Common Pitfalls of Succession Planning And How To Avoid Mistakes
Succession planning can sometimes seem overwhelming. With so many moving parts, it can be difficult to know if you’re on the right track. Below, we outline 10 common succession planning pitfalls that organizations make. Building formal plans and checks to avoid these pitfalls will help to ensure the success of your succession planning process.
Succession planning can sometimes seem overwhelming. So today we are going to talk about some of the most common mistakes organizations make when developing their succession plans to hopefully help you avoid making the same mistakes. The first mistake is focusing exclusively on the executive level. It is common for organizations to focus succession efforts on the executive team, and this makes sense given the time and resources required. However, this approach can leave big gaps in critical non-C-suite positions. When building your plan, do not forget to include lynchpin roles in other areas such as admin or IT. Next is using a one-size-fits-all competency framework. There are a lot of decisions that you can make during the succession planning process, and it can be tempting to use an off-the-shelf framework to save time and money. However, they are unlikely to fully capture the uniqueness of your organization. Do not let the convenience of these ready-to-use models lead you to overlook important characteristics. Third is describing an idealized version of the role. When it comes time to identify which competencies are needed for a given role, there can be a tendency to describe those qualities you would like to see rather than what is actually needed. But to see the best results, remember to focus on what is essential to success in the position. And next is underestimating the changing nature of work. Part of what makes succession planning such a powerful process is that it takes into account future needs. This means taking time to consider how the role will change. Think about the impact of changes to technology or to your industry more broadly. Be sure that the role you are planning for will still be around when the succession candidate is ready to take over. So those are just some of the common mistakes we see companies make when developing their own succession plan. If you recognize some of these issues in your own organization, we recommend you visit our sample succession planning process page. This simple process can help you build a robust succession plan that avoids these common issues. In our next video, we will talk about some of the mistakes that get made when it comes to implementing the succession plan.
What are 10 Common Pitfalls of Succession Planning for Businesses?
- Focusing exclusively on the executive level
- Using a one-size-fits-all approach
- Idealizing the role
- Underestimating change
- Keeping succession plans a secret
- Relying on a single successor
- Assuming success will extend to other positions
- Delegating succession planning to HR
- Failing to update the plan
- Inadequate documentation of the process
1. Focusing exclusively on the executive level
Given the time and resources required for effective succession planning, many organizations tend to focus their efforts solely on executive level positions. This approach can lead to detrimental gaps in important non C-suite roles, particularly when individuals in lynchpin roles suddenly leave the company. Don’t forget to consider including key positions in administration or IT when developing your succession plan.
2. Using a one-size-fits-all competency framework
A common succession planning mistake is adopting an existing or dated competency framework on which to evaluate succession candidates. This may save organizations a great deal of time. However, any off-the-shelf framework is unlikely to adequately capture the complexity and uniqueness of your organization. Don’t let the convenience of ready-to-use competency models lead you to overlook characteristics that are important to your organization.
3. Describing an idealized version of the role
When identifying which competencies are needed for a given role, there can be a tendency to describe those qualities you’d like to see of the individual in the focal role, rather than the actual requirements. Remember to focus on what is essential to success in that position.
4. Underestimating the changing nature of work
An important part of succession planning is anticipating future needs. Part of this means taking time to reflect on the future of the focal role. Consider how changes in technology, your organization, or the broader industry might impact the responsibilities associated with the position. Be sure the successors you identify are being developed for a role that will still be around when they are ready, and that they are being trained in skills that will be essential in the future.
5. Keeping the succession plan a secret
Succession planning is an important strategic process and there can sometimes be the feeling amongst leadership that the plan should not be communicated throughout the organization. However, a lack of transparency might lead some high-potential employees to leave the organization if they do not perceive the availability of strong advancement opportunities. Communicating to employees that these opportunities exist is likely to have a positive impact on their motivation to pursue developmental goals, and to remain with the organization long-term.
6. Relying on only one successor per role
When asked about their succession plan, some companies feel they are on the right path because they have identified a successor for key roles. However, this can be a problem if your one internal candidate decides to leave the organization or accept a position in a different department. Taking a more narrow focus can also make it difficult to fill the inevitable vacancy left in middle-level leadership roles when an employee steps up into a senior leadership role. Having a talented pool of candidates gives you options when it comes to filling a focal role, and ensures you’ve developed sufficient talent to fill vacancies as they arise.
7. Assuming that success in one position will extend to success in a higher position
A common mistake made in succession planning is the assumption that high performing individuals at one level will continue to perform well in a higher-level position. Continued success is not a guarantee, which is why it is so important that you carefully identify the competencies needed for success in the focal role. Evaluate all succession candidates against this criteria, not their past performance.
8. Delegating full succession planning responsibility to HR
Succession planning should always be a company-wide initiative. Depending on your organization’s structure, it might make sense for your HR department to spearhead the process, but placing all the responsibility on HR is typically not effective. The most common reason that succession planning fails is a lack of management support. In order to achieve success, all parties need to be held accountable.
9. Failing to update the succession plan regularly
Some organizations go through the work of developing thorough succession plans but then become stalled in the implementation phase. This is a common succession planning mistake. You should never go more than 6 months without reviewing your succession plan. As individuals undergo professional development, their readiness to move into new roles should be re-evaluated. Also, remember that succession planning is a dynamic process – your plan may need to be updated if your organization faces unexpected challenges.
10. Inadequately documenting the succession planning process
As outlined in SIGMA’s six-step succession planning process there are several components that go into the creation and implementation of a succession plan. Carefully documenting this process can sometimes seem low priority in light of all the other things that need to get done. However, having this information is important for two key reasons. First, you will be better able to communicate the success of your program if you can clearly state what was done and the impact it had on key indicators. This is essential when making funding requests to extend succession planning to other areas within the organization. Second, having a carefully documented succession process is vital if your organization ever finds itself in a situation where it must defend selection decisions. You may not know the true value of having this information until you need it.
Top 5 Challenges of Succession Planning
There are several succession planning challenges that organizations need to be aware of.
1. Clarifying Roles
There is a growing trend among both leaders and employees to wear multiple hats in the organizations they work for. This type of job-sharing can keep teams lean and efficient, but it can also damage role clarity and become a major barrier to succession – it is incredibly difficult to hire or groom a successor for a jack-of-all-trades. For this reason, companies should keep job requirements (e.g., the education, experience, knowledge, skills, duties of a given role), job descriptions, and candidate success profiles up to date. Another benefit of this practice is that role clarity is associated with significantly higher work satisfaction and decreased turnover.[i]
2. Promoting from Within
One of the best indicators of effective succession planning is the ability to promote from within. Unfortunately, many companies find themselves lacking the in-house talent required to do so.
The best way to rise to the challenge of promoting from within is to be proactive. Invest in strategic hiring and employee development so that you can attract and retain top talent. Establish a succession planning process that will allow you to build an effective pipeline and a strong succession bench.
DID YOU KNOW? Over 20-30% of todays’ boards replace outgoing CEOs with external hires. These new habits are costly; average salary, bonus, and equity incentives for outside CEOs amount to $3.2 million more than for those promoted from within. Not only that, internally promoted CEOs tend to outperform external counterparts in the long-run, delivering superior market-adjusted shareholder returns in 70% of preceding years.[ii]
3. Resisting Bias
Another major succession planning challenge is the difficulty to avoid bias. In a study done by Yale University, researchers found that even after training to be objective, both male and female participants were more likely to hire men, consider them more competent, and pay them $4,000 more per year than women.[iii]
These biases can hamper succession planning because they not only lead to legal trouble, they also prevent businesses from achieving their full potential:
- Research done by McKinsey & Company showed that organizational diversity correlated with better performance and that gender diversity in management increases profitability
- Companies in the top 25% percentile for gender diversity on their executive teams were over 20% more likely to achieve above-average profits
- Companies with more culturally and ethnically diverse executive teams were 33% more likely to achieve above-average profits
- For every 1% rise in a workforce gender and cultural diversity, there was a corresponding 3% increase in sales, and 9% increase in revenue
To help you overcome this challenge, here are five common biases to watch out for during the succession planning process:
- Halo/Horn Effect – The tendency for first impressions, either positive (halo) or negative (horn), to influence opinions in other areas
- Contrast Effect – The tendency to evaluate people in light of other candidates rather than objectively on their own
- Similarity Bias (“Like Me” Bias) – The tendency to prefer candidates similar to oneself, both in demographics (age, gender, race, etc.) and personality (communication styles, social styles, etc.)
- Conformity Bias – The tendency to agree with decisions, or adopt impressions, of the majority of a group
- Confirmation Bias – The tendency to search for, interpret, favor, and recall information that is in light with personal beliefs and values
4. Seeing the Big Picture
As with any long-term, future-focused plan, one of the challenges of succession planning is keeping sight of the big picture. Without regular recalibration, succession planning and employee development can quickly become all about the steps and not about the strategy. Instead of checking boxes, make sure your succession plan is based on mission-focused goals.
5. Maintaining Morale
Succession planning is a major strategic process that will inevitably impact your employees. Depending on how it is executed, succession planning can help or hurt your team’s morale. Studies show that employees’ sense of security is directly related to the “structuredness,” or ambiguity of succession plans.[iv] More than that, minimizing disruption during leadership transitions will increase overall performance and decreases turnover.[v] Therefore the best way to not only maintain, but boost morale, is to create and communicate a clear succession plan.
Overcoming Common Pitfalls of Succession Planning
Now that we have explored some of the pitfalls companies experience when building a succession plan and the challenges of succession planning in general, we would like to focus on common errors organizations make when putting their succession plans into action. Following this review, we offer recommendations based on best practices to overcome these common succession planning mistakes.
We include common mistakes in the succession process related to:
- Deciding who to involve in succession
- Outlining the criteria on which decisions are made
- Being clear about the process
- Managing perceptions
- Communicating with employees
In our last video, we talked about some of the common mistakes’ companies make when developing their succession plans. Today, we will discuss ways organizations go wrong in the implementation of these plans. And the first is keeping succession planning a secret. Succession planning is an important strategic process, and for that reason, some senior leadership teams feel it should not be communicated throughout the organization. But a lack of transparency might lead some high potential employees to leave the organization if they don’t think there are advancement opportunities available. Communicating your succession plan to your employees is likely to have a positive impact on their motivation. Next, is relying on only one successor per role. Companies sometimes think they are on track if they have identified one successor for each key role. The problem with this is that if your one succession candidate decides to leave, you have no backup plan. That is why having a pool of talented candidates is important. It gives you options when it comes to filling important positions. Next, is assuming that success in one position will extend to success in a higher position. It is not uncommon for companies to assume that if an individual performs well at one level, they will continue to do so when promoted to a higher level. But continued success is not a guarantee. Remember to carefully evaluate all succession candidates against the criteria needed for the position, not just their past performance. Next, is delegating full succession planning responsibility to HR. Now look, depending on the structure of your organization, it might make sense for HR to spearhead the succession planning process. But succession planning should always be a company-wide initiative. The most common reason succession planning fails is a lack of management support. So, remember, keep all the parties accountable in order to achieve success. Fifth is failing to update the plan regularly. Some organizations go through the work of developing through succession plans but become stalled in the implementation phase. You should never go more than six months without reviewing your succession plans. Remember, succession planning is a dynamic process. Do not be afraid to update your plan as you make your way through. And last is failing to properly document the process. Carefully documenting each step of the succession process can sometimes seem low priority. But having this information is important for two key reasons. First, you will be better to communicate the success of your program if you can clearly state what you have done, and the impact it’s had on key indicators. And second, documentation is vital if your organization ever finds itself in a situation where it must defend selection decisions. This is a case where you will not know the true value of having this information until you need it. So, those are some of the most common mistakes we organizations make when implementing their own succession plans. For a complete list, check out our top 10 succession planning mistakes post at sigmasuccession.com. And at Sigma, we have a variety of resources available to help you through the process. You can visit our template library or download our free succession planning guide to get started today.
Why Does a Company Need a Succession Plan?
Think of your businesses and consider for a moment the effects of a valuable member of your management team, such as your CEO, CFO, Controller or Executive Director, leaving the organization. What kind of challenges would this have on your company structure, processes and operations? Often, the impact of staff and leadership changes has a ripple effect that is eventually felt by all company departments in some capacity.
If the above notion is cause for concern, it may be time to consider a strategically developed succession plan for your organization. Businesses inevitably face change and that is particularly true for organizational leadership roles.
Succession Planning Best Practices
The best way for companies to prepare for the future is by engaging in a succession planning process that allows you to proactively prepare for staffing changes by leveraging the talents and company experience of existing staff and team members. Succession planning for businesses assesses potential gaps in staffing that may come down the line. It allows businesses to develop a plan of action by establishing key skills and requirements for the role and developing a pool of proficient and experienced team members that would seamlessly transition into the role.
To avoid unnecessary complications and company-wide challenges, it’s best for companies to be armed with a succession plan targeted for each key role of the management team. This begins with thorough succession planning aimed at developing a unique strategy to suit the individual needs of your business and leadership team members.
Causes of Failure of Succession Planning
For succession planning to be truly effective, it requires the commitment and buy-in from a company’s leadership team. From there, the importance of succession planning can truly be understood and implemented company-wide and will lead to long-term succession planning success.
Unfortunately, it is not uncommon to encounter pitfalls of succession planning, and these can occur for a number of reasons depending on company structures and priorities.
Reasons Why Succession Plans Fail:
- A lack of urgency to invest the time, resources, and funds to actively maintain a business’ succession plan.
- Companies aren’t looking ahead. Unfortunately, management often looks to the past to fully understand the future needs of management teams, when in reality they should be looking ahead at company and technological advances.
- No formal internal assessment plan or document has been created. A formal document or internal succession plan should be created to account for new and future leaders so that the succession plan can properly factor in the skill sets and talents of future staff and evolve as the company grows and expands.
- A potential successor can leave the organization. Whatever the reason may be, whether personal or professional, it’s important that companies establish a pool of potential candidates as well as focus on the retention of this valuable pool of candidates.
- Existing leadership members, who stay on far past their expected departure time, can pose a serious problem for established succession plans.
- Some leadership teams believe that succession planning falls solely on the shoulders of the HR department. This can lead to succession planning failures, as succession planning should ideally start from the top, with buy-in and involvement from the leadership team.
Need Help Getting Your Succession Planning Started?
Avoid common pitfalls of succession planning and let us help develop a strategic succession plan for your business. At SIGMA, we have a variety of resources available. Start by reviewing our Sample Succession Planning Process for strategies on how to avoid each of the pitfalls and succession planning challenges we’ve discussed here. Contact us to learn how we deliver a full year Succession Plan for each member of your leadership team in just two half-day workshops.
[i] Hassan, S. (2013), The Importance of Role Clarification in Workgroups: Effects on Perceived Role Clarity, Work Satisfaction, and Turnover Rates. Public Admin Rev, 73: 716-725. doi:10.1111/puar.12100.
[ii] Harrell, E. (December 2016). Succession Planning: What the Research Says. Harvard Business Review. https://hbr.org/2016/12/succession-planning-what-the-research-says.
[iii] Agarwal, P. (October 19, 2018). Here Is How Bias Can Affect Recruitment In Your Organization. Forbes. Retrieved from https://www.forbes.com/sites/pragyaagarwaleurope/2018/10/19/how-can-bias-during-interviews-affect-recruitment-in-your-organisation/#551eeb0d1951
[iv] Dibner, A. S. (1958). Ambiguity and anxiety. The Journal of Abnormal and Social Psychology, 56(2), 165–174. https://doi.org/10.1037/h0049064.
[v] Friedman, S. D., & Saul, K. (1991). A Leader’s Wake: Organization Member Reactions to CEO Succession. Journal of Management, 17(3), 619–642. https://doi.org/10.1177/014920639101700306