At the minimum, failing to plan a succession strategy could possibly hinder your conduct of day-to-day operations. Taking it to the extreme, the absence of competent leaders, when not appropriately and timely addressed, could wreak havoc on the business. This may result in it losing its standing in the ever-challenging market and eventually collapsing into oblivion.
To avoid those catastrophic effects, an increasing number of organisations are devoting efforts into succession planning. While some succeed and keep thriving, others do not.
To continue our “Succession planning” series, this blog post entry is intended to lay out 5 tips that we believe are requisite for any succession planning strategy.
1. Have a well-defined business strategy
Initiating any plan without consulting the overall strategy amounts to costly failure in the long run.
A thorough and comprehensive strategy is a prerequisite as it captures the organisation's goals and objectives, which serves as a roadmap for formulating and launching a succession plan. Therefore, any succession plan, to begin with, must be integrated into short – and long – term business strategy for best outcomes possible. By addressing this first and foremost, the organisation is allowed to:
- Align their objectives of the succession strategy with that of their overall strategy
- Establish a benchmark for shortlisting elite candidate
- Consolidate the engagement of potential successors and even those who fail to make the candidate list
- Address talent demand by consulting the projected estimates of workforce shortages or surpluses
- Get buy-in from all stakeholders to standardise the succession plan into an integral component of the organisation's schedule
- Establish metrics for gauging performance once the plan is implemented
In return, a succession plan, once launched, is key to future-proofing the organisation’s overall strategy.
2. Take into account labour market factors
This determinant is twofold: the internal labour resources and the external labour supply.
A thorough analysis of internal workforce fund is critical to safeguard the organisation from the shortage of elite employees as it takes into account such determining factors as:
- Competency gap, referring to the discrepancy between the actual capability of employees and the expectations cited in the plan
- Retirement eligibility, measuring the level of ageing of the current workforce. The more old your workforce, the more imperative the need to carry out succession planning
- Turnover rate, demonstrating how likely a given employee left their position vacant based on historical data of turnover instances. The opposite term is the retention rate
- Potential skill shortage, presenting the need for conducting further training and development, given that the departure of key incumbents is likely to occur
In the context of succession planning, researching the availability of the external labour market helps provide a valid ground for timely hiring new employees, especially when the shortage of internal talents cannot be resolved, and providing these new hires with proper training and development to prepare them for future career advancement.
A labour market analysis enhances succession planning by incorporating supply and demand analyses. These two constitutes what is known as the gap analysis, which demonstrates the extent to which the organisation is susceptible to either workforce shortages or surpluses.
3. Identify, anticipate future talent demands
Unlike executive-level positions that could be undertaken by a multitude of university graduates, finding one to assume C-suite capacity is assuredly demanding due to the existing scarcity of sufficiently competent candidates, both in and out of the organisation. The struggle requires HR functions to address upfront talent issues.
The initial step to take is to round out the list of all the critical-mission positions that required a talent bench strength readily for being drawn out when those positions are vacated. On completion, the next move is to carry out the identification and projection of future talent demand, the two best-practice are determining criticality and measuring employee retention rate.
While the former is used to describe those critical positions that would expose the organisation to adverse consequences if left vacated, retention risk refers to the possible circumstances where the current incumbents depart. This could happen either due to contingent events when Hi-Pos jump ship for a more prospective job or anticipated cases in which they leave for retirement.
By utilising these two methods, enables the organisation to quantify future talent demands and propose a course of measures needed to meet those demands.
In addition, organisations should seriously consider employing strategies to brace for positions that not even currently exist within the organisation but is reckoned to be critical in the coming 3 or 5 years. By training current Hi-Pos or acquiring new hires in anticipation of that, organisations are future-proofed from potential talent shortages.
4. Identify talent gaps and strategies to close those gaps
Talent gap expresses the extent to which the actual performance of talents fails to meet the expectations or requirements of the organisation. In other words, a talent gap exists when the employees cannot achieve their goals due to the lack of required competencies (knowledge, skills, and attitudes - KSAs)
The talent gap is categorised into 2 distinct issues that could be an impediment on the capacity to meet planned performance and productivity of the organisation:
- Development issue arises when there is an inconsistent pattern in the employees’ competency that prevents them from performing efficiently and effectively their roles; can be resolved through proper training and development.
- Management issue underlines the employers’ failure to direct the behaviour of their subordinates, which results in employees conducting their job in an inept manner. This can be tackled through the manager enhancing their conduct and interaction with employees.
Either types of deficiencies could bring consequential impacts to the outcomes of your business strategy. Furthermore, identifying and bridging talent gaps are a must in order to construct an effective training and development process that follows. To identify the existing gaps of your talent inventory, consider the following basic steps:
- Identify your organisation’s objectives: Sadly, this simple step is often overlooked. Planning ahead your company's goals should be prioritised as it helps you better identify what types of training your employees need now and in the future.
- Clarify skills needed based on the individual’s role: To ensure that you are on the right track of planning additional training or courses for your staff, you need to describe the skills most needed for each job classification in your company. Moreover, doing this would provide useful insights into your assessment process.
- Assess and evaluate employees’ performance: This is believed to be the most important since it determines what aspect you need to act on. There are many approaches that you can use to gather data and assess your employees, either leveraging statistics-based and objective measurements like KPIs or using assessment tests for self-identification and self-evaluation.
- One more emerging method to gauge employees’ performance is to consult their direct managers, co-workers, and even personal clients. 360-Degree Review, an emerging feedback tool, is among the best practices as the data and insights generated are highly sufficient and relevant.
- Disseminate growth mindset: First introduced by Carol Dweck, the author of the best-seller “Mindset’’, growth mindset spurs people to adopt a new outlook and shift from fixed to growth-oriented on their perspective of work and life.
By cultivating a growth mindset at the workplace, every individual is encouraged to embrace self-motivation, self-discipline, and self-development. This mindset shift has the potential to breed and nurture a growth-oriented culture that inspires innovation and welcomes diversity.
5. Implement and ongoing post-implementation review
Let’s assume that you have successfully thrown together a fine-tuned plan that has buy-ins from all relevant stakeholders and got a budget lavish enough to cover any cost overruns. The plan then was implemented, no qualified candidates are missed out, all talents seem to be identified and enrolled in the talent pipeline. However, the process does not just end there. We have multiple blog posts reasoning that succession strategy is a perpetual and continuous process that should be conducted simultaneously with business planning.
Therefore, once the succession plan comes into force, a performance appraisal must be carried out to identify and respond accordingly to any shortfall and windfall that takes place unexpectedly.
A case in point is when a candidate’s progress is becoming sluggish. This must be addressed by making appropriate adjustments to their training and development path, or phase them out of the plan if the stagnancy could not be resolved.
The same holds true for talents whose progress is impressively encouraging, next progression should be made to speed up the transfer of knowledge, either by providing them with more formal training and job assignments or exposing them to job-shadowing to make room for other skill sets.
That being said, leadership candidates should be made aware of any adjustments to ensure their commitment to the plan.
In order to measure the performance of your succession plan, three critical questions that need addressing are:
- How satisfactory with the succession plan are employees, both candidates and those who fall short?
- Is there a decline in turnover rate, or an uptick in retention rate?
- Are all the key positions assumed timely after left vacant? How satisfactory are those current incumbents?
For more best practices about Succession Planning, please download our whitepaper "THE EXECUTIVE'S GUIDE TO SUCCESSION PLANNING" today!