Do you know who will be leading your business in the future? Do you have the people with the capability and potential you need? We work with both multinational businesses as well as private owners and many have identified that the single biggest risk to their business future is people – or more precisely the lack of people with the right skills and experience. Sadly too many organisations do not have a systematic approach to succession planning and effectively leave it to chance.
Interestingly, succession planning is not just a business risk issue. Research conducted by Shen, Cannella, and Albert, found that there is also evidence that that investors, employees and customers respond positively to companies who invest in planned succession management
Essentially the purpose of succession planning is to ensure that there is a ‘pipeline’ of people with the talent and capability to fulfil key roles and deliver the strategies of the business. It is our view that a ‘key role’ is any role that drives a disproportionate share of the organisation’s performance. While traditionally, organisations think in terms of key roles being leadership roles, in reality these also include other roles such as technical, product or service development.
Succession planning is not a complex process. It starts with the organisation identifying what’s needed to deliver the strategy. For example:
- What are the ‘key’ roles?
- What capabilities do we need?
- Who is retiring?
- What businesses and people might be acquired?
- What gaps exist?
Once these questions have been answered the business can set about preparing specifications for roles and finding suitable people. Finding the right people means measuring and assessing a number of things, such as:
- Current levels of competence and performance.
- Technical skills – does the role require high, medium or low technical skill.
- Experience – for example industry and international experience.
- Cultural fit – personal style.
- Personal motivation.
Evidence to measure/assess the above can be collected from how a candidate has performed in their current/previous roles as well as through independent assessment. The advantage of using an independent assessment process is that decisions about who has/does not have the potential to fulfill a key role can be taken in a consistent manner across the business.
Once the business knows and understands the people it has and their own personal motivations, it can prepare a succession plan that should ultimately be owned and signed off by the Board.
However, succession planning does not exist in isolation. For example, any gaps that exist may generate a requirement for recruitment. In addition, the performance of the successors will need to be regularly reviewed as well as appropriate development support provided to enable them to reach their potential.
Ultimately, a highly tuned succession planning process cuts the risk to the future success of the business. After all – surely it is better to guide talent through the business than recruit a stranger from the market?
Shen, W., Cannella, J.R., Albert, A. (2003), “Will Succession Planning Increase Shareholder Wealth? Evidence from Investor Reactions to Relay CEO Successions” Strategic Management Journal, Feb 2003, Volume 24 Issue 2, p191-200