Uncover pivotal trends shaping leadership and development
By Paul Eccher, Ph.D., President and CEO, Vaya Group
We would be worried about any company that doesn’t have a strategic business plan. Yet we often find organizations that don’t have a strategic succession plan.
Beyond serving as a good business practice, several other factors require leaders to take a closer look at their succession plans:
- Aging Workforce: The average S&P 500 CEO is 58 years old, says public company intelligence firm MyLogIQ. Younger employees often leave to get promotions faster.
- Lack of Diversity: Only 15% of S&P 500 CEOs are women, according to the World Economic Forum, and only about 1% of Fortune 500 CEOs are Black, according to NPR. Without a focus on diversity deeper in the organization, many diverse leadership candidates might be missed.
- Cost of Hiring Outside: Hiring externally is expensive, time-consuming, and can hurt employee engagement and morale. Research from the University of Pennsylvania shows that outside hires cost 18-20% more and do worse in the first two years compared to internal employees in the same position.
- Incomplete Succession Plans: Even companies that have a succession plan often don’t have one that covers all leadership levels. Strategic succession planning needs to extend beyond the top of the house to include those outside the C-level.
Overall, succession management reduces the risk of losing a leader without having anyone ready to step in and be effective. Too often, companies start succession planning too late, leading to extraordinary costs. Looking at succession planning as a whole allows for better decisions about promotions and development investments, and prevents rushing to fill a role.
By building a strong group of talented future leaders, you can increase engagement, diversity, and retention. This also creates more stability within the organization, which boosts confidence from shareholders and the market.
4 Ways to Improve Your Succession Management Plan
Here are some strategic steps business leaders can take to start or improve their succession management plan:
- Identify Success Criteria for Critical Roles: Go beyond job descriptions to identify the most important skills, experiences, and capabilities needed in a role over the next three years. Think about the culture and values you want the person to promote.
- Perform Objective Assessments: Assess employees based on your success criteria to reduce bias. This ensures that promotions are based on the right skills, not just personal preferences. Check how each successor candidate stacks up against the critical success factors needed for the role.
- Understand Each Employee’s “Career Story”: Learn about each employee’s career goals. What do they want? How do they want to grow? What future job roles interest them and why? Succession is a two-way street, with both the company and the employee working together to create a purposeful, individualized plan.
- Focus on Development at Every Level: No one is too new or too experienced for personal and professional development. Emphasize building habits, learning through experiences, and coaching. These methods are more effective than traditional training.
By taking these steps, organizations can be ready for the future with a strong and diverse leadership pipeline, prepared to handle tomorrow’s challenges.