Lars Dalgaard shares best practice for succession planning in your organisation.
More successful businesses are embracing succession planning to deepen their employee bench strength and ensure top talent at every level of the company. Once viewed as a boardroom activity among executives to fill top leadership positions, succession planning has evolved into a powerful tool focused on proactive — and ongoing — assessment, promotion, and retention of key performers throughout the business.
Succession planning: Everyone’s talking about it — why now?
In the past, succession planning was something companies did to plan for the worst-case scenario: replacing senior leadership due to retirement or career change. This dialogue ensured the executive team was taken care of, but ignored key contributors in lower ranks across the enterprises that were also critical to the business.
While succession planning continues to play an important role in managing talent depth at the executive level, times have changed. Industrialised countries are facing the challenge of a rapidly aging workforce. The resulting talent gap will directly impact the future sustainability of every enterprise and companies are waking up to the fact that there are costs and pain associated with not having a succession planning strategy in place.
What succession planning can do for your business
Simply put, succession planning has the power to transform how companies manage the future of their talent — from top to bottom — in order to positively impact bottom-line results. Done well, it drives an ongoing, proactive dialogue between managers and senior executives that identifies and tracks individuals’ talents in key positions. Companies can then put key contributors on a growth path where they can be most valuable to the company. Key benefits include:
Better career development
Succession planning facilitates genuine development of employees — for both their own benefit and that of the organisation. After identifying a talented employee, it’s understandable that a smart company will help train and support that individual in a way that moves their career forward.
Effective succession planning can help ensure your company:
We’ve all seen the scramble that happens when an employee unexpectedly leaves. The time and stress involved with interviewing, hiring, and ramping up a new employee is a flat-out burden to any company. Effective succession planning translates to a definitive plan — and reassurance — that your organisation can dramatically reduce the effort to replace a key contributor by literally having the right replacement strategically engaged and ready to step in.
There are two primary ways that succession planning delivers measurable cost savings. The first is in avoiding the significant out-of-pocket expense incurred by using a third-party placement agency or headhunter. The second way is more subtle, and often unrecognised: the cost of reactively focusing on hiring and ramping-up a new employee.
When a key contributor leaves, it can often take six to nine months to bring a replacement up to speed — clearly, a huge hit to productivity at many levels of the company. While some corporations might dismiss this as a cost of doing business, they’d certainly think differently if they could get a real-time report reflecting real money lost due to employees desperately trying to fill a position instead of working toward their revenue-generating responsibilities.
Building a foundation for effective succession planning
Many companies see the value of building a succession planning strategy but simply don’t know where to start. The first step is to assess what you’re doing now to take care of your future talent with questions such as:
- What is the average age of your employees? What percentage of your employee base is retiring within the next five years?
- What is your current process for identifying employees with a high potential to take on leadership roles?
- How do you identify internal talent that may be ready to step into key roles today?
Effective best practices for succession planning
HR professionals and human capital experts agree that effective succession planning relies on three best practices, regardless of your industry, as follows:
1. Define the process
There are several key elements to designing a process that is both comprehensive and tailored to your company.
The first step is the assessment of key positions. This is a thorough survey of key positions across the company. Once you’ve assessed key positions, then the next step is to thoroughly assess the key talent in the organisation.
Once these first two steps are completed, then you can begin to generate development plans for grooming individuals and deepening your bench strength in all the critical areas of the business. The focus is on the high potential employees and how to develop and retain them.
2. Continuous review
Once the process of assessing and identifying employees at all levels of the company has taken place, managers should have a good idea of the depth and scope of available talent. The next most critical step is discipline. While succession planning can effectively guide identification, development and retention, if ongoing evaluation and measurement isn’t adhered to, the process breaks down.
3. Leveraging technology
The reality is designing, implementing, and executing an effective succession planning process can be time consuming and challenging to manage. A paper-based system is not viable because there are simply too many variables to be assessed. Just collecting and analysing data on its own to drive assessments for every employee is alone a massive undertaking.
Fortunately, there are innovative performance and talent management technology solutions available that dramatically facilitate the entire succession planning process. And, applying technology allows managers to have intuitive and easy-to-understand views of their team — including readiness and risks of someone leaving — as well as greater access to successor candidate pools through flexible search tools. But this comprehensive view of a company’s talent pool and bench strength is only possible using today’s powerful technology designed especially for succession planning.
Lars Dalgaard is CEO of SuccessFactors.