Imagine you run a growing software company…
The future looks bright, but then your Chief Technology Officer (CTO) suddenly resigns after a heated argument with a colleague. As you watch them walk out the door, it dawns on you – your company is in big trouble.
The CTO, unfortunately, was the only person who truly understood the ins and outs of your proprietary software, and no one else in the team possesses their unique skill set. You know that recruiting for such a specialised role could take months, and that their departure means re-writing the company’s financial projections for the next six months…
Know how to avoid this?
Succession planning: a brief history
Succession planning is about being future-ready and minimising disruption when someone leaves your organisation. This is done by analysing the workforce to identify, assess and engage future leaders.
“Usually, succession planning is reserved for middle management and up. Company boards think about succession planning for their CEO, and it’s employed for managers that could step into executive leadership roles. But every manager should ask themselves the question: Do I have a successor?”
Nick warns that planning is vital for unique or highly skilled roles where a sudden departure can be quite damaging, and is particularly important in the wake of COVID-19, border closures and subsequent skill shortages.
“Having a talent bench or internal pipeline in place will help minimise this impact,” he says.
The benefits of succession planning
While bringing new talent into an organisation can be transformational, it should be balanced with a pipeline of strong internal talent.
There are several benefits in promoting internally:
- Cost savings
Moving internal talent up into executive roles will still result in gaps to be filled through external hiring, but doing so at a lower level is less expensive than executive recruitment.
- Bottom line
A failure to plan ahead could mean critical positions are left unfilled for lengthy periods, impacting the organisation’s bottom line (not to mention culture).
- Skills and knowledge
When people leave they take intellectual property and critical skills that are not immediately replaceable. Succession planning and promoting within your organisation ensures potential replacements are upskilled in these areas and knowledge is retained.
In high-profile companies, succession plans are often made public to reassure clients and investors that a leadership transition will be free from disruption.
Engaging future leaders as potential successors can be a powerful way to retain top talent.
Having more than one candidate competing for promotion will drive performance.
To promote internally or externally? How to decide.
Overall, succession planning is about creating a balance between external hiring and internal talent development.
“All forward-thinking talent managers have a pool of external talent to draw upon in case someone leaves; but they should have an internal ‘bench’ as well,” says Nick.
He advises that the decision to hire externally or promote internally should be informed by company strategy.
“A strategic shift may require an external hire. For example, if your business is embarking on a digital transformation journey you may need to hire someone with IT leadership skills the current team simply doesn’t have,” Nick finishes.
An example of succession planning done well
“We have a great example of succession planning here at Six Degrees Executive,” explains Nick.
“We reached out to one of our most talented managers, Suzie McInerney, while she was on parental leave with her first child. We told her we thought she’d make a great State Director for Victoria if we could work together to build her financial and commercial acumen. Susie completed the training, took the promotion, and made an excellent State Director.
“Three years later, we ran an internal and external process to find a CEO. We again reached out to Susie (coincidentally, she was on her second parental leave) and told her she was one of three being considered for the role. After some more leadership development, she became our CEO and is doing wonders for the organisation.”
Four tips for getting succession planning right
Nick suggests the following strategies for effective succession planning:
- Align succession planning with the future strategy of the organisation.
“For example, will you enter new markets, categories, or geographies? Perhaps you need to build your digital capability? Explore whether you have the capability internally, or whether you need to pipeline and map future talent.”
- Have a formal process in place for identifying and assessing potential leaders within the organisation.
“This might be a performance review – an HR-managed process where individuals are regularly assessed against their KPIs to identify top performers who could move up. Look for individuals who possess the critical capabilities that are a source of competitive advantage for your organisation.”
Accelerate leadership development of talent within the business.
“For example, a future leader may possess all the required skills apart from a knowledge of finance and leadership know-how. Your succession planning strategy would involve filling these gaps to ensure the individual is fully trained to step up when the time comes.”
- Develop an engaged talent bench.
“Build relationships with top-tier talent and create an ‘on-demand’ pipeline of future leaders to keep you ahead of unexpected vacancies and reduce the potential time to hire.”