Succession planning is an integral part of talent management
Talent management is all about fulfilling the organization’s business objective by acquiring, developing, and deploying the employees with the highest potential. The responsibility of HR is to create an environment where these high-potential employees can learn, develop, gain on-the-job experience, and progress in their careers, with the expectation that some of them are destined to play a significant role in the future growth of the organization.
Succession planning is a process for identifying and developing new leaders who can replace old leaders when they leave or retire. It increases the availability of experienced and capable employees prepared to assume these roles as they become available. Those organizations that can nurture and manage their talent well are the ones that can identify and develop future leaders. Succession planning forces an organization to introspect carefully on its available talent, build constructive appraisal processes, and ensure they are applied fairly across the organization.
Most small and mid-size businesses (SMBs) very rarely have formal talent management and succession management processes. Even though these are prevalent among large enterprises, SMBs lag behind in this respect — and even those that have incorporated succession planning find that getting an effective business outcome and doing it right remains a challenge. In the last few years we have seen increasing interest among SMBs in recognizing the importance of talent management and succession planning; however, there appears to be a substantial gap between intention and reality. It is one thing to have these processes implemented, but the real question is: do they deliver?
Implementing a succession planning process usually involves significant cultural change, and SMBs find it harder to embrace such change, as some have grown over the years without any formal process. Sometimes they face challenges from traditional mindsets that prevent the modern performance-based appraisal processes necessary for creating a fair system — and a modern performance process is the backbone of talent management and succession planning. Finding potential successors who are ready to take up new responsibilities when their time comes requires discipline, consistent processes, and organizational commitment, mainly from senior leadership. Succession planning is a top-down approach at first, even though the actual realization happens at the grassroots level.
Approaches to succession planning and talent management
At times succession planning is misunderstood as a procedure in place only for the highest level of executives. This is a flawed concept. Succession planning must be driven from the top, but its primary purpose is to ensure that a pipeline of talented (high-potential) individuals is always ready and in place.
As resources are scarce among SMBs, proper coordination among the talent acquisition team, training team, and succession planning team will ensure that you get your internal employees ready to take up newly available opportunities. Organizations should go to external candidates only when no internal candidates are available — this is where succession planning saves the organization thousands of dollars in onboarding, training, and making a new employee productive.
The most progressive SMBs focus on continuity and sustainability, so most of their succession planning programs reach right down through the organization — identifying promising talent from managers, middle managers, and senior managers to recent graduates, and seeking opportunities to develop that talent. A typical approach uses organization and development reviews to identify the areas in which the organization needs to excel, what the implications are for leadership, and where those leaders could be found.
Once the requirements are clear, the next step is to capture a range of information about the successors — such as year-on-year performance rating, internal and external career moves to date, perceived strengths and weaknesses, language ability, and mobility. Some organizations “force-rank” successors based on a range of criteria. The next step is to categorize people by timeframes and readiness for positions in 0–2 years, 2–4 years, and 4–7 years, which helps create relevant career planning steps so the successor is ready within the stipulated timeframe. Ultimately the business strategy will determine what kind of skill set the company needs in the future and where people with those skills can be found. Leadership is not a fixed concept — and especially with all the changes around us, new management skills will be needed — so flexibility is essential to ensure your talent management practices keep evolving as the business changes.
The role of competencies and competency models
Competencies and competency models have become very sophisticated over the last decade or so. Some are specific to internal processes like leadership or talent acquisition, and some are specific to a particular industry segment. Large organizations usually spend much time and effort building these for themselves, but most SMBs cannot build something on their own and may end up with homegrown competencies across various talent management processes.
To be successful, SMBs should pay attention to competency models that are uniform across all talent management areas and explicitly link performance and succession together. They should look at building or acquiring competency models aligned with their overall business strategy. Competency models designed to evaluate performance appraisals tend to be reasonably mature and consistently applied, but not so much in other areas. Depending on maturity, organizations may use traditional annual appraisals, 360-degree reviews, or continuous performance management (CPM) practices — most often with the same competency model. Increasingly, organizations link appraisals to bonuses, connecting compensation models more closely with competency and performance issues; that said, succession planning is not always related to the competency model, and organizations should pay attention to connecting the two.
Building a global talent pool
These days it is not uncommon for smaller SMBs to diversify outside their country boundaries, and depending on the industry, they may have teams based in offshore or nearshore locations. The post-COVID-19 environment will force SMBs to recognize the importance of developing an all-inclusive global talent pool capable of meeting the post-pandemic situation as well as future challenges of organizational expansion and diversification. A structured succession planning process keeps track of who may be suitable to take up international opportunities, helping organizations plan better by understanding the availability of talent across the globe.
Is your succession planning in line with your diversity policy?
On paper, all companies have a diversity policy. Still, implementing it consistently across hiring, promotion, job rotation, and succession planning is certainly not done systematically. In most US-based organizations, race and religious diversity are generally less advanced than gender diversity. The lack of women’s representation in senior roles has already created much bad press in the last few years, and movements highlighting racial justice will push organizations to be more proactive — not only maintaining a healthy diversity policy but applying it to all areas of HR, specifically the future succession planning process.
Most SMBs do not pay much attention to job rotation
Once the organization finds the right candidates, it should put programs in place to make them ready in the stipulated time. It is an excellent opportunity for SMBs to consider job rotation or secondments as a positive, desirable thing — some companies even make this a prerequisite for taking on senior roles. This is also an excellent way to give experience to high-potential candidates.
Conclusion
SMBs can look to the many strong talent management and succession planning programs in place across large enterprises and adopt some of the best practices. Many modern-day HR and talent solutions like SAP SuccessFactors are based on industry best practices, which can certainly help kick-start the succession planning initiative for your organization.