Why companies that fail to plan succession are falling behind
In Effective Succession Planning, William Rothwell defines succession planning as a “deliberate and systematic effort by a company to ensure leadership continuity in key positions, retain and develop intellectual and knowledge capital for the future, and encourage individual advancement.” Succession planning helps ensure business continuity and performance, particularly during times of shifting leadership and change.
LinkedIn data shows that employees at companies with high internal mobility are twice as likely to stay. In the current labour shortage, investing in your people is also a cost-effective alternative to buying in new talent. Beyond the impacts of the global pandemic though, technological change isn’t going away. A recent Mckinsey survey showed that 85% of companies have accelerated digitisation, and according to the OECD, the average lifespan of a technical skill is just one to two years. Skill obsolescence is only likely to accelerate, which means that on-the-job learning and development have assumed a new urgency and are now critical to professional success. Even top performing employees may struggle to stay ahead of the pace of change unless organisations help them to address skill gaps. Succession planning pipelines increasingly need to be built upon future –perhaps undefined- skill sets, disrupting traditional benchmarks.
Most HR professionals know that the cost of replacing an employee is around ten times their salary (HBR), but the detrimental effects of churn are exacerbated by the current labour shortage. Despite the urgent need for increased resilience and potentially devastating impact of losing key talent, only about 30% of SMEs have identified a talent pipeline. Meanwhile corporations forgo £82 billion in market value due to failure to identify successors (Strategy-business).
Traditionally, succession planning was carried out periodically, but due to the resource pressures many companies are currently facing, ‘growing your own’ talent has risen up the priority list for many HR leaders. To ensure continuity of talent in key positions, accelerate development and improve retention, organisations must develop a fluid yet structured approach to succession planning.
Not every talented employee will be leader material. Some may lack the competitiveness, social skills or simply the desire to step into a leadership role. It is important to develop and retain this demographic, who can still be important contributors to organisational success. In order to create development opportunities for non-leadership talent, lateral moves are key. Whether it be departmental rotation or mentoring, mapping and communicating multiple development pathways, through the organisation, both for managerial positions and technical specialisation, will help to boost retention rates.
With virtual work a new normal for many organisations, performance frameworks also need to be re-evaluated. In the absence of face-to-face management and peer recognition, new systems of recognition and reward are required to maintain employee engagement. Benchmarking performance across your organisation will help to create a talent pipeline, insuring against loss of productivity in important leadership and operational roles.
Traditional succession planning is no longer applicable to today’s agile organisations. To ensure continuity of talent in key positions, firms must introduce fluid succession planning that embraces cross-functional collaboration and agile working. Effective development activity involves more coaching, mentoring and lateral moves than previously.
With flexible working and non-linear career paths on the rise, learning on the job is now essential. A key indicator of professional potential is fluid intelligence, or speed of learning. Measuring this helps to identify employees who learn quickly and therefore have the potential to be high performers in future, yet to be defined roles. Using assessments to identify talent with high potential for job progression will help to eliminate bias in the succession planning process, both validating decisions and galvanising a pipeline of talent.
It is also possible to predict job success by measuring the traits that matter the most for professional advancement. These include conscientiousness, competitiveness, adjustment and ambiguity acceptance, all of which are useful predictors of your employees’ potential for success in changing roles and contexts. Since personality stays relatively constant over time, Personality profiling can be an objective and incisive means of streaming talent and targeting development activity to catalyse progression through your talent pipeline.
For more actional insights, download our practical guide to Succession Planning.
