7 vital elements of water-tight succession planning

 

7 vital elements of water-tight succession planning

Are you taking succession planning seriously enough in your organisation? You see, you may not realise it, but there’s a good chance that your best managers and top performers in your business are about to resign.

(The figures point to signs that over 35% of employees in the UK are planning to leave their jobs this year.)

With confidence in the UK economy increasing, employee mobility is also rising and good people are, once again, looking for new opportunities.

And although that means that potential talent becomes more readily available, it also means that having a solid succession planning strategy for the key roles in your business becomes even more essential.

“Most company directors greatly underestimate the difficulty, time and cost associated with CEO and C-suite succession planning,” – Scott Saslow, founder and CEO of The Institute of Executive Development

Now, if THAT isn’t a good enough reason to start taking your succession planning strategy more seriously, then I don’t know what is.

Whether you’re the founder of a family run business, on the brink of retirement, seeking desperately for “another version of you”.

Whether you’re in a senior director’s role and looking for your future successor, with the express aim of moving into a new role yourself.

Or whether you’re an HR director who realises that constant staff turnover is an inevitable part of the 21st-century organisation.

In every single case, I’d like to suggest that you’ll have more success with succession when you take a strategic, evidence-based and long-term approach to identifying and developing future talent.

The Cost of Poor Succession Planning

There are plenty of reasons why every kind of business ought to be considering how they approach succession planning.

That’s because the long-term success of any business relies on the continued success of its people.

On top of that, succession planning has a BIG impact on the performance and profitability of an organisation, without a doubt.

When we bring good people into any business, we can’t expect them to want to stick around forever…

Especially not the highly-motivated high performers who are filled with ambition and are driven to achieve bigger and greater things and seek pastures new.

Of course, this increased fluctuation is a core aspect of the new work-landscape we are in.

Equally, if you’ve founded and grown a business and led that business for the best part of your life, you have to be aware that you’re going to have to let go of the reins at some point in the future.

And although that decision may be difficult, it’s an essential one that comes to all founders at some point.

Yet, despite these truths, it’s surprising how few organisations take strategic succession planning really seriously.

And in those organisations that are aware of the importance of succession planning, there often lacks a strategy that is repeatable.

Which is surprising, when we really think about the huge costs involved when the wrong person is chosen for a key role in a company; both monetary costs and costs to reputation, team morale, company cohesion, employer brand and customer perceptions.

“27% of employers said a bad hire cost them more than $50,000, according to a 2013 CareerBuilder survey of more than 6,000 HR professionals”

The fact is, if you’re concerned with identifying top talent for future succession, you need to be aware that the really good people in your industry normally won’t even consider applying to work for an organisation that doesn’t offer developmental and promotional opportunities!

Ultimately, the biggest cost of not developing future talent and potential management and leadership successors, is that they don’t stick around.

It’s as simple as that.

Why do Succession Planning decisions often go wrong?

In my experience, there are plenty of reasons why succession planning is such a challenge for both large and small organisations.

Internal vs. External Sourcing

Firstly, there has traditionally been a preference for looking externally for people to fill key roles and executive positions within an organisation.

Bringing in new blood has always been a favourite strategy for senior leaders and HR directors.

But is that really the best way?

Well, according to a 2012 study by Matthew Bidwell, an assistant professor at the University of Pennsylvania’s Wharton School, external hires are 61 percent more likely to be laid off or fired, and 21 percent more likely than internal hires to leave a job of their own accord.

What that means, is that if you can source the right talent from within your current workforce, then there’s a good chance that you will be able to develop them to a greater level of success than someone brought in from the outside.

And they are also likely to stick around longer and grow with your company.

The fact is, those people who achieved success at management or leadership level within another organisation, may not necessarily have what it takes to produce the same results in your company.

The lesson here, is to identify whether or not the experience that your potential successors bring to the table is actually relevant for your business now and in the future…credentials aren’t a great predictor of performance in this case.

Poor Person-Culture Fit

As Peter Drucker once said, “culture eats strategy for breakfast.”

And this is especially true when it comes to succession planning.

In fact, one of the major mistakes that’s made when planning for future successors, is to bring in managers and executives who may seem to have the right profile for the role, yet whose values and motivational needs clash with the core values and the culture of the organisation.

Imagine: you create a succession plan for your business and you identify the core competencies, behaviours and experiential criteria for the role in question. Based on this profile, you begin sourcing external candidates and potential talent…

The job-profile dictates that you’re looking for people who are competitive, ambitious, goal orientated, with a drive to change the world and deliver results quickly and to a high standard.

And so you hire accordingly.

Nonetheless, the problem here is that the culture of your organisation, (for the sake of this example) is all about cooperation, teamwork, low levels of hierarchy and very little individual responsibility.

So, what happens when you put this person into that kind of environment?

Of course, they try hard to keep their head above water and deliver the results that they are used to, but the culture of the company simply smothers their natural talents… And they leave after six months.

When your organisation has a very distinct culture, it’s absolutely critical that you consider this within your succession planning process. Otherwise, people will exit your business within a very short period of time.

This makes the argument for developing an internal succession planning process even stronger: if you can’t change your company culture you have to make sure you’ve got the right internal growth for potential talent.

Short-Termism When Selecting Managers

It’s important to remember that succession is basically a preparatory exercise for the future.

It’s a process of benchmarking the skills, behaviours, competencies and experiences that are demanded by your management roles, both now AND in years to come…and consistently identifying and developing those elements.

The big hurdle here, is that many organisations simply do not have a formal process in place to evaluate the changing demands of senior roles as the business grows and develops.

In many cases, there is only an understanding of the current requirements for success…if that.

In reality, this shows itself clearly when senior executives or managers unexpectedly resign or retire, the organisation ‘hits the panic button’ and scrambles to get “bums on seats”, with little regard for the future.

In the scramble for a replacement, the focus is on speed rather than accuracy. A direct result of this kind of executive selection is poor retention, a drop in team morale and the high costs of re-hiring after the fact.

Not to mention the dent in reputation and drop in customer service that goes hand in hand with poor management selection.

“The majority do not think that their organisations are doing enough to prepare for eventual changes in leadership at the CEO and C-suite levels, nor are they confident that they have the right practices in place to be sure of identifying the best leaders for tomorrow” – Professor David Larcker of the Stanford Graduate School of Business.

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Lack of a Suitable Evaluation Process

Our biggest enemies, when it comes to succession planning, are:

  • Over-reliance on gut-feeling
  • Personal recommendations

Yet, it always amazes me to discover that large organisations still rely on one or both of the above to identify and select potential successors for key positions.

Seeing as how succession is a form of ‘risk-mitigation’ for your organisation, we would expect to see far more stringent measures in place to identify our future leaders and senior executives…right?

Yet, for most companies, that simply isn’t the case.

Some organisations rely on recommendations from the incumbent manager and others rely on personal recommendations from senior leaders or board members…

…yet very few of these hires succeed because they are based on subjective opinions and experiences, as opposed to proven and objective metrics which actually show clear success criteria.

Proven metrics and data-driven job-profiling allow HR teams and senior leaders to measure and evaluate every potential successor against a solid benchmark, drastically improving their chances of identifying suitable people and reducing hiring time in the process.

7 Vital Elements To Improve Your Succession Planning

1.    Get Started ASAP

There’s no time like the present; especially when it comes to planning for succession. We can never be too prepared for a potential exodus of talent.

Even though you may not want to face the fact that your top managers may leave unexpectedly, it could happen…and you need to be ready.

Succession planning is not something we do sporadically. It must be ingrained in your organisation as a key strategic process which deserves constant attention from senior leaders and HR teams alike.

Succession decisions are more time-consuming, perilous and more costly when they happen after a resignation rather than before!

2.    Ask Deeper Questions

It’s not enough to skim the surface and focus on the “now” when it comes to succession. It’s not only about who can do the job now and how you go about identifying and recruiting that person.

When you start asking deeper questions about the role, the company and the growth of the business, the job becomes much easier:

  • Who has been successful in the past in this role?
  • What kind of team does this person have to manage?
  • How will the demands of the role change over time?
  • Are we prepared to develop and grow this person?

3.    Involve People

Traditionally, succession planning has been the remit of the managing director or senior leader, with HR having little say in the final decision. In many cases, HR provides the tools and senior management makes the moves.

But what if we involved other key people in the process?

By gathering information from direct reports, team members and even suppliers on the nature of the role and the requirements for success, we can build a far more accurate picture of a successful hire.

It may also be that through this involvement you actually discover weak points, unnoticed aspects and vital data about the job-profile…and you may even identify internal management or leadership potential in the process.

4.    Evaluate Success Criteria

There’s no doubt that each position in your management or leadership team has a unique set of required skills, behaviours and competencies. It’s also worth noting, that these can easily change as your business develops and grows.

It’s for that reason that a formal evaluation or benchmarking process for each of the key roles in your business is essential to making effective succession decisions.

By mapping the demands of each of your senior or C-level roles and creating an evidence-based job-profile which can be adapted as required, you are setting yourself up for far greater success and a far greater capability to react to unexpected departures.

Not only that, when you have an accurate profile of the criteria which lead to success in these roles, you’ll be able to hire higher calibre people who are naturally suited to the role.

You’ll also be able to build an internal talent pool more easily when you have the data to compare against.

5.    Consider Future Growth

It’s all well and good identifying people who you believe will be able to fulfil the demands of your senior manager role right now…but what about in 5 years’ time when the company has grown and the role has changed?

Will this person be able to grow into that? Will they still be able to deliver the same results under different conditions? Do they have the motivation to change with the company?

These are all vital questions for any ‘future-proof’ succession strategy – and by evaluating current job demands and how they may change in the future, you can make more informed decisions and save time, money and energy on hiring for the ‘short-term’

What is the job now? What is the job going to be in the future?

6.    Focus On Identifying & Developing Internal Talent

As I mentioned earlier in the article, it seems that identifying and developing internal successors is showing itself, more and more, to be the most efficient and cost-effective way to find successors for key positions in your company.

And there are a few clear reasons why that could be so:

  • They know your business and your culture already
  • They’ve worked within the culture and the values
  • They have learned to navigate within the culture and the politics
  • They have a relationship with management teams

To this end, senior managers need to evaluate the workforce and the company to make sure that they nurture a wide range of talents, competencies and skills.

They are then always ready to move potential leadership talent into the pipeline and avoid long and expensive ‘gaps’ that come with concentrating solely on external talent acquisition.

7.    Hire Externally For Fit

Although I’ve placed an emphasis on internal talent development, many companies don’t have this option, and are forced to look externally when vacancies on the leadership team arise. Many MD’s think it’s simpler.

In this case, it’s vital that potential candidates are sourced based on “fit” rather than simple experience or credentials…or worse…recommendations.

When you hire externally for succession, it’s wise to include key criteria in your job-profile that encompasses:

  • Culture-Person fit
  • Team-Person Fit
  • Person-Job Fit
  • Future Fit
  • Behavioural Fit
  • Competency Fit

This is most easily done with a formalised talent assessment process that allows you to map success criteria and then evaluate candidates based on those criteria.

When you then add a coaching element to the development of your new hire, you can seriously improve their chances of success!

Data-driven executive selection decisions can protect your organisation from the risks of haphazard hiring decisions and make your succession process more predictable and therefore, more manageable when the time comes.

So, what do you think? – Do you have a formal succession plan in place for your business? Have you been ‘burned’ in the past by a poor decision?

Please share your comments below – I’d love to hear your thoughts.

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