Surprisingly, more than one-quarter of large organizations don't have plans in place to identify their high-potential employees. This statistic was based on a survey conducted by AMA Enterprise, a division of American Management Association that offers advisory services and tailored learning programs to organizations. In their survey, only 21 percent of respondents indicated they had an extensive program to spot future leaders within the organization.  

A leading question: Why does succession planning matter?

Surprisingly, more than one-quarter of large organizations don't have plans in place to identify their high-potential employees. This statistic was based on a survey conducted by AMA Enterprise, a division of American Management Association that offers advisory services and tailored learning programs to organizations. In their survey, only 21 percent of respondents indicated they had an extensive program to spot future leaders within the organization. 

As companies operate on squeezed budgets in an uncertain economic climate, it's important for HR to understand where their business is today and where they plan to be in the next three, five and ten years. HR then must align their programs, policies and practices with the business. This type of planning, called strategic HR planning, encourages HR to practice evidence-based HR. HR demonstrates this practice when they use their data to understand their current workforce and to determine new, or make adjustments to, programs or policies that will support the needs of their workforce into the future. 

"You can't be a strategic partner to the business if you don't understand what talent you have and then put a succession plan in place to meet the business goals for today and in the future," says Jan Cotroneo, director of Product Marketing for Ceridian. 

Cotroneo says, "To begin implementing a succession plan, it's important to first identify the key roles of a succession plan. Once the roles are identified, HR should begin to analyze the data. Do they have an aging workforce for these key roles that impact how quickly replacements will be needed? Have employees with key talents in the organization been identified to be groomed to move into these roles? Is the company doing the right things to retain their talent? Should hiring practices be changed or updated to target talent externally for these roles?

"Companies that know they are going to lose employees in key roles need to have proactive plans in place to promote qualified employees and/or recruit externally to bring new management on board," Cotroneo adds. "Also, those who are key talent and at the top of their salary range may need to be incented, trained and further developed to prevent them from going to the competition."

A lack of succession planning can adversely affect an organization in a variety of ways that includes no strategic direction, decreased productivity and poorer financial performance. A 2011 CareerBuilder survey shows that more than one-fourth (27 percent) of companies said they've been adversely affected financially by poor succession planning or a lack thereof. 

 

A systematic approach

An automated system and a process for succession planning are important for several reasons. From a legal standpoint, having a good process tied to succession planning in place shows that you have a way to reward your employees through promotion and compensation. 

"If an employee pleads wrongful termination, companies need to have a standardized system to rate employees," explains John Whyte, Talent Management product manager for Ceridian. "Having such a system helps keep organizations in compliance." 

A succession management plan also provides quality in managing talent when someone leaves unexpectedly and helps HR identify internal talent who can move into the position.

"It's much more expensive to place an external employee than an internal one," Whyte adds. 

Whyte also suggests the following best practices for aligning business goals with a talent management plan: 

  • Use an integrated talent management system that captures the skills of new hires, such as interests, career goals, language skills and the employee's five-year plan. A talent management plan helps HR search internal candidates for future openings. For example, it would be useful to identify employees with Spanish speaking skills when planning to fill an open position in south Florida.
  • Tie performance reviews tightly to company goals and have cascading goals and goal alignment. Goals are not just set by what employees want to work on but what the organization's objectives are for that year.
  • Make sure compensation systems are closely linked to performance and set ranges with which managers can work.
  • Create a learning management plan with content that is skill specific, such as communication skills, to tie back to employee job performance.

"Organizations must establish clear objectives and make sure employees understand them," Whyte adds. "Establishing goal alignment ensures employees understand why their goals are what they are and how that rolls up into the bigger picture."