Organizations that immediately bounce back after losing a leader typically have one thing in common: a solid succession plan. Think of it as a road map for life’s twists and turns. Ultimately, organizations that maintain a sense of direction during uncertain times saved themselves thousands, if not millions of dollars, by recruiting, training, and developing candidates for future vacancies. With a succession plan in place, an employee is then able to step into a new role in the event of retirement, promotion, death, illness, injury, or the creation of a position. Establishing a plan for any of these events is crucial for a business’s continued success. Large or small, corporate or non-profit, every type of organization faces these changes at some point, and attempting to navigate them without a plan can be detrimental. Failing to have a clear succession plan in place prior to the loss of an employee can result in:
- Losing time and money through training new hires
- Decreasing employee engagement
- Resigning employees, due to development stagnation
- Halting progress in a strategic plan
- Shifting the direction of the company away from the strategic plan
- Shutting down the organization
Other Types of Talent Planning
Succession planning should be considered an all-encompassing concept that includes several principles of plan management. Adapted from the American Management Association’s “Effective Succession Planning,” some of the most common corporate talent planning models include:
- Replacement Planning – The attempt at mitigating the risk that comes with sudden and unexpected changes in planned job candidates
- Workforce Planning – The strategic planning of the entire staff at an organization
- Talent Management – Primarily a Human Resources function that focuses on recruiting and developing new talent
- Human Capital Management – A way of establishing the economic value of a person, based on the return on investment of their labor, their creativity, institutional memory, and a host of other difficult-to-quantify attributes
Succession plans should cover all jobs within an organization, including the staff, middle management, and senior executives. The idea remains the same for nonprofits and public-sector agencies. However, in these cases, succession plans are generally used to ensure coverage of an executive director or board member’s position.
Why You Need A Succession Plan Right Now
In a study discussed by the American Management Association, executives of billion-dollar companies rated succession planning as the third most important company issue, behind financial results and strategic planning. Decision-makers are beginning to take the total focus off of the bottom line and starting to invest more time and effort into the preservation of their staff. However, as it turns out, vacancies and development both end up affecting the bottom line anyway. In fact, the Society For Human Resource Management reports that unfilled and unplanned vacancies cost companies about 50 percent more in lost revenue than the salary for the vacated job itself.
Succession planning helps build a culture of development and mentorship within an organization, as well as creates a platform for executives to pinpoint key talent early on. The American Management Association also provides several additional reasons for building a succession planning and management program, which include:
- Contributing to implementing the organization’s strategic business plans
- Increasing the talent pool of promotable employees
- Providing increased opportunities for “high potential” workers
- Encouraging the advancement of diverse groups
- Improving employees’ ability to respond to changing environmental demands
- Deciding which workers can be terminated without damage to the organization
Frequent retirements can cause a climbing recruiting and training bill. According to Forbes, CEO turnover at most large corporations averages once every three years. Each time a CEO resigns, hundreds of hours are spent recruiting, interviewing, and screening candidates. But it’s not just leadership positions that need to be filled. As revealed in a Pew Research Center study, 10,000 baby boomers reach retirement age every single day.
For this reason, establishing a comprehensive plan to fill a gamut of positions is crucial. Likewise, keeping employee turnover low will eliminate some of the costs incurred through frequent onboarding, as well as allow for a more seamless strategic development process.
Be Ready for A Rough Patch
During times of economic downturn, most companies reduce or eliminate middle-management positions, which in turn diminishes the possibility of internal promotions. Anticipating changes in employment and utilizing internal training and development systems will help reduce the cost of hiring new employees, as well as ensure that a workforce remains diverse. On that note, incorporating diversity into your corporate climate will give your organization room for more knowledge, talent, perspectives, and backgrounds. Your leadership’s method of succession is essential to keep in mind as executives tend to select candidates that mirror themselves in appearance, values, and persona. This inherent personal bias is why establishing a commitment to diversity and multiculturalism early on can prevent cultural one-sidedness.
Tips For Implementing Your Succession Plan
Creating a succession plan is essential to the preservation of any organization. But how do you make it happen? A few points to ponder while establishing your succession plan are: Making it a company program, rather than just an HR program: Keeping the plan within the Human Resources department brews a training and talent management agenda. Your succession plan should comprehensively include every member of the organization throughout the entire process.
Maintaining transparency: Employees should know when they’re being pinpointed and groomed for leadership positions. Allowing for an open dialogue between all parties gives management the opportunity to establish training and mentorship needs, as well as creates a culture of support where employees help each other to reach their goals. Furthermore, employers should try to know when and if employees are considering retirement, if possible. Creating a two-way communication between management and employees will allow for a stronger overall plan.
Creating a personal development plan from the first moment of hire: As soon as an employee is brought in to the company, their path to success should be clear and concise. It should be evident what steps will bring the employee to a leadership role; this allows the employee to focus on accomplishing goals and provides a metric by which they can be evaluated. In addition, developing employees and providing them with resources for growth has proven to be less expensive in the long run, because somebody who already works for and knows the ins-and-outs of an organization will require less training than an outside hire.
Finding Key Talent Early On: Learning employee strengths and weaknesses early in their employment paints a better picture of their ability to fill in during periods of transition. It also ensures that successions will be successful by identifying gaps and developing employees to fit into leadership roles.
Amplify Your Growth
While a robust succession plan will ensure the conservation and continued success of your organization, it can require a significant upfront investment. For more information on ways to finance your organization’s growth, contact the Corry Redevelopment Authority.