Succession planning is the identification of internal prospects to fill key positions, and the development of these prospects for the designated positions. The intent is to have a strong group of replacements who can step into key roles on short notice.
Every organization has key positions that must be occupied by well-trained and talented individuals. Preferably, each key position should also have at least one designated backup person, so there is an adequate amount of in-house depth.
The Succession Planning Concept
The essential concept behind succession planning is to provide additional support to those capable of filling key positions in a company. Arriving at a succession plan is not a haphazard process, but rather a highly organized one. The following activities must be pursued:
- Position identification. To be included in a succession plan, a position should be considered essential to the welfare of the business and difficult to fill. If a position can be readily filled by multiple employees or from outside the company, there is much less need to include it in a succession planning system. Though a succession plan typically addresses senior-level positions, it may be just as important to target highly technical positions that are deep in the organization chart.
- Personnel identification. Identify those employees in the company who are “quick studies” in their current positions. If they are intended for management roles, also evaluate them based on how well they interact with others. It is of some importance to identify more people for accelerated development than the number of positions available; doing so keeps the company from losing its backup staff when someone leaves the company. Also, having several people competing for the same position fosters a sense of competition. If someone were to instead be anointed as the chosen successor for a particular position, a sense of complacency could set in.
- Additional support. The company must be organized to constantly bring along people in the succession planning system. This means having an advancement process that allows employees to rotate through key positions on a regular basis, so that a number of people can gain experience in the same area. In addition, maintain a substantial training budget, so that designated individuals are routinely exposed to different types of training.
- Administration. How are designated employees doing as they are groomed for higher positions? This is the job of the human resources staff. They must discuss performance with everyone working with a targeted employee to uncover strengths and weaknesses. They also talk to the employees themselves at regular intervals to gauge their feelings about their progress. It is also necessary to monitor the training given and the time spent in the current position to determine when a change to a new position or the application of additional training might be warranted.
It is of particular importance to examine all possibilities for advancement. This may mean that someone not especially likeable is at least considered, on the grounds that their technical skills are proven and their personnel skills could be improved. At the reverse end of the spectrum, this does not mean that a person who is universally loved and admired should be an automatic candidate for advancement, especially if they do not have a well-rounded skill set to complement their social abilities. In more senior positions, it may be of more importance to locate someone with the toughness to go against general opinion within the company and take the business in a new direction. In short, likeability can be given too much weight when selecting employees for rapid development.
Succession planning can be viewed as a form of risk management. If the management team has already identified people who can backfill key positions and understands any shortfalls in their training or experience, this is one less catastrophe that they have to worry about. Instead, they can be confident that this risk is being addressed, and that they can overcome any sudden (or expected) employee departures.
A final point regarding succession planning is that it must be attended to constantly. A mere annual review of the succession situation represents such a minimal commitment by management that it only sends the message that there is no real interest in succession planning. Instead, this must be a constant task of the human resources manager, who routinely meets with the senior management group to examine the current state of employee advancement.
The Pooling Concept
It is quite difficult to accurately forecast which key positions will become available or when, which means that it is also difficult to precisely target where a high-potential person will go within an organization. For example, a person could be fast-tracked in the direction of the chief marketing officer position, only to find that the current occupant of that position likes her job just fine and has no intention of moving out of it. This lack of forecasting precision would seem to cast into doubt the concept of succession planning, since an exact promotion track is so difficult to arrange.
A possible option is to develop a pool of high-potential individuals whose general management skills are enhanced over time through additional training and work assignments. They are not informed of the exact direction of their future careers, for the excellent reason that the senior management group is none too sure about this, either. Instead, they are rotated through a number of positions, gaining experience in different parts of the company, and are then slotted into a senior role when a position opens up. This approach sidesteps the inherent forecasting error associated with specific promotions, instead concentrating on raising the general level of ability of the targeted group. It also places less pressure on the current holders of key positions, who might otherwise think that a backup person is looming in the background, impatiently waiting for them to leave.
It can be frustrating to groom an employee for a key position and then watch them depart for a more lucrative offer with another firm. Here are several ways to reduce the likelihood of someone being hired away, or at least to take advantage of the situation:
- Compensation monitoring. Adjust the compensation of a fast-tracked employee more frequently than for other employees. Ideally, this means reviewing compensation levels whenever a designated person completes a block of training, has a change in job title, shifts locations, adds responsibilities, and so forth. By doing so, there is less risk that the in-house compensation level will drop below the market rate, so another firm will have to offer an above-market price to hire someone away.
- Tailored benefits. Determine the particular benefit needs of a high-potential employee and cater to those needs. This may require a customized benefits package, which can be a pain for the human resources staff to manage. Nonetheless, this approach can keep an employee from even considering working elsewhere.
- In-house venture capital. What if an employee wants to leave in order to start a business? The company can maintain an in-house venture capital unit that offers to fund these initiatives, possibly with the option to buy these start-up companies at some point in the future. By doing so, the company maintains contact with key employees and has an avenue to a pool of new products and ideas.
Another way of looking at succession planning is that the process is a retention tool. When employees are informed that they are valued and will be fast-tracked through the organization, they will be more likely to remain with the company. Also, even if a person later leaves the company, they will be more likely to look favorably upon it as having boosted their careers, and so will be more likely to send business and possible job candidates back to the company. At some point in the future, they may even be re-hired by the company.
It might appear that succession planning is only for larger organizations with correspondingly large budgets. This is not the case. A smaller organization is putting itself at considerable risk if it does not ponder the impact of a key position being unexpectedly vacated; this means targeting the top few crucial positions and developing a plan for how to backfill these positions.
Ideally, succession planning should result in no sudden crises when positions are suddenly vacated. Instead, there is a designated individual who can step into these positions on short notice, with minimal negative impact on the company. From the perspective of an outsider, succession planning should yield an ongoing series of seamless job transfers among employees.