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 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.
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:
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.
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.
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.
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.
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.
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:
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.
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.
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.
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.
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.
The benefits of good succession planning are clear. But, organizations often struggle to run successful programs. Common obstacles include:
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.