Succession Planning’s Link to Success

Success Planning, Succession Planning for Owner Managers, Talent Management, Succession Planning for Family Businesses, Succession Planning for Small Companies

Skilled folks leave. So planning succession sounds like a no-brainer. A sports team couldn’t compete without a bench so why do we think it is any different in the workplace.

A recent survey of US companies suggested that 40% have no succession plan and of those 20% cover “critical roles” only with less than 10% covering just executive positions.

Timely planning for the replacement of key skills ensures uninterrupted performance during a change of personnel. Organizations that underestimate the importance of succession planning have a lower value.

Let’s examine that statement and what happens when an organization is faced with having to replace a key skill. To start, agreement and understanding of exactly what the skill is and the function that it fulfills are required. This will refresh the senior team’s knowledge of the importance of the role but most importantly provide the opportunity to consider whether it is going to change in the future. Has the company’s strategy evolved since the position was last reviewed?

The role has a deputy but does the incumbent have the current and future skills that the organization will need? If not is there time to develop these? The discussion has now expanded into talent management and whether the Company’s program is delivering required skills in a timely manner.

The labor market is shrinking and with greater emphasis on engagement new hires take longer to screen and land. Can the assistant do the job? What will be the impact if they are overlooked – will they leave?

How does the cost of training compare with recruitment? No matter how good the fit a new recruit will take time to integrate and the loss of the incumbent and potentially the deputy will be a serious blow.

Discussion by the top team of these points would be desirable and agreement on the organization’s shortcomings would quickly emerge. However, succession strategy needs to be decided in the clear light of day and not in the midst of declining productivity resulting from missing skills or knowhow.

The process of succession planning exposes weaknesses in an organization’s sustainability and enables mitigation of threats to performance resulting from transition of personnel. The discussion above touched upon recruitment, internal development, culture, engagement, and compensation. A succession plan increases the value of a business to a prospective buyer as well as its attraction to new recruits.

An organization that reviews staff replacements “as needed” will be stuck in the past. Consideration of evolving skills will be compromised. A prospective buyer will label such an organization “reactive” and perceive a lower value.

Synchronizing succession planning and talent development with compensation will reduce turnover. Employees will value a process that monitors their readiness for advancement. Work has become a commodity and no matter how well engaged the pressure to change employer is being fueled by increasing numbers of recruiters.

Evolution of the workplace has restored the value of this old HR standby which should be a key agenda item for advisory boards or human capital committees. In private companies the CEO should use this process as an integral part of value protection. We cover the topic in more depth in our blog for Owner Managed Companies.

A reluctance to plan succession ignores the inevitability that organizations will change.

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