The Libor rate-rigging scandal has resulted in the men at the top of Barclays, chairman, Marcus Agius, and chief executive, Bob Diamond, falling on their respective swords.
But inevitably any changes to the senior management team have a direct impact on the business, potentially leaving it feeling rudderless and having a negative effect on staff morale.
Such a scenario also means that successors will need to be appointed, in a process that can prove both time-consuming and costly – particularly if an organisation’s reputation has been tarnished, it is under pressure and there may be reluctance among possible candidates to take on a post that could be perceived as a poisoned chalice.
As a result, there is no doubt that succession planning should form a key part of any organisation’s long-term business strategy. This is not least because businesses of all stripes are finding it increasingly difficult to fill leadership and senior management positions, whether they have been engulfed in scandal or not.
On the one hand, this situation has been caused by a lack of suitable external candidates – key talent is often reluctant to take the risk of changing jobs during an economic downturn.
On the other, the financial difficulties of the last couple of years have seen learning and development budgets being cut and organisations having to do more with less.
Skills gaps
This means that too many employees have been asked to take on more senior positions without necessarily having the requisite skills in place. But with a significant number of ‘baby boomers’ due to retire over the next few years, this leadership crunch is only likely to become more acute.
Research bears these statements out. The ManpowerGroup 2011 Talent Shortage survey, which questioned 40,000 employers across 39 countries and territories, revealed that one in three employers experienced difficulties in filling posts due to a lack of available talent.
Industry analysts, Bersin & Associates, also indicated that finding suitable candidates to include in their leadership pipeline was one of the top three challenges that senior managers faced in 2012.
Just under two thirds were already seeing such gaps as either ‘critical’ or ‘urgent’ problems to tackle over the year ahead, a 20% increase on findings from six months earlier.
Therefore, against this backdrop, it would appear that there is a clear business case for introducing succession planning processes into your organisation today.
Not only can such processes ensure that skills and responsibilities are seamlessly transferred from one individual to another as they move up through the ranks, but research has also found that such activity helps to cut staff turnover and boost engagement levels as employees are able to see a clear career development structure ahead of them.
In addition, newly-promoted workers from inside the organisation are inevitably productive and effective more quickly than new hires coming from outside.
Key steps to follow
Despite these benefits, succession planning extends no further than a few ideas jotted down on the back of a napkin for a surprising number of organisations.
The Bersin & Associates 2011 TalentWatch Survey, which interviewed senior HR and business leaders from more than 130 corporations around the world, discovered that 47% could not identify their high potential employees and almost 50% adopted an ad hoc or had no approach for managing potential high fliers.
This scenario would seem to imply that all too often, succession planning is underdeveloped, badly executed or simply ignored.
But to introduce an effective succession planning strategy, there are a number of key steps that can be followed. Firstly, it’s important that the focus isn’t simply on chief executive and senior board director roles.
While replacing high profile leaders such as Steve Jobs at Apple, John Browne at BP and Jack Welch at General Electric is likely to prove particularly challenging, it is important that a succession planning culture permeates the entire organisation and that the net is cast as widely as possible.
Another key consideration is to align succession planning activity with the organisation’s long-term business strategy. To do this effectively means being clear about business goals and models as well as what skills are required for success – not just today, but in five or even 10 years time.
Managing risk
Once critical roles and skills have been identified, the next step is to evaluate which high-performers have the potential to step into these positions. For those with a longer-term focus, this can also include recent graduates who have only just started to realise their potential.
Something else important to consider, however, is ‘talent mobility’. If individuals are to acquire new skills and experience, particularly in a large, global organisation, it is necessary to have a dynamic internal process for moving them around from role to role.
But it is also vital that succession planning isn’t simply viewed as a standalone business process. It must be integrated with other core HR activities such as talent management, reward, learning and development, performance management and recruitment.
L&D activity can, for example, help individuals to start developing the necessary skills to move into new roles, while performance management systems track their progress. Similarly, if it becomes clear that expertise needs to be brought in from the outside, such findings will influence future recruitment moves.
To this end, senior HR leaders may find it useful to create individual employee profiles that indicate where they are within the organisation, what future roles they have the potential to move into, the training and skills development that will be required to get there as well as any retention risks.
Succession planning itself is all about managing risk and has the ultimate aim of safeguarding the future of the business. This means it’s high time that organisations ensured that they have their house in order.
Rob Caul is chief executive of e-learning, talent management and succession planning software providers, e2train and 81Boxes.
