The first thing that likely comes to mind when you hear succession planning is retirement. However, needing to prepare for talent leaving due to retirement is just one rationale for having a formal succession planning process.
Here are just a few other reasons your organization should introduce a formal succession plan:
Many think of succession planning as a solution for the after effects of people leaving. However, it may just be the most powerful tool for retaining top talent in the first place[i]. Formal succession plans have been shown to increase engagement and reduce the likelihood that employees will leave their company through strategies such as:
- communicating a clear career path[ii],
- adding transparency to promotion decisions[iii], and
- providing structured opportunity for the development of your best employees[iv].
these components of openness and transparency fosters a positive workplace
culture. This will help create an engaged environment that employees actually
want to stay in, encouraging long-term retention and commitment.
One of the largest risks to an organization’s growth is the inability to scale their talent. While technology can help us upgrade our capacity to do many things at once with the addition of a few servers, the people (and specifically leadership) part isn’t so simple. The growth of a business will create new leadership needs that, left unfilled, will derail the business. In the absence of a formal succession plan, most organizations will recruit externally, which comes with a steep learning curve.
External hires tend to cost your organization more in both recruitment expenses and in salary, yet often receive lower performance evaluations in their first few years than internal hires do[v]. It takes time for an external hire to adjust to not only their new position, but also to a company’s culture. This period of onboarding may result in a rockier transition than if your company chose to promote from within. A formal succession plan ensures that you have a talent pipeline for filling needs internally.
Executive turnover has been a hot topic in the news, and tends to be the result of extreme situations that most organizations will not face. These provocative incidents, however, lead to an important question for all organizations: if a linchpin member of your team were to leave today, would you have a credible successor able to take their place? In not preparing a pool of candidates ready to step into a role, you may find yourself holding on to underperformers longer than you’d like. This may be because your top talent is moving on to other companies with more opportunities, because your junior employees are not given chances to grow their skills, or because you simply do not have enough talented people to fill all the roles in your organization. Without a succession plan, your company may be vulnerable to unexpected loss, and to further damage from insufficient talent to fill the vacancy.
There is no way to know when an unexpected absence, termination, or retirement will hit your company, but succession planning is a proactive strategy to prepare yourself by maintaining a qualified pool of candidates for your most critical roles.
I genuinely believe that most organizations see the value of diversity to their culture, competitiveness, and bottom line. However, diversity at leadership levels still has a long way to go, with women holding fewer than a quarter of senior leadership roles worldwide, and Hispanic, Black, and Native people still underrepresented in leadership positions relative to the population[vi]. While it is easy to point the finger at ‘old white men’ hiring and promoting more of the same, I think it is more due to lack of formal succession planning. Without a formal plan, individuals are more likely to engage in replacement hiring, and to rely on cognitive biases, such as promoting someone similar to themselves[vii]. On the other hand, with a mature succession plan focusing on building long-term and sustainable talent benches, organizations will have more options (and more time) to develop employees based on their merit, experiences, ambitions, and interests. By looking to fill a role, rather to replace a specific person, and using objective measures, organizations are more likely to end up with a qualified and diverse leadership team.
examples highlighted above should give you a glimpse of just how powerful a formal
succession plan can be. Retaining quality employees, helping your organization
grow, and preparing for the future of your organization are just a few of the reasons
a detailed, personalized succession planning process will have both an
immediate and a long-lasting impact on your company.
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[i] Anderson, H. J., Baur, J. E., Griffith, J. A., & Buckley, M. R. (2017). What works for you may not work for (gen) me: Limitations of present leadership theories for the new generation. The Leadership Quarterly, 28(1), 245–260.
[ii] Trepanier, S., & Crenshaw, J. T. (2013). Succession Planning: A call to action for nurse executives. Journal of Nursing Management, 21, 980-985.
[iii] Church, A. H., Rotolo, C. T., Ginther, N. M., & Levine, R. (2015). How are top companies designing and managing their high-potential programs? A follow-up talent management benchmark study. Consulting Psychology Journal: Practice and Research, 67(1), 17-47.
[iv] Watkins, M. D. (2012). How managers become leaders. The seven seismic shifts of perspective and responsibility. Harvard Business Review, 90, 64-72.
[v] Krell, E. (2015). Weighing Interval vs. External Hires. Society for Human Resource Management. Retrieved from https://www.shrm.org/hr-today/news/hr-magazine/pages/010215-hiring.aspx (Mar 11, 2019).
[vi] Jones, S. (2017). White Men Account for 72% of Corporate Leadership at 16 of the Fortune 500 Companies. Retrieved from http://fortune.com/2017/06/09/white-men-senior-executives-fortune-500-companies-diversity-data/ (Mar 11, 2019).
[vii] Chen, C.-H. V., Lee, H.-M., & Yeh, Y.-M. Y. (2008). The antecedent and consequence of person-organization fit: Ingratiation, similarity, hiring recommendations and job offer. International Journal of Selection and Assessment, 16(3), 210-219.