How to Overcome These 7 Succession Planning Challenges
Succession planning is a complex process, especially in the fast-changing economic environment that we find ourselves in. However, organizations need to be ready for the future to remain competitive and succeed. To help you successfully guide your organization through these dynamic times, let’s take a look at the most common succession planning challenges and how you can overcome them.
Contents
What is succession planning?
Why is succession planning difficult? The challenges and how to tackle them
What is succession planning?
Succession planning is a business strategy to find and nurture future leaders to fill roles identified as critical within an organization. It is a process of ensuring that you have successors for all these critical roles when the need to fill the positions arises.
In some organizations, succession planning focuses on C-level and senior manager-level roles. In others, it involves a wider range of positions the company considers strategic to the business.
The goal of succession planning is very simple but vitally important. It helps ensure that your organization has:
- Continuity of operations
- High-quality leaders in place
- A correct understanding of which roles are vital to your bottom line
Why is succession planning difficult? The challenges and how to tackle them
While a majority of organizations consider succession planning important, only 13% of companies say that they are excellent at developing leaders at all levels. There are many reasons why effective succession planning is challenging. Let’s look at some of the common succession planning challenges and how to tackle them.
1. Tapping into the long-term perspective
Identifying roles that are critical to your company is the first of the significant succession planning challenges. Many organizations focus on the critical roles of today rather than on the positions that will be key five to ten years from now. To plan well, you need to understand your organization’s long-term strategy and goals and the roles and skills you will need to get there.
Companies like Netflix that engage a long-term perspective through scenario planning have a competitive edge when it comes to meeting and exceeding financial targets. CEO Reed Hastings mentored his newly appointed co-CEO Ted Sarandos for years before finalizing the decision.
What’s more, he chose a candidate who has a proven track record of identifying, tracking, and responding to the most likely market trends. “Ted drove the revolution in our content strategy, which was way ahead of its time and has been key to our continued success,” says Reed.
The Institute for the Future reveals that 85% of the jobs that will exist in 2030 haven’t yet been created. In its Emerging Technologies’ Impact on Society & Work in 2030 report, the institute notes that future work will be much more task-driven. That will lead companies to compete for talent to complete the tasks instead of workers looking for work.
HR can help facilitate scenario planning by using potential labor market trends to develop a dynamic group of succession candidates. These people should be well prepared to address both the current and future needs of your organization.
2. Empowering potential: Gathering, measuring, & merging potential and performance data
HR professionals and company leaders often have data from performance reviews and a good overview of how employees are performing. However, you should also consider potential when choosing the right people for your succession plan.
Measuring potential and combining the results with performance data can give you a good idea of where to focus your efforts. The popular 9-box grid is a good starting point for measuring potential and identifying future stars you will mentor and develop in the succession pipeline. However, to overcome the “one and done” critique of this method, it’s important to diversify your data points.
A High Potential (HiPo) candidate has the aspirations and ability to handle executive-level functions. They also have the willingness to engage with your company’s succession development plan.
Here are a few ways to gather potential data:
- One-on-one conversations and personality profiles can help you identify employee aspirations and opportunities for development.
- Special assignments, like opening a new office, and manager, peer, and customer feedback can help you identify executive ability.
- Input from leadership development plans via surveys, mentor critiques, committee performance evaluations, and software tools can help you identify employee engagement.
- The feedback loop between learning development and identification of key talent helps you discover candidate strengths that are relevant to your organizational needs.
- Goal setting systems like SMART goals (Specific, Measurable, Achievable, Relevant, Time-Bound) and OKRs (Objectives and Key Results) bring organization to the HiPo evaluation process.
3. Tracking relevant succession planning metrics
Organizations often don’t keep a good track of how their succession plan is doing, what they’re doing well, and what is not going so well. The struggle to determine what exactly to measure is one of the common succession planning challenges.
The important point to keep in mind when implementing successful succession metrics is to measure the outcomes of your succession plan rather than the process itself. Examples include:
- The number of high-potential employees (HiPos) identified for each critical role – Ideally, you’d want to have at least two successors for each key role.
- Bench strength – This metric helps you assess your organization’s ability to fill critical positions internally. You can evaluate this by comparing the number of HiPos ready for promotion vs. the total number of HiPos.
- % of open critical positions filled from within vs. % filled externally – With this metric, you can gauge your organization’s ability to develop internal talent and how well your succession plan is working.
According to a Harvard Business Review analysis, poorly managed C-suite transitions account for a whopping $1 trillion in S&P 1500 market value losses.
Microsoft was almost one such example. In 2013, it put aside a “golden metric” of successful succession management – the percent of critical roles filled internally. Company leadership went looking for candidates to replace underperforming CEO Steve Ballmer, primarily from external companies. In this case, the top picks were Steve Mollenkopf, the COO of Qualcomm, and Alan Mulally of Ford. However, they both withdrew their names from the running.
Microsoft then turned to the insider Satya Nadella. He has since proven himself to be an excellent choice for both company culture and its bottom line. It’s widely agreed that the massive organization dodged a bullet. A senior manager or executive hired from the outside is typically more expensive, bad for public relations, and can reduce the morale of your internal candidates.
4. Fighting bias
McKinsey’s Diversity Wins study found that companies with the most ethnically and culturally diverse executive leadership are up to 36% more likely to beat their competition in profitability. Gender diversity also positively correlates with greater profits. Top performing companies have 7-18% more female executive staff members than their lesser performing peers.
Recognizing and overcoming bias during the succession planning process helps bring in diversity to grow your bottom line. Here are five types of bias to be on the lookout for:
- The contrast effect is when ratings are given based on how someone stacks up to other candidates rather than on that person’s own track record.
- Cognitive bias is when leaders promote members of the leadership pool based on personal feelings.
- Conformity bias is when managers allow their opinion of a candidate to be swayed by others on the selection team to “fit in” with their peers.
- The halo/horn effect is when first impressions of a candidate’s likeability are correlated to how they’ll perform on the job.
- The leniency effect is when a candidate is rated too high because of a context bias, such as the manager not wanting to negatively impact the working relationship.
A diversified review and selection process for your succession plan is effective in fighting bias.
For example, Paul Ramsey, a former employee at Atrium Health, says they teach managers the 360-degree approach to allow for multiple perspectives during the review and selection process. Directors of different units meet to give feedback on the candidates’ work performance, which allows for “healthy discussion where people can push back,” Ramsey says.
Deloitte developed a succession planning tool that combines different sources of data to identify suitable successors. The data includes historical succession decisions as well as real-time information on workforce skills and competencies. With such insights, companies are able to build a high-performing, diverse talent pipeline.
5. Following through on development plans
Employees and managers are caught up in their day-to-day responsibilities and they might not always have time to follow through with the development plans laid out for them. That’s why finding ways to encourage potential successors to continuously learn and grow is so important.
Job rotation and special assignments with set milestones for achievement help keep development on track. For example, a candidate’s task might be to analyze which predictive technologies integrate best into the existing company platforms. The next milestone might be to present a report on these findings to the CTO.
Motivating executive-level leadership to meet their goals also means integrating “action learning” into their schedule. This is learning combined with real-life scenarios. It involves a group of talented employees brought together to help solve organizational issues.
Medical research firm Eli Lilly’s biannual six-week action learning program includes 18 employees identified by HR and their line managers as having executive-level potential. The CEO provides a problem that needs solutions, and the team makes recommendations. In 2000, the group suggested appointing an e-executive and providing funding for the e-business growth initiative they were given. The CEO immediately accepted both of these suggestions.
When you combine learning with real-life scenarios that help solve organizational issues, the motivation to follow through is high because candidates can see tangible outcomes to their efforts.
6. Keeping the succession plan up-to-date
Succession planning is not a one-and-done, even though it’s often treated as such. You should set regular intervals for reviewing, evaluating, and updating the succession plan based on the changes within your organization.
The changes that trigger a need to update your succession plan will vary from organization to organization and can include:
- The creation of a new department
- Turnover in your succession talent pool
- A senior manager or C-level executive leaving unexpectedly
- The business restructuring to meet real-world challenges, such as the pandemic e-commerce shift
Even without major organizational changes, you should consider the plan dynamic and review it at regular intervals. As people move through the professional development process, re-evaluate their readiness to take on new roles. Likewise, as individuals join the organization, determine if they have executive potential and update the plan accordingly.
7. Managing employee morale
One of the often overall succession planning challenges is managing employee morale. Some employees might be disappointed that they’re not a part of the plan. Others might feel that you’re adding to their responsibilities with an uncertain promise of promotion.
You need to be clear about how your succession planning works. Communicate the criteria to become a part of the talent pool and the development expectations for receiving a promotion. This transparency helps ensure that your employees understand why someone is a part of the plan or promoted while someone else is not.
Don’t forget to reiterate to candidates that they’re part of the plan. That way, they’re more likely to pursue learning and development and stay at your organization over the long term.
You can manage the expectations of those being prepared for promotion by communicating timelines. Let employees know when you expect the critical role to be vacated and how long the mentoring process will be. Finally, it’s essential to maintain a balanced number of candidates for each critical role. Too much competition may cause top talent to take their chances elsewhere.
When you engage in a few key best practices to manage company morale, you reduce turnover rates and maximize the efforts you’ve put into your succession plan.
Over to you
Overcoming succession planning challenges and putting a solid plan in place is crucial to business continuity. This will help keep employee morale high and leadership talent turnover low. In other words, you’re making sure that you’re filling the roles that are truly critical to your organization with the best candidates and are building a future-ready organization.
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