Creating continuity at the top is obviously essential for the health of any organization, but it’s only one part of succession planning. Limiting planning to the C-suite is like looking through the wrong end of a telescope.
Your business more than likely has a number of highly-skilled, high-performance people working in various capacities, at various levels within the organization — and they would be difficult to replace if they were to leave.
These are people who have accumulated knowledge and expertise regarding how to make the business run smoothly, efficiently and at the lowest possible cost. In other words, they know how to get stuff done…and done right.
What happens if they retire? Or get hired away by a competitor? Or, god forbid, be struck down by an accident or disease. Would your business be able to carry on effectively and without significant interruption?
Organizations definitely need a well-designed succession plan for vital C-suite roles, including an emergency succession plan you can activate quickly.
But it’s equally important to devote attention to making sure you’ve identified future leaders for critical roles throughout the organization.
The pandemic has brought succession planning into urgent focus
When it comes to new issues for businesses to deal with, the pandemic has been like a firehose being turned on full blast. Companies are slowly but surely coming to grips with the economic and social devastation that COVID-19 is wreaking.
Many are rebuilding, preparing for the eventual return to regular business, and taking a good look at their people, processes, and systems. Some of these clearly need modification.
Succession management is one of them.
Having to deal with COVID-related issues on top of every other issue.
Running a business or managing a department is difficult enough in “normal” times. But the issues forced on organizations by the pandemic have exacerbated the intensity and complexity. That includes managing remote employees, increased need for safety measures, lost revenue, decreased opportunities and trying to create new ones.
Key employees can be in a vulnerable group.
For example, age is now even more of a factor when considering long-term sustainability and success simply because COVID-19 has a disproportional impact on people over 60. That’s why baby boomer-aged CEOs need to start seriously considering who should next in line to help run the firm as well as how they would replace important employees along with their essential knowledge.
The world is more volatile than ever.
COVID-19 has caused our world — personal and business — to change rapidly and often without warning. What happens if the virus attacks someone at your organization in a key position? Who will handle payroll? Or manage benefits? Or analyze data? Or manage a key department?
Losing top talent is costly.
Succession planning isn’t only about planning for the future; it’s about making sure the people in your plans are engaged and envisioning a future with your organization.
A McKinsey survey showed that in highly complex occupations, high performers are an astounding 800 percent more productive. And, according to Willis Towers Watson, it’s prudent to first identify the top three to five skills of strong performers, and then make certain you have at least two qualified “understudies” who can step into their place, at least temporarily.
Women are leaving the workforce in droves.
Hundreds of thousands of women — nearly eight times more than the number of men — dropped out of the US labor force in September of 2020.
Nearly 617,000 women left the workforce in September alone, compared with only 78,000 men, according to U.S. Bureau of Labor Statistics. Half of the women who dropped out were in the prime working age of 35-44.
Women have been hit harder by this recession than by previous downturns. Industries that employ a lot of women, such as hospitality and leisure, are faring worse during the pandemic.
According to reports from the Census Bureau and the Federal Reserve, women also are more likely to take on care responsibilities in the home, which during a time of homeschooling and home caring can be too much for many to continue their professional careers.
This represents a critical loss of talent that was either positioned to assume leadership responsibility or had the potential to step into one of those roles.
Culture is a big part of succession planning.
Developing the right culture is critical to retaining key people. One of the best ways to plan for the future is to create a culture in your organization that makes leaving something employees can’t even imagine doing.
Succession is often top of mind, but low on the to-do list
According to a recent Deloitte study, 86 percent of leaders believe leadership succession planning is of utmost importance, but only 14 percent think their organization does it well.
The Governance Challenges 2019: CEO Succession report, done by the National Association of Corporate Directors (NACD), found that only 23 percent of surveyed organizations have formal written CEO succession plans. Although there is no readily available statistics on succession planning for non-C-level key employees, it seems safe to assume that even fewer organizations have formally addressed it.
A backup plan for people in critical positions below the C-suite has evidently not been a priority among many HR professionals or senior leaders—especially as they try to manage and engage a mostly remote workforce and figure out how to run a company without having control over future events.
But experts recommend that, even in the face of the pandemic, you attend to it sooner rather than later to prevent potentially costly organizational disruptions.
Retaining institutional knowledge is part of succession planning
In today’s business world, what we know is equal to or perhaps even more important than what we do. Knowledge management focuses on identifying, harvesting, archiving and retrieving organizational knowledge. According to the Society of Human Resource Management (SHRM), less than 40 percent of HR professionals said their employers were analyzing the impact of workers over the age of 55 leaving their organizations in the next ten years.
Imagine how much easier it would be to fill critical positions if the knowledge gained by experience could be passed from one generation to the next. Succession planning allows the potential successor to gain useful skills and knowledge without a long learning curve. Succession planning can also decrease the need for formal, often costly training programs.
Succession planning isn’t just for large companies
Many business leaders and HR practitioners believe that succession planning is a complex process and a practice restricted to the largest organizations with the most sophisticated organizational development departments.
Succession planning can definitely benefit smaller organizations even if they have fewer resources available for knowledge management or formal, structured employee development programs.
Succession planning isn’t rocket science, but a step-by-step process can make life easier
- What is your main concern? That dictates your plan.
Are you worried about employees — including people at the top — leaving because of illness or a better offer? Retirement? Does a new business strategy require different skill sets in key positions? Clarifying your reason for developing a succession plan will help you construct a plan that truly meets your organization’s needs.
Start the process by identifying critical roles and employees who keep your business solvent, don’t do this in a vacuum. Meet with appropriate company leaders to develop a skills inventory of your workforce and then share it with a core team of several leaders who can help you narrow the list down to what’s absolutely critical
- Assemble your team.
Choose the right balance of team members, including people who are process-oriented, effective communicators, knowledgeable about job competencies and competency development, and connected throughout your organization.
That team should either include or at the very least engage Board members as well as executive teams across multiple succession areas of concern.
- What main factors will influence your plan?
Will marketplace trends dictate new competencies in key positions? Changes such as that can lead to a more diverse workforce — and that can create the need for new ways of developing internal talent. Make sure to identify the top three to five skills of strong performers.
- Does your succession plan match your business strategy?
If your succession plan and overall strategic plan aren’t on the same page, neither one will be particularly effective. Make sure the two are in sync.
- Where will you find the best candidates?
Decide exactly what kinds of talents, skills, and knowledge you’ll need for each key position. Next, look internally. You’ll probably find the right talent who already have the skills and knowledge, or can learn them more quickly than most. Then, look outside for the right talent.
- Make sure your succession plan features an action plan.
A succession plan has to be turned into concrete action with measurable goals, specific timelines, and accountability. Then, continuously monitor the plan with ongoing evaluation, and adjust when parts of the plan don’t work as well as expected.
Identify skill gaps and training needs, then provide the necessary tools to ensure the accumulation of knowledge and skill.
Stress test your plan. Create scenarios that leverage the power of experiential development, then run candidates through them before making talent decisions. Can these people step into a role during a crisis? Do you need a temporary fix, such as bringing in retirees who have performed the same or a similar function? Be demanding and realistic about the capability of your available talent.
Monitor the performance of successors and be willing to make adjustments when needed. But perhaps the hardest part of all is trusting trust them to do the job. Create an environment of psychological safety where people know they can come to you at any time with questions.
- Do your candidates even want this job?
Everyone likes the idea of being promoted or accepting more responsibility; not everyone will embrace the reality. Remove as many obstacles as you can, broaden their perspectives, give them tools to succeed and methods to manage stress, and support them.
- Rely on coaching
Coaching is an essential investment in the growth of a leader at any time, probably more so these days. Expectations are higher than ever and employees in new roles may need to make critical decisions that might fail or make tough choices about pay cuts, layoffs, and furloughs — and probably do it all remotely.
- Anticipate the world they’ll be leading
This isn’t just about keeping the machine going. COVID-19 is changing how companies look at their future; so is digital technology. The pandemic has resulted in companies altering everything from organizational structures to working processes to professional relationships and more. As you scramble to adapt to what’s happening right now, you’ll need to keep an eye on what’s next. That means you’ll need to map out critical roles you may need in the future.
- What does success look like?
How do you measure the success of your plan? Here are a few metrics to keep in mind:
- Turnover rates
- Talent retention (primarily your succession candidates)
- What percent of open positions could you fill from within?
- How much time did it take to fill a position?
- What was the cost of recruitment, training and onboarding?
We haven’t seen the last of COVID-19 nor have we witnessed the last profound change it may cause. The pandemic has already reshaped how organizations function, possibly permanently. And the coronavirus will not be the last threat that will challenge our status quo and demand that we create that dreaded phrase, a “new normal.”
Developing the right strategies — including a well-thought out succession plan — can provide a significant competitive advantage as economies and markets return.
MMA has tools to help you move forward
Succession planning doesn’t have to be overwhelming, but it does need a disciplined, informed approach to make it work to your full advantage. Contact your Marsh & McLennan representative to find out how we can help you strategize and customize an operational succession plan.