Succession Planning in HRM
— May 5th, 2022
In Human Resources Management (HRM), leadership succession planning is the process of identifying and nurturing talent to fill key positions in the future. Succession planning ensures that organizations continue to operate efficiently and without interruption after key people leave, retire, or pass away.
A succession plan is important as it makes it more efficient for new leaders to be appointed without disputing the company’s forward momentum towards its goals. Once a business goes off track it can be difficult to recover.
Despite its importance, only 35% of organizations have created a succession planning process for business-critical roles. Additionally, 74% of leaders report they lack the training for the challenges they face, making them unprepared to step into a more senior role.
Many business leaders and HR experts believe that leadership succession planning is a complex process and best suited to larger organizations. However, this is not the case; small or medium-sized businesses should also have a plan in place when it comes to preparing for succession.
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What are the benefits of succession planning?
Succession planning has many benefits for both employers and their employees, making it a solution where everyone benefits. Among other things, succession planning:
- Improves employee retention
- Protects organizations from uncertainty
- Boosts employee performance
- Provides the freedom to focus on business goals
- Boosts morale
- Helps avoid business crises
- Provides organizational clarity
- Reduces transition costs
- Reduces hiring time
- Promotes career development
- Prevents premature promotions
What is the succession planning process?
By failing to create an orderly plan for succession, a company may face long-term repercussions that are not easy to recover from.
On the other hand, having a clear strategy to follow will ensure businesses are prepared for the day leaders depart. Useful steps to follow as part of a succession planning process include:
Identifying key business areas and positions
The first step in succession planning is identifying key business areas. These are the functional areas taking care of different domains within the organization. Examples of key business areas include management, operations, marketing, and finance.
Businesses will next need to identify which roles within each of these areas impact the company's performance and which would be the most difficult to replace. Some helpful questions to ask when it comes to identifying key business positions include:
- How does this position impact the company?
- If this position became vacant, how would that affect the company?
- Are there some significant risks if this position becomes vacant?
- What skills (hard and soft) are needed for this specific role?
Identifying capabilities for key areas and positions
Next, it is essential to identify the capabilities needed for the key areas and positions outlined in the first step. This information is important when selecting criteria and guiding leading plans.
Additionally, knowing the required capabilities is necessary to set clear performance expectations and assess performance.
Questions to consider when identifying capabilities:
- Have the relevant knowledge, skills, and abilities needed to achieve business goals been identified?
- Has the information about key areas, positions, and skills necessary for these positions been communicated to employees?
- Can we leverage knowledge from other departments and agencies that have developed competency profiles for similar vital areas and positions?
When a company has a clear understanding of the capabilities that are essential for success in each key position, it can begin to nominate potential succession candidates. When determining successors, it is helpful to ask questions such as:
If we were to hire for X role, which employees within the organization would be the strongest candidates?
Would these candidates need training? And, if so, what type
Although the obvious choice for a successor might be someone high up in the company, it's important not to rule out other high-performing employees.
Sometimes the worker an employer chooses to step into a leadership role will turn down the opportunity. Having backup employees in mind with the skills necessary to thrive in the position can avert a crisis.
This is why it’s beneficial for employers to talk to all their workers about their personal development goals for work and where they see themselves in the future.
Assessing development needs
After the final candidates have been nominated for future leadership roles, the next step is to make sure they are prepared for the task at hand. Employers will match the current capabilities of the candidates against the success profile.
If any gaps in the candidate’s skill set are detected then these can be filled through training and development, or through coaching and mentoring. It’s vital that successors have reached the required skill set before they can step into a leadership role.
Identifying succession gaps
While nominating successors, it may come to light that there are no suitable candidates whatsoever to fill specific roles.
In this case, more extensive development training is required to equip current employees with the skills they need to step into this role confidently. In certain instances, companies may have to look externally to fill the position.
Evaluating the succession plan
By regularly evaluating their succession planning efforts, businesses will gain clarity on what is and isn't working within their current process. Factors that should be considered during the evaluation period are:
- The organization’s depth of talent prior to succession planning versus after succession planning started.
- The number of qualified candidates ready to take on a new role compared to before succession planning started.
- Improvements in the way your organization develops employees, such as new learning and development tools or processes.
- Organizational performance overall.
- Whether there is reduced risk associated with employees leaving the organization.
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Overall, the main purpose of succession planning is to ensure companies have leadership continuity. This is achieved by developing action plans for individuals to take over leadership roles after current leaders depart the company.
With a succession plan in place, organizations can protect themselves from uncertainty, avoid a crisis, reduce transition costs and prevent premature promotions. To effectively implement a succession plan, employers should follow a process that will help them identify and prepare employees for future leadership roles.
This structured approach to succession planning will leave a business ideally prepared for any potential outcomes and ensure they are never left exposed to the risks of key personnel leaving.