Succession planning is beginning to receive the recognition and attention it deserves. Despite this, some companies are still lagging and failing to properly arm themselves with a comprehensive strategy to insure themselves against the sudden vacancy of key positions.
If any proof was needed as to the importance of replacement plans to company image and investor confidence, look no further than Steve Jobs’ resignation as CEO at Apple Inc. which resulted in a USD10 billion drop in company stock value. It is becoming increasingly clear that investors want to put their money with the businesses that are actively preparing themselves for the unexpected and employees need to know that the time and effort they are investing may be rewarded, rather than fearing that they will be pipped to the post by a hotshot newbie. That is not to say that external hiring should be off the agenda, as indeed there are pros and cons to each approach, but rather that employers should look at their workforce and see the opportunity to develop them towards the roles that they need.
Why make succession planning a priority?
Executive search firm, Bó Lè Associates, asserts that there are four key reasons why establishing a succession plan adds value to your business.
1. Stability
Having a backup plan will reassure both employees and executive management. Employees will know that, in the long term, leadership changes are likely to be stable and will not affect their livelihood. Staff are more likely to stay with a company if they believe that their position is secure.
2. Company loyalty
A succession plan signifies that a business is holding its employees’ interests first by considering internal candidates for promotions, rather than searching externally. Employees’ career development is seen to be taken seriously which will make them more inclined to stay with the company. Pierre Zhuang, CEO, Bó Lè advises a transparent approach; “Managers should make a HiPo list so that employees can know that the company wants to help them to grow and move up at the right time.”
3. Confidence
Planning for future replacements of key executives will increase morale as it assures employees that executive management are aware of and planning for the future of the company and that they will not be left without any direction.
4. Increased company valuation
In addition to the balance sheet, investors also speculate on a business’s long-term development when choosing to purchase equity or debt in a firm. A succession plan would clearly indicate efforts by management to secure the future of the business. This would lead to increased valuation for the company as it shows that executive has contingency arrangements in place for the future.
How should you put a plan in place?
Succession planning cannot be successful if it is left to executive management to perform and maintain with no support, rather its implementation should stretch down the managerial line, spreading the responsibility for decisions and innovation. Zhuang added, for those having difficulty succession planning for executive level roles, “Change the mindset. Succession planning is not only on the CEO agenda, the whole company’s support must be behind it to help enhance the company’s growth and stability. HR should know all the potential they have and the needs they may have and encourage staff to ask themselves the question: ‘Who can succeed me?’ If HR is aware that no one suitable can be identified internally it can be prepared by starting an external search.”
Delegate responsibility
By distributing the ability to make decisions throughout the organisation, a company can better assess its current talent by evaluating which team members are capable and talented decision makers. It will also help to create a pyramid structure, strengthening the foundations to support the tip.
Create a chain of succession
There should, ideally, always be one person directly below a managerial position capable of stepping into their superior’s shoes when necessary or timely. Not only is this attractive to employees, who can see a clear career development path, but also to employers who will benefit from the well-prepared talent chain.
Share responsibility
By spreading responsibility and authority down through the company, senior-level management successors would no longer require such extensive managerial experience and such a wealth of expertise thereby increasing the pool of potential candidates. This structure makes succession planning within a company a much simpler undertaking, and offers both stability and long-term development for the business, the employees and the investor.
Paul Arkwright
Publisher
