1 Best Practices White Paper More Effective Succession Planning Written By: Greg Strange Director of Product Development HRsmart This document is the exclusive property of HRsmart and may not be reproduced, shared, disseminated or otherwise transmitted to another party either in part or in whole without prior written consent. The information and statistical data contained herein, along with any forward-looking statements, have been obtained from sources we believe to be reliable, but are not warranted by us. HRsmart shall not be liable for errors contained herein or for the incidental or consequential damages in connection with the furnishing, performance or suitability of this material. Copyright 2007 HRsmart, Inc. All rights reserved.
2 Preamble Succession planning has historically been a simple process reserved for small businesses focused on preparing children to take over the family business when it is time to retire. As businesses grew, the need to ensure a quiet transfer of power became critical and a more defined succession planning ensued, but remained little more than a codified listing of the people being groomed for a particular position within an organization. Astute executives and HR professionals realize that succession planning must also encompass mission critical positions with direct revenue or profit impact within an organization. They also realize the succession planning process should be an open process relying more on business need than on visibility to a select group of executives. A line of succession ensures a company doesn t suffer any losses due to a lack of properly trained, well-experienced professional replacements. Many companies are finding it difficult to break away from old succession planning processes, such as executive review meetings of favored contributors, to embrace employee feedback to find not just a suitable replacement but the right person for the job as the company grows and business challenges change. In addition, companies that have already broken away and embraced an open process are finding they have some bright stars they might never have found had they failed to make their succession planning process more efficient and responsive. The best processes have companies making good faith estimates on their current and future skill and competency needs, finding hidden talent, as well as soliciting and acting upon feedback from every level in the organization. Identifying Current and Future Skill Shortages A financial advisor will tell you that you can t figure out where your money is going unless you have a way to track the money in the first place. The same goes for your organization. You must be able to track the skills and competencies represented in your employee population, who s acquiring the skills and whose skills are waning. Organizations can take a few first steps before beginning to catalog. First, a reliable and fairly accurate skills library needs to be created or amassed on a per job basis. To compile this information, you have several options. A good initial step may be to look at existing job descriptions and/or personality assessments if those are already in place. You can also conduct an employee survey to gather feedback on what skills and competencies each employee uses in their job. You can implement career development and succession planning talent management applications to offer a way for
3 employees to build personal skill and competency profiles, either through self-reporting, course completion in a complementary learning management system or by rated scores from a performance management application. Or you can hire consultants to create a complete skill and competency model for your organization. Many methods will work and sometime using multiple methods will help facilitate the process as long as employees are able to suggest additions to the library. This will be crucial later when you are looking for hidden talent. With an accurate skills and competencies inventory in place, you can begin perform some basic reporting to determine where to focus your succession planning efforts. A simple report such as Retirement Window of Critical Positions should tell you who may leave your organization within a specified time period for positions that have revenue impact. From there, it s a short step to look at the skill profiles of the retirees and then focus on people within the organization who can take over the position today, six weeks from now, or six months from now. Retiring populations aren t the only ones with which companies should be concerned. Position-specific turnover is important as well. If, for instance, you have a position with a four-year turnover window and incumbents have a three-year tenure, then it s time to consider hiring people who have either a primary skill and competency overlap or can act as viable future replacement candidates if the incumbents leaves within the next year. Focusing on company-wide turnover rates while ignoring position-specific turnover rates will simply mask your organization s critical skill shortages. Finally, it s important for executives to inform the organization of upcoming expansion positions. If the organization s core business is expanding or changing to meet market demands, informing HR and other key stakeholders of these changes will give them a head start in trying to source candidates both internally and externally. When developing a skill and competency profile for existing positions, it s important to consider the skills and competencies required for the expanded role of those positions, as well as the profile for any new positions that may become available. This will help create a baseline requirement for recruiters and executives to use when searching the organization and executing workforce planning strategies. Finding Hidden Talent There are as many theories surrounding how to find hidden talent in your organizations as there are employees with hidden talents. An often overlooked talent pool is the one that doesn t yet exist. Talent may be hidden from you because it hasn t yet developed but can be ready by the time it s needed.
4 How many employees in your organization today have MBAs? You may or may not be able to run a quick report to find out. Do you also know how many employees are currently studying for a MBA and will obtain it in six months to two years? This kind of forward-looking data is crucial to your future success. By predicting future points where career development and business need intersect, careerdriven employees can receive a realistic career path based on their current and future value to the organization. You will also be better equipped to forecast recruiting and turnover costs, identify people at risk for leaving and determine how your organization will look in one, three or five years. When you start applying this thinking to positions and skill sets across your organization, you begin to see that finding hidden talent is, in fact, finding future talent. This requires a good understanding of what you need now, what you will need down the road and who is developing toward future positions. Your Employees Know the Best Successors Day in and day out, employees work with potential successors for every job in the organization. Very often they are working with the incumbent and potential successors. They see what the incumbent does well and what a potential successor might be able to offer to the position. It s important to get the feedback of people who work with the incumbent and allow them to recommend possible successors. Executives can gain great insight into the REAL skills, competencies and experience required day to day, rather than making assumptions based on organizational hierarchy and departmental affiliation. Talent management systems that allow for managers to nominate team members for positions, and allow employees to nominate others go a long way in mitigating the paperwork and administration of such a task. Also, by combining career paths and development with succession planning, you achieve much greater efficiency and suitability. Allowing people to create career paths and the respective development plans often enables them to better plan the learning resources they need. Managers can determine which project teams will enhance the employee s development, and the employee ultimately signals to the organization their true career goals. When employees self-nominate for succession to a position, they create a tailor-made roadmap for executives trying to figure out who in their organization is the best fit, regardless of the employee s visibility to the executives. Career development can be considered bottom-up succession planning, and succession planning top-down career development. Employees Desire Change and Career Growth Take a minute to think about all of the positions in your organization. How easy it is for each employee to find a similar position with another company? Chances are that roughly 90-percent of your organization could move easily into a similar position with another company, including companies
5 outside your industry. Consider the people who have left your company voluntarily, how many of them left for a position that does not exist within your organization today? Probably very few. Most likely, the job your employee and moving into with another organization actually already exists within your organization. So, why do employees consistently state in surveys and polls that the reason they left a position was for growth or advancement opportunities (ranked #2 after their manager s inability to manage them)? It s easy; employees depart for growth opportunities elsewhere because most organizations do a better job of marketing open positions externally than they do internally. Often, organizations fail to internally announce job openings along with the job requirements, or the possibility of succeeding into a desired job. It s a simple communication problem. Employees continue to leave for other companies in pursuit of something you can already offer them because they don t know the desired position exists in the organization. It could also be that an employee knows of the position, but it appears unattainable, either because there is no obvious objective criteria for the job or promotion to the position seems to rely on a good old boy network or manager favor. Employees don t usually want to leave when they have a favorable environment or the career satisfaction that typically stems from growth, opportunity and reward. People will avoid leaving a job unless they are compelled by bad management, lack of recognition for contributions or a lack of obvious career growth opportunities. Epilogue Creating an environment where every level in your organization can provide feedback allows you to break free from the time-consuming and often error-prone succession process, where successors are selected based only on the most visible and current aspects of a position. Although it takes a bit more managerial skill to reject nominees for positions and a bit more time to accurately estimate future position needs and profiles, in the long run, it will create a culture where employees feel their voices are heard and they have an equal opportunity to ascend in the organization. These are highly-valued and sought-after organizational qualities. You can turn your organization into a place where your people and your business can grow.