A successful business is built on effective planning and strategy. The future working of businesses depends on quality employees who play crucial roles, although, they may need to be more consistent. Consistency varies due to reasons like age, skills shortage, or competition.
This leads us to succession planning, ensuring these crucial roles are always filled. Succession planning benefits all types of organizations whether big businesses, small startups, or family businesses. With succession planning, the organization has an added advantage over conserving financial resources and time-to-hire.
An organization must be well-prepared with such strategies, that are now easily available with online tools, as 40% of talent reviews are conducted virtually. These online resources provide regular skill assessments that can be used to train potential employees and aid them in climbing up the succession ladder.
What is Succession Planning?
Succession planning is the strategy or the steps that a company takes to maintain crucial roles in events such as retirement or withdrawal from the company, by analyzing and evaluating potential employees and further educating them.
Although succession planning includes selecting the right person for the role to replace a retiring employee, its important feature is to maintain the talent pipeline. Why talent pipeline? As it is significantly better than hiring a new employee altogether. Keeping succession planning in mind, a company can start cultivating talent once they see the potential an employee offers to them.
“Whenever you see a successful business, someone once made a courageous decision.” - Peter F. Drucker
This above quote is true when it comes to decisions like succession planning and for an effective succession following points need to be noted -
- Succession planning is a never-ending process and needs to be updated now and then.
- Every senior member of the company should be included in the process to keep their vision for the company intact.
- Succession planning needs to have an early initiation and should be strategically organized at every step.
- The process should be equal for every member of the company.
Knowing what is succession planning, one should take into account that it is completely different from replacement hiring. Replacement hiring though is similar to the process of hiring someone to replace but it does not reflect in long-term talent development.
This process is widely known and followed frequently, with 1 in 3 CEOs being hired externally as of 2016, which is remarkably poles apart from the results about 50 years ago.
This being said, succession planning moves forward with hiring internally rather than externally due to certain factors like the passing of knowledge, preceding team relationships, and the tedious onboarding process.
Examples of Succession Planning
McCormic and Co.
Here is the classic example of an effective succession planning where the CEO devised the plan over years to tailor potential executives. The CEO of McCormick and Co., Robert Lawless successfully transferred his role to Alan Wilson, his successor in 2008.
The CEO strategically and efficiently created a plan within a period of five years. He made use of a small part of his discretionary compensation to identify and train the right person for the role. The organization then observed the progress of candidates over the period. This shows the integrity and dedication needed for an effective succession planning.
The Walmart Family Succession
Walmart is a successful retail business that has been managed by the family since its establishment by Sam Walton in 1962. The key takeaway in this example is the family’s commitment to achieve the founder’s vision along with staying upfront with the ever evolving retail market.
They evolved themselves with current market trends, technology while maintaining company’s values. They kept themselves transparent in communication and any decision-making by creating a Family Council and a trust to ensure the company’s shares.
Such adaptation and transparency keeping in mind the company’s vision makes it a successful succession strategy.
Mariott International
This example shows effective succesion planning in family business, where Mariott International is a successful name in the hospitality industry since its inception in 1927. J.W. Mariott Jr., son of the founder, is the mastermind behind the company’s success, as he was the driving force in the company’s global expansion.
Due to its effective succession planning, the company has been able to achieve its current success, which was achieved through strong leadership, excellent customer service, and vision to maintain company’s culture.
Succession planning - Myths or Reality?
There are a few outtakes of succession planning which are considered misconceptions. A study was conducted that proposed the following points-
Succession planning for CEOs only
It is believed that succession planning should be considered for important members like the CEO or any senior member of the company. This understanding must be changed, as succession planning is not for any specific member but any person who encompasses critical roles, for example, technical roles and office administration.
These roles, though, are looked down upon and are very crucial for the overall operations of the company. Hence, succession planning must be assigned to each role.
Succession planning should be managed by HR only
HR is the backbone of the management side of any organization, but, they don't need to be burdened with everything employee-related. A survey claimed that 42% of organizations depend on HR for managing the succession planning process.
This percentage seems to be higher than 23% where the board committee members of the organization involve themselves in the same process. HR along with all the senior management and associated trustees should work together to bring the proper functioning of succession planning.
Succession planning is for retirees only
Succession planning comes up when a position needs to be filled, and not necessarily for CEOs, but also retiring members. However, there is a misinterpretation that the positions become vacant when a member retires.
This holds untrue, as a position can come up for various factors like changing roles, illnesses, relocation, or death. Therefore, whatever the reason for the vacancy, succession planning should not be hindered.
Succession planning is not required for start-ups
Over 50% of America’s employees are hired by small businesses or start-ups, and two-thirds of these businesses do not have a proper functioning succession plan. They mention having a flat structure where few levels of management between senior members and employees exist.
They also believe that being a small company there are low chances of employees leaving the organization. However, small businesses do experience members resigning from a post for reasons of the business being a start-up.
Therefore, such businesses must carry out succession planning by cross-training employees to fill out each other's roles in the organization.
Succession planning is not required for family businesses
Similar to small businesses, succession planning is important for family businesses. Family businesses involve a delicate and complex process when it comes to transferring the leadership role to members.
With succession planning managing the business becomes easy by providing the members with specific roles, distribution of profits, creating board group, and other points like taxes, etc. In all, succession planning avoid bias in making decisions.
Why is succession planning beneficial?
Cultural importance
When discussing about any organization, one often mentions about work culture. Here, the work culture is referred to as social and behavioral patterns at a workplace, where values and common goals are shared and discussed.
Succession planning has an important role in bringing out the best of work culture. Employees get reassurance when there is a strategic and long-term stability in an organization, as well as when they know that there is a clear plan in events of transition of roles.
Beyond stability, succession planning offers these employees motivation. These people understand that hardworking and deserving candidates are selected for the process, and therefore they will provide higher work performance so as to include themselves in the talent pipeline, since the process requires identifying and training the talent pipeline.
This gives the employees a working environment of learning and growth.
Todays workplace culture gives a significant importance to diversity and inclusion. Succession planning can become a tool to promote this culture using its objective process. It also reduces bias with the assistance of skills assessment platforms like WeCP which are used to assess potential candidates on skills and are not bias-based.
👉 Read More: How UST Uses WeCP to Transform Candidates into Skill-Mapped, Project-Ready Talent
Operational importance
The operation of a business is most benefited by proper succession planning. With succession planning in effect employees work to achieve the targets because of increased motivation and job satisfaction.
Succession planning involves in retaining the talent and therefore, organizations show commitment by investing in an employee and train them for future roles by upskilling them. Thus, almost 94% employers confirmed with having an effective succession plan, the organzation’s operations were positively impacted.
Financial benefits
It seems that succession planning requires a major financial management, but in fact this is not true. An effective and strategised succession planning does not require much time and costs compared to an unplanned one.
Unplanned succession requires companies to look for talent on urgent basis, which then results in investing more money and time. External hires are found to be costly, for instance, $3.2 million more are needed on average for outsider CEOs than those who are promoted from within. This is a lot more money one can imagine.
Key Strategies for Effective Succession Planning Process
Succession planning is never an easy process and should involve continuous employee development. Members like project managers, an expert in succession planning, senior leaders, and potential successors are key people to bring an effective succession planning. It requires lot of systematic strategies and needs to be followed in a step-by-step process -
Identify critical and vulnerable positions
To begin with succession planning, the first step is to recognize the key positions that will be vacant in the near future.
One can begin with the top position, which is the CEO position, a critical one, and then scroll the organization chart to the bottom. Factors like qualifications, experience, soft skills, etc. that impact the company’s future must be assessed and evaluated.
Develop eligibility requirements
The next step in succession planning is to create a job profile of the position and its role. This aids the company to secure the right person to carry on the role.
When developing the profile one must consider the criterion needed as well as knowledge, skills and abilities, etc. required.
Identify a talent pipeline
After establishing the role, the next step is to search for positions that can be temporary filled in case of any vacancy.
They can also be applied as a successor position. An important tip is to be transparent with the employees regarding succession requirements thus, gaining their trust and confidence with the process.
One can verify the similarities and differences between the two roles and then try to establish an alignment.
Appoint successors from the qualified positions
Almost at the last step, that is to select the right person as a successor, whether internal or external. One can take feedback from leaders or can invite employees to express their interest for the role.
The selection process is of vital importance and must be done with utmost diligence, as this ensures the companies succession planning to be effective.
Create an action plan to prepare successor(s)
Once the person is selected, an action plan should be created to train and educate the successor. This will not only ensure the an effective succession planning but also motivate the new successor to work towards achieving the company’s goal.
Evaluate the succession plan
The last step is to verify the transition of the role to be a smooth process by documenting and evaluating the entire process. This step is crucial too, as it provides a view of the process and aids in making any changes if required for future transition processes.
Best practices for effective succession planning
A company’s HR team should recognize the importance of succession planning and bring it into effective by following few practices. They are -
- The first important step to follow is to create a strategy for succession planning by outlining the objectives and methods used. This will aid them in deciding the roles, individuals to include, training materials and resources, goals of the plan, budget required, and time period needed.
- They can also conduct trial plans instead of directly proceeding with program.
- Assessments and evaluations must be carried to verify the skills and knowledge of selected individuals.
- Constant training and educating the employees ensures better employees from which they can select for the program.
- Final evaluation of the program should be conducted to analyze program’s effectiveness.
Conclusion
Succession planning has never seen a bright future with company members now recogizing its value and importance. The need of having a secure strategy for creating a position and filling it with the right individual has never been more important than before.
These strategies also benefit in creating a better talent pipeline and can be achieved through skills assessment tools like WeCP.
With final thoughts, a succession plan should be made as a necessity for the businesses, whether its big or small one, or family-run, to achieve a continuous growth and maintain the overall vision of the company.
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