal plan.
The first step in developing a succession plan is to determine which roles to focus on.
Alex Clark, SHRM-SCP, HR director for Sonstegard Foods Co. Inc., a 450-employee egg producer in Sioux Falls, S.D., breaks job roles into two categories: short term and long term.
"For short-term needs, I like to use a triage approach and identify the critical activities our locations need to operate day-to-day," Clark says. "If the product cannot be made, sold and delivered, the business won't have customers or revenue."
To meet the long-term needs of the business, it can take years to internally develop employees who will execute the company's strategy and future vision, he says.
Many business leaders believe succession plans are needed only for executives. However, O'Grady, now director of HR for Greensfelder, Hemker, & Gale PC, a St. Louis-based law firm with 260 employees, has a succession plan for every position in the organization. "If an organization is communicating that only senior leadership positions have succession plans, it sends the wrong message that some people are valued more than others," she says.
Still, unique roles will likely require more-complex succession plans. While all employees are important, not all jobs are key.
"For instance," RMI's Anderson says, "if a driver doesn't show up for work or leaves the company, we have 90 other drivers who can bridge that gap. But our planning department is lean. If a planner decided to leave our company, we can't take anyone from any other department to do that job, and it would leave a huge hole in our company."
At Sonstegard Foods, the HR team has identified key positions that are critical to the company's operations, such as dryer operators and plant maintenance workers who know how to make the product and maintain specialized equipment. These individuals need an aptitude for mechanical, electrical, pneumatic and computer systems.
"They have to be well-rounded in multiple crafts to move 6 million eggs a day from the barns to the cartons and turn liquid egg into a dry powder that meets precise quality, customer and regulatory specifications," Clark says.
"Their skills and knowledge make them critical to retain because of the difficulty to find competent people in competitive environments, and also essential to cross-train with multiple colleagues to ensure coverage during lean times," he adds. "The goal is for everyone to have identified replacements to fill in for any vacancy, vacation or leave."
Find Candidates
The second step in succession planning is to identify who might be capable of stepping into new roles if employees in key positions leave the company
"Who is ready now?" O'Grady asks. "Who would be ready in one to three years? Three to five years? Identify what types of tools, training and knowledge [you] would need to share in order for individuals to be ready to become a successor."
At the law firm, "we do a talent review process to identify the breadth of talent across the organization," O'Grady says. "We have a lot of individuals with highly technical expertise that can't be learned overnight. We build in plans for more-tenured individuals to do a knowledge transfer to the next generation, even if they aren't leaving the organization or being promoted anytime soon. It's important to build a culture where knowledge is shared, rather than just being held by one individual. Constantly share knowledge and information."
Anderson emphasizes the importance of including the identified employees in the planning process.
"Interview the succession candidates to see what areas they want or need to develop and if they have an interest in fulfilling the role," she says. "I've had employees who don't want to be leaders. I had one employee who stepped into a sales manager position and hated it. His sales were declining, so I asked him what was happening. He said he hated being a manager. We put him back into a sales position, and he excelled again."
'It's important to build a culture where knowledge is shared, rather than just being held by one individual.'
Cady O'Grady, SHRM-SCP
Capture Knowledge
After managers have determined who might be suitable for roles, it's crucial to provide those candidates with training and development opportunities. This might include participation in mentoring, job-rotation, job-shadowing or cross-training programs; attendance at conferences; or enrollment in educational courses
"We like to do rotations, which can help individuals learn from others," says Amy Jo Young, senior director of organization effectiveness for defense systems at Northrop Grumman Corp., an aerospace and defense company headquartered in Falls Church, Va., with 90,000 employees.
Cross-training is essential, many experienced HR professionals say.
"Make sure leaders aren't hoarding information and are involving those who may be tapped to lead in the future," says Anthony T. Eaton, HR advisor at pharmaceutical distributor AmerisourceBergen in Irving, Texas, which has 25,000 employees. "Ensure there is a level of inclusion and delegation," he advises. "For example, when a leader takes extended PTO [paid time off], have the identified successor step into the role and lead in their absence."
When you know someone is leaving, ensure that the departing employee is working with a potential successor to transfer all pertinent knowledge about the role.
"Don't wait until the last minute," Young says. "Right now, we have someone who has been working on a program for some time and that employee is retiring in a couple of months. We have named the successor, and they are working together to meet the customers [and] key stakeholders and learn about the contract."
What should HR professionals do if an employee resigns unexpectedly?
"If you find out Bob is going to leave and no one was planning on him leaving, the head of HR needs to get somebody from outside [Bob's team] to shadow Bob for three days and take notes," Productive Leaders' Kelly says. "Every meeting, every conversation needs to be captured and mapped out."
Why is it critical to document the transfer of knowledge?
"If you ask Bob, who has been in the job for 20 years, how to do his job, it would be akin to asking him to explain breathing," Kelly says. "He's been doing it so long he can't recognize what he does."
Kelly spent 25 years in the U.S. Navy, where individuals are given new job assignments every two or three years. Despite the frequent changes, the Navy maintains a high degree of readiness and effectiveness. According to Kelly, that's because "every single person prepares the next person to take over the job. You prepare a binder to brief that person about everything they need to know about the job and leave the binder on the desk with your cellphone number. Everybody takes responsibility to share institutional knowledge for the good of the organization."
One way Northrop Grumman captures institutional knowledge is by engaging in storytelling, and videotaping this process. "It helps us capture historical perspective and leverage procedural information that's critical to the program," says Young, who adds that the videos are used as a reference and that security concerns are kept in mind.
"We will have employees sit down with a group of people to share information, and we videotape it or they videotape themselves talking into the camera to dive into some details whenever we need them," she says.
Plentiful Replacements?
Succession planning is an ongoing, evolutionary process.
"Have a process in place for regular review of succession plans and the associated development for those who have been identified as potential successors," Eaton says. "Are they being groomed to take on a role?"
Experts also advise HR professionals to communicate regularly with potential successors.
"Stay connected with your employees," O'Grady recommends. If succession candidates are considering leaving, HR professionals need to know so they can determine whether it's possible to offer enticements, such as a more flexible work schedule, to retain individuals whose needs might have changed.
"With the amount of turnover happening presently, making sure there's depth on the bench is critical," Clark says.
Preparing multiple succession candidates for each key position gives the company maximum flexibility, which is vital in today's fast-changing environment.
Revisit succession plans on a quarterly basis. Life changes drive job changes and, thus, vacant positions, so consider the personal situations of the employees involved: Who is retiring, getting married, having children, graduating with advanced degrees, losing parents or experiencing serious health challenges? Also determine who needs mentoring, job rotations or additional training, and then ensure managers have what they need to develop capable replacements for their teams.
After all, planning now prevents future panic.
