Something that most people have forcibly learned over the past year is that things can dramatically change in the blink of an eye. That is the same for any healthy business.
This aspect of business ownership can be intimidating, the change and the responsibility to prepare for it. But succession planning, strategic organization realignments, and creating a future leadership structure can help.
In 2020, the COVID-19 pandemic changed the way that businesses run. Lately, the Great Resignation has taken a toll on employee turnover rates. This has made succession planning and business exit planning crucial.
Key employees have been resigning at higher rates than normal and are expecting more from their employers. Higher expectations and higher turnover rates mean that employers need to step up to the plate in more ways than one.
Businesses should always have a contingency plan to protect and future-proof operations. If you’re not planning for the future, you’re risking your business and putting your company at risk.
Creating a comprehensive strategy for replacing key employees is crucial and should be one of your key practices, especially for critical positions.
Human resource departments will emphasize the fact that employees are a business’s biggest asset. With this in mind, business owners should prepare for unexpected changes as a key practice.
Whenever a key employee leaves the company, things will begin to change. The concept of succession planning ensures that change and adjustment is smooth and (mostly) pain-free. Your approach to succession planning is crucial.
Losing an employee is always hard. Not only do you lose someone who has the institutional knowledge needed to be a success in the role, but there are also the added consequences of going through costly and time-consuming recruitment and onboarding processes for external talent.
As a company, you should have procedures in place to make sure that any loss of key roles or employees doesn’t catch you off guard and leave you in the dark.
If one of your managing positions were to call it quits tomorrow, how would your business cope? Would you have a smooth integration process and interim leadership to replace this long-tenured leader and clear career development expectations for their replacement?
As a business-savvy leader, you need to expect and plan for things like employee attrition rates rising, superior employees leaving the company, and even the event of death in your managing positions.
That’s why having an effective succession plan in place helps. It means that instead of going through the task of scrambling to find new roles from elsewhere, your succession plan ensures that your internal talent is already equipped with the skills and drive needed to make a success of their next role within the company.
But before we get too far, let’s talk about the basics. Starting with what a succession plan is.
What Is a Succession Plan?
Before you can learn about how to create a successful succession plan, you first need to understand what it is and how this corporate practice is best used within the structure of an organization.
By definition, succession planning is the process of identifying and training the next generation of future leaders who could assume a leadership role should an employee in that role leave the company or get promoted within the company.
As a manager or HR employee, you know your superior employees. They have bright career paths in front of them, and they routinely go above and beyond the work of their coworkers.
They may not be ready yet for the complete transition of leadership, but soon they will be able to replace key leaders and take on critical roles. If unexpected events arise, you need to have transition plans ready.
The transfer of ownership over key projects or important clients needs to be smooth, or your overall business strategy will suffer. Organization realignments are unavoidable, but your ability to maintain the key practice of establishing an employee life cycle is what matters.
Business succession plans outline the process of filling that vacant role as quickly as possible with little time needed for recruitment and training. It may seem time-consuming, but having people ready to step into key roles will save you time and money in the long run.
What Is the Purpose of a Succession Plan?
Whether you’re running a small family business or a large corporation, you need to make crucial succession planning decisions before emergencies happen. Having a pool of talent that you can tap into is the first step of that process.
In some cases, such as in retirement or during maternity leave, staff departures are expected and even planned for. In this case, many companies have a plan to replace this crucial team member.
However, there are some cases when a senior leader leaves the company unexpectedly. Here, a contingency plan must be in place to fill their critical position quickly. Not having this plan in place could damage the company’s journey toward achieving its goals.
Succession planning is slightly different from career pathing. Career pathing is when all high-potential roles that an employee could hold within a company are mapped out as they go through a career development -whether vertically or laterally.
This is a crucial step of employee development and is necessary for setting up your business for success. However, succession planning does not stop there.
Succession planning doesn’t have to just be for the high-level senior executive roles- it should be used for any role that is considered crucial to the success of the business and that requires a level of skill set or expertise that is not easily replaceable.
If you cannot continue to support your business without a role, no matter how junior, you need to have a plan to replace them, or you will be left in the lurch when they do inevitably leave the company.
Why Is Succession Planning Important?
Succession planning is an essential and integral part of the process when it comes to the talent management process. This helps create a pathway for identifying critical roles within an organization, the people who have the proper skillset and attributes for those roles, and the positions that will need filling quickly should they become vacant.
Having a successful succession planning strategy in place will help cut the costs and time of staffing as organizations will be able to manage their recruitment in-house.
Business succession plans will typically include outlining a handover process of employing a senior leader in the interim that will handle several duties and tasks that will get them used to the role that they may take over in the future.
Who Is Responsible for Succession Planning?
Succession Planning commitment begins with management, followed by the CEO. Without the commitment in place, the process is unlikely to work effectively.
Additionally, the Board of Directors is responsible for some elements of the development plan. Their job is to hold the CEO accountable for making sure that any succession plans in place are working effectively, too.
But what is HR’s role in succession planning?
HR departments would usually be responsible for developing processes and all of the related materials in addition to the implementation. The CEO, Senior Leaders, The Board, and HR must all work together to engage with succession plans.
HR professionals should be eager to be involved in the succession planning process, as planning ahead of time will ensure they do not have to rush to hire a replacement.
If you are a member of an HR team that does not have a succession plan, you should begin to plan for this and ask your senior leadership to work with you to create a comprehensive succession plan.
What Metrics Determine Succession Planning Success?
One of the main fundamentals of Human Resources within an organization is to implement a company culture where every single employee matters to an organization. That is why when it comes to recruiting and retaining staff, they make sure that they have the best talent on board.
The effectiveness of your organization’s succession plans can be determined in several different ways.
Bench Strength: Identifying Potential and Readiness of Existing Staff
This is the measurement of talent that is ‘sat on the bench’- not quite playing the game but could be ready to be subbed at any time the need arises.
To assess the bench strength of your organization, speak with leaders regularly about the members of staff on their team. Are any of them showing potential in leadership skills? Is anybody interested in a leadership position?
Determining these things will help to identify those who are the high-potential employees capable of moving up a rank when a position becomes available.
The reason for bench strength being a strong metric when it comes to succession planning is that it depends highly on having a strong team of players who would be willing to step up to the plate and take up more challenging responsibilities and positions when needed.
Not having people in place means having to go through the expensive and time-consuming process of going through an external hire.
Risk of Loss
Another metric should not only take the employee’s skills into account but also their engagement. Employee engagement metrics are based on asking management to assess how excited and engaged an employee is in their existing position or whether they seem ready for a career move.
Managers are more likely to be able to identify whether an employee is likely to leave the company in the next six to twelve months bases on their engagement level.
Their marketable skills should also be taken into consideration as these will make the employee a potential target for outside recruiters. Employees that are engaged within an organization are more likely to be in it for the long run and are worth investing in for potential succession later down the line.
Successful succession plans prepare for gaps in teams left from promotions and departures. The metrics help managers to consider the balance of their teams when an employee leaves.
Equality and Diversity
Employers should make sure that their bench doesn’t lack the diversity needed to continually build a diverse team from the ground up. There are many benefits of diversity and inclusion within a team, including the ability to make better decisions.
Diversity in the workplace can be measured by several factors such as; pay gaps, regional diversity benchmarks, gender, age, and race ratios. Many senior leaders of companies around the world are not diverse.
This can hurt the company in the long run, and when minority employees do not see senior management that looks like them, it could impact their interest in staying with the company and their ability to envision progressing.
Increasing diversity in your workplace can diversify thought and improve your internal processes and workflows.
General Succession Planning Framework
Every succession plan needs to follow a general framework to be deemed successful. Here is a breakdown of what this framework can look like:
Identify Key Areas and Positions
These key areas and positions are crucial within an organization’s operational activities and strategy. Businesses should identify the positions that are necessary to help the organization to achieve their business goals now and in the future. They should say which of those positions would make it difficult to achieve these goals if left vacant.
Identify Capabilities for Key Areas and Positions
Focus on employee development efforts and set performance expectations. Here businesses can determine the capabilities needed for the key areas and positions previously identified. They should look at the relevant knowledge, abilities, skills, and competencies that are needed to help to achieve business goals and maintain business operations. Then inform employees about the key areas and positions and the expected capabilities needed to achieve them.
Identify Interested Employees and Assess against the outlined Capabilities
Interested employees will make themselves known. It is the job of the succession plan to be able to identify which of these interested employees has the potential to gull these key areas and positions. Career plans and interests should, therefore, be a continuous conversation between employers and employees. These conversations will help employers to be able to assess the positions that could experience vulnerability if left vacant and the potential candidates who may be ready to advance with the necessary training and development.
Develop and Implement Succession and Knowledge Transfer Plans
Companies need to use strategies that implement learning, training, development, and the transference of corporate knowledge into their succession planning and management. This could look like mentoring and training new hires as part of their professional development.
Here, companies can link their employees’ learning plans alongside the necessary knowledge, skills, and abilities needed to fulfill current and future roles.
Evaluate The Effectiveness of Current Plans
Monitoring and evaluating a business’s current succession plan ensures that all key areas and positions are developed. It also makes sure that key positions are filled quickly and that all new hires in these key positions are performing their roles efficiently. The evaluation also ensures that members of demographics within an organization are represented adequately in leadership positions and feeder groups.
Steps to Building Succession Planning Strategy
Creating a successful succession plan can be intimidating for those who are new to the process, but having a framework and steps to follow can ease this process.
Here are some key steps you can take to build your own succession plan.
Identifying Succession Candidates
Organizations should choose team members who can easily step into a leadership role when it becomes vacant. However, they shouldn’t go with the assumption that employees know how people within the team view their career goals.
While they may have a good idea of who could fill a vacancy as it arises, if that employee’s goals don’t align with the position, then they will need to reassess. This is why it is important to discuss career goals with employees regularly to help them make succession choices. Consider having regular check-ins with employees to determine their interest in progressing. Ask them what their goals are and where they see themselves in the future.
Work on Professional Development
Businesses should already have been investing in the professional development of the pre-selected employees set for potential succession roles. If you are not currently investing in career development, that should be your first step in the succession planning process.
Candidates should have as much exposure to the operations of the business as possible to help them to gain knowledge and experience the daily aspects of the role. They should also be included in key meetings and important decisions.
Their soft skills can be boosted by connecting with mentors, deeming them acceptable for a leadership role. Skills that require focus are communication and interpersonal skills such as diplomacy and empathy.
You should also encourage employees to attend workshops and webinars that can further their knowledge of the field. These webinars can be beneficial to brush up on their knowledge and modernize their skills.
Create a Culture of Leadership
A strong company leadership culture can improve your entire leadership pipeline. Employees who show leadership potential should be encouraged and trained to be the obvious successor for the current generation of leaders.
Establishing a clear future for employees can help them excel and encourage them to stay with the company. A leadership culture features job shadowing of current-generation leaders so that employees who will be part of your future leadership structure can observe the day-to-day operations of a long-tenured leader.
Encouraging employees to grow and learn can close skill gaps and be a key driver in improving your leadership transition should an executive director or critical manager leave the company.
Complete a Trial Run of Your Succession Plan
A potential successor should have the opportunity to assume some of the responsibilities of a role before it becomes fully available, such as when a manager takes leave time.
Consider getting creative with this trial run and creating job rotations between interim leadership and junior leadership. This can help the employee life cycle greatly in the long run.
This employee will gain some of the experience and confidence needed to fulfill the role when it is their ‘turn’ to take it on. This also helps to identify gaps in knowledge that may need filling.
Common Mistakes Made in Succession Planning
Businesses that take a rushed approach to their succession planning can often negatively affect their talent management processes. The most common mistake in succession planning is not planning for it.
By reading this article and displaying interest in succession planning, you are already one step ahead of this crucial mistake.
One of the most common mistakes made during the process is that assumptions are often made about employees' plans for the next steps in their careers.
To avoid this, have regular check-ins with employees and ensure that their comments and goals are considered when succession planning.
Another mistake is overlooking the importance of continuous performance management for employees. Taking the time to regularly check employees' progress is much more effective than an annual review. Not doing so can disengage employees and harm their commitment to business growth.
Succession planning is an essential strategy used by businesses to ensure that they are prepared for future changes in the present. This planning may be time-consuming but will pay off in the long run.
Companies that display their competencies in effective succession planning can match employees with the organization’s long-term goals and stay committed to their leadership development.
Regardless of when senior leadership leaves the organization, junior employees will be ready to take on more responsibility and help with advanced projects.
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