The notion of succession planning sounds like a no-brainer. Talented people leave and employers need someone to take up the slack. Quickly.
In the National Football League, it’s simply called “next man up” (let’s call it “next person up”). Of course, in the NFL, they typically have enough bench strength to meet the turnaround time. Not so in your typical workforce.
40% of employers in a recent survey have no succession plan in place.
The survey, from XpertHR U.S., a legal compliance information provider in New Providence, N.J. found that, of those organizations that do have a formal succession planning process in place, 20% report having one only for roles critical to the organization, while 8.7% have one in place for executive-level positions only.
Is that a big deal? It is to Marta Moakley, an attorney and legal editor at XpertHR, who says not having an effective succession plan can compromise a competitive market position, engender a reactive business environment, and unnecessarily increase talent acquisition costs.
In the survey, which had more than 500 CHROs, CFOs, general counsels, business owners, consultants and assistants participating, 20.2% said they were not confident that their workplaces have adequate talent pipelines for critical positions. Another 16% indicated that their organizations do not plan to develop a succession plan. Encouragingly, Moakley says, about a third of respondents said their organizations are in the process of creating one.
“Succession planning helps enhance business continuity and performance when top talent exits, skills gaps are identified, or tragedy strikes,” she says. “Implementing a succession plan helps ensure an organization’s bench strength, solidifies the viability of a corporation beyond certain charismatic executives, and may even inform future acquisitions.”
In addition, succession planning can reduce potential risks to an organization by addressing likely openings in a proactive manner. If done well, succession planning integrates a number of other internal processes, such as talent management and employee retention initiatives, and includes an ability to measure the plan’s results.
Moakley says a welcome surprise in the survey findings was the relatively low number of survey respondents reporting that the primary reason that no succession plan was in place was due to a lack of board or corporate leader support (10.8%). She explains that although this remains a significant number, it is a situation that HR can remedy by continuing to keep potential succession challenges – especially with respect to key divisions – top-of-mind for CEOs.
If done right, succession planning works – but that significant percentage of survey respondents are failing to engage in the process is concerning, Moakley says. Based on the survey responses, the main drivers behind the failure to engage in succession planning may be attributed to a particular organization’s culture, priorities and stakeholders’ perceptions of the process.
Specifically, the greatest amount of survey respondents (58%) reported that there was no succession plan in place at their organizations because staff replacements were conducted as needs arise – a clear signal that the corporate culture is comfortable with a reactive model for addressing talent changes.
However, if staffing needs are filled using this type of reactive model, then the organization is probably not synchronizing internal processes to develop talent into leadership positions. This approach may also contribute to employee turnover, if employees are aware that there is no formalized process for gauging aptitude and readiness for advancement, according to Moakley. As a result, staffing needs and corporate succession may lead to talent gaps and higher recruitment costs.
By fostering individual employees’ leadership potential and growth, succession planning can drive an employer to meet its own potential and goals. Not doing succession planning may show a lack of long-range vision that, ultimately, could leave the organization vulnerable in an evolving marketplace.
HR’s job here is to ensure that senior management is on board with the process and understands the business risks inherent in ignoring succession planning, though Moakley says it may be difficult get the topic in front of management, especially in an unregulated industry with no succession planning requirements for any roles.
“The greatest risk in succession planning is failing to engage in the process at all,” Moakley says. “A major obstacle could be a reluctance to discuss the subject of succession planning, which requires an organization to embrace the inevitability of change inherent in employee retirement, turnover and separation.”