Developing future leaders is a hot issue in management and HR circles. Craig Donaldson looks at some of the latest trends in succession planning, exposes the associated pitfalls and details how to make the most of succession planning initiatives
Developing future leaders is a hot issue in management and HR circles. Craig Donaldson looks at some of the latest trends in succession planning, exposes the associated pitfalls and details how to make the most of succession planning initiatives
Succession planning plays a key role in developing future leaders in any organisation, however, many still struggle to identify and develop those potential leaders. Furthermore, factors such as skills shortages, changing generational expectations, shorter careers with individual companies and the ageing of the workforce make good succession planning vital if some companies are simply to survive in the future.
Over the next few years, around the world, more employees will leave the workforce than enter it, according to Helen Scotts, general manager of Hay Group. “Current senior leaders are disproportionately represented in those numbers that will exit. Those employees who enter the workforce in the same period will not necessarily seek a career pathway ending inevitably in a leadership role. They will seek other options and make other choices,” she says.
Sarah Kearney, managing director of SHL Australia, says the growing interest in succession planning is fuelled by demographic changes such as an ageing but increasingly mobile workforce. The fact that the job for life notion no longer exists or appeals, combined with Generation Y showing limited interest in the long-term career path, has resulted in a stark realisation that many critical roles within companies may not have a successor, she says.
“Many of these critical roles are often at the senior levels, which is why leadership development has become such a buzz concept, but there are also many other critical roles that rely on unique skills or specialised knowledge which are also at risk.”
Succession planning gaps
There are a number of common pitfalls that occur when engaging in succession planning, according to Kearney. Some organisations are more reactive whereby they become aware of a potential ‘critical role flight’, or unscheduled resignation from a critical role, she says.
“They then quickly scour the organisation for the person who seems to be most ready to take on the role. The risks are many associated with this approach, for both the organisation and the individual. In fact, it can be decisions such as this that can seriously damage a potential high-performing individual’s career and create an even higher level of exposure for the organisation.”
Another common pitfall is identifying critical roles based on the incumbent’s attributes, rather than the actual role requirements, says Kearney. So, when trying to find a potential successor, the organisation identifies people with the same qualities as the incumbent – some of which may be relevant, but the match is against a person rather than what the role actually needs in order to be effectively carried out.
Another mistake many organisations make is in carrying out ‘replacement’ planning rather than succession planning, according to Justine Coleman, a senior consultant with the Australian Institute of Management (Victoria and Tasmania). This means that they earmark certain individuals for specific roles.
“The challenge with this approach is that the specified role may never become vacant, the successor identified may leave before the position becomes vacant, or they may not have the necessary skills when the position becomes vacant,” she says.
By identifying groups of high performers within the organisation and developing them so that they could take on a variety of roles if necessary, Coleman says the organisation will have a number of appropriate people to select from and high performers will be retained as the range of possible future roles for them is broader.
Kearney also says that many organisations adopt an acquisition approach to succession planning, where they consistently seek external experts and leaders to fill their critical vacancies. “This is not only extremely costly, but also quite high risk. The risk relates to the potential fit between the acquired employee and the role, culture and values of the organisation,” she says.
Succession planning’s season
There are a number of demographic factors at play that will make succession planning more vital for organisations than ever before, according to Coleman. As it becomes harder to recruit the right talent from outside the organisation, businesses will find more success by developing their own talent internally for key senior positions, she says. “This in turn will assist with retention, as employees’ desire to be challenged and developed will be met through accelerated development, whether a promotion is readily available or not.”
As demographic factors become magnified, Kearney says the pressure to retain individuals at all levels, but specifically within critical role domains, will reach critical levels. “The catch phrase ‘people are our most important asset’ will swiftly move from rhetoric to reality,” she says.
“It will only be those organisations that have genuine and well thought-through succession and talent management strategies that will realise a competitive advantage. These organisations will have a stronger ability to hold onto their important talent and if they do experience ‘critical role flights’ they will have a selection of well-developed, motivated high potentials that will be ready to fill the gap.”
A window for HR
This presents a unique opportunity for HR in being able to step up to this challenge and deliver initiatives that genuinely add value to the business and contribute to its sustainability.
The first step is to learn as much as you can about how leading organisations are approaching succession planning, says Coleman. “Think about which elements will suit your organisation’s culture and needs and can help to deliver on specific strategic initiatives,” she says.
“The next step is to encourage the leadership team to see succession planning as something that should be owned and driven by them with support from HR (rather than the other way around). Highlighting the risks of not preparing for future leadership needs and the performance and retention benefits of accelerated development is key.”
Kearney also highlights the importance of working with the executive or leadership team, and the CEO, to determine a strategy for sustained retention and succession management and ensure that full commitment to this strategy is secured. The formalisation and execution of this strategy should then be carried out systematically and with rigour.
Critical roles should be identified and accurately profiled against role requirements, and not the individual in the role. The profiling needs to capture a visionary element as well so that the role continues to evolve for the changing market and business context.
Once the capabilities for the critical roles have been determined, Kearney says the next step is to execute the talent management component of the strategy. “That involves identifying high performers in the organisation and assessing their potential to succeed in more senior and complex roles. The biggest pitfall here is that people assume high performance means high potential – and it doesn’t.”
Once you know who your high potentials are, Kearney says the next step is closing any of the capability gaps they may have against the relevant critical roles they are suited for. This ‘gap closing’ strategy should include a clear and targeted development plan that is both individually and organisationally owned. “It should have clear timeframes for achievement. There should be at least two to three people on track for each critical role and these programs should be occurring at multiple levels in the organisation, so you have employees in different states of readiness for the opportunities (and challenges) that will arise through business growth and departures of critical employees.”
Securing executive support
HR professionals have traditionally experienced difficulty in securing executive support for some initiatives. Succession planning is one of those initiatives that is more important to executives, as they can see the immediate relevance of it.
Succession planning is already on the radar of more enlightened executives and they are often the ones driving this agenda, according to Kearney. “In these situations what HR needs to do is demonstrate their understanding of the business imperatives and bring forward their technical and commercial skills to initiate and execute the appropriate strategy,” she says.
For those HR professionals that are trying to get succession planning on the agenda, Kearney says they need to arm themselves with the facts about the reality facing the organisation.
“HR professionals need to be compelling in their arguments about the risks to the business if they don’t act now. Their arguments need to incorporate factors such as sustainable growth, risk mitigation strategies, competitive markets and the consequences of the demographic changes. They need to inspire their executives to take action and they need to inspire confidence that they can genuinely add value to a critical business challenge,” she says.
One of the most powerful ways to encourage executives to commit to a holistic approach to succession planning including a strong focus on development, according to Coleman, is to highlight the risks involved in not effectively planning for future leadership needs. Most organisations will have experienced a key senior role vacancy for an extended period, or appointed someone internally or externally who has not worked out – these instances are serious indicators that succession planning and development in an organisation is not adequate.
“When the immediate and opportunity costs of such events to an organisation are considered it makes sense that a proactive and development-focused succession plan should not only be supported by the executive, but owned and driven by them,” she says.
