What is Succession Planning? Definition, Need and Process

Succession planning is a process for identifying and developing internal people with the potential to fill key leadership positions in the company. Succession planning increases the availability of experienced and skillful employees that are hopeful to undertake these roles as they become available. This process focuses on seeking the right person, not just the available person. It’s built on the idea of recognizing the potential leaders in organization and developing them so that they are ready to move up when the opportunity arises. It’s one of the best methods to promote recruitment and retention in organization.

Succession Planning - Definition, Process and Importance

Although people often mix up replacement planning and succession planning, the latter goes beyond former planning because its focus is larger than one position or department. While often related to planning for senior executive replacements only, it is really broader than that can extend as far down the organization chart as managers want to go. It also differs from replacement planning because successors are considered by level on the organization chart. A talent pool is identified based on each level of management and a typical goal is to prepare as many successors as possible to be 80 percent ready for promotion to any position at the next level on the organization chart. The remaining 20 percent of development is provided when individuals have been promoted to higher level responsibility.

Succession planning is usually based on the assumptions that:

  1. A goal is to identify a talent pool of many people who are willing to be considered for promotion and work to be developed for it.
  2. The future may not be like the past, and the competencies required at each level may be different in the future so that merely “cloning” past leaders is not appropriate.
  3. Development occurs primarily on the job rather than by off-the-job training experiences.

Why Succession Planning Matters?

Some people question whether it’s worth to spend time and money on succession planning. They argue that, with many people losing their jobs and working below their skill level, it should be easy to find satisfied replacements for the reduced number of people who can afford to retire at a time that retirement funds with the stock market.

But that thought is not true. The people who leave their work do not match perfectly to the people who will be replaced as retirements or job growth. For example, the job growth in health cares. How many workers leave from information technology can become accountants?

The fact is that succession planning is needs whenever in good and bad situations. Organizations should consider the future; they should plan for change in the future. Competition for the talents is tend to be more and more intense, just rely on the external human resources will delay the development of organization. They should focus on the internal human resources planning to maximize the advantage of company’s value.

Succession planning is critical to the business because the high-potential employees will one day become the leaders of the Company. This is why they need to be provided with opportunities to learn widely in organizations. These candidates should also be trained to widen their experiences to look into the working environment so that they can get a good understand of what are they expected to be to remain successful.

Another reason it’s important is the candidates recognized in the plan will eventually bear the responsibility for assuring the company is capable of meeting future challenges. These “high potential” candidates must be carefully selected and then provided training and development that gives them skills and competencies needed for tomorrow’s business environment.

It helps to improve employees’ commitment and retention, by given the opportunity to become high-potential leaders, employees will become more active in engaging the planning. To meet the career development expectations of existing employees, they will work harder to get the chance.

The world is changing fast; the knowledge is exploding every day, so as the marketing organizations face. What is important today may become inferior next month. Organizations will be in trouble without plans for future change. To meet the responding flexibly to change, a succession plan is necessary.

Succession planning does not belong to big companies only. Small business like family-owned firms also needs it. Succession planning is an important component of any business strategy process. Succession planning will aid the business owners in preparing for the time when they arrive retire, addressing extreme matters such as illness or death, securing the survival of the business through the transition of ownership, maximizing the return of the retiring owner’s investment and minimizing tax burden at transfer.

Succession Planning Process

Here is an overview of the basic steps of the succession planning process:

1. Preparation

A succession planning starts from preparation. The first priority in the preparation is deciding members of succession planning team. This group will determine the scope of the entire project by formulating how many levels of management will be concluded.

2. Get Commitment

No succession planning program can operate without managers and employees at all levels totally understanding why a succession program is needed. At the same time, executives, managers, supervisors and employees must clearly understand their role in the program. Organization should also link strategic and workforce planning decisions connect succession planning to the needs and interests of senior leaders.

3. Assess the Organization

During this step, constitutors should assess current problems and practices or organization, what’s situation around organization and analyze the strength, weakness, opportunity and threat (SWOT) of organization. What’s more, they will analyze present work requirements and individual performance to get overview of organization.

4. Determine Key Positions

Decisions makers should analyze the “gaps” by determining current supply and anticipated demand. They should check whether the positions arrangement is reasonable and what modification should be done to make the operation more efficient. At the same time, future conditions should be considered, whether the organization needs some new positions to meet the changes in the future.

5. Identify Competencies for Key Positions

In this stage decision makers identify core competencies and technical competency requirements of those key positions, they align the organization’s strategic objectives with the work and competencies need to realize those objectives. At the same time, they will identify the future work requirements and individual potential. The future will not necessarily be like the past. The organization’s future requirements should be driven down to each level, job and function. The result should be expected future job descriptions and future competency models.

6. Identify and Assess Candidates

Firstly, HR audits develop a pool of high potential candidates based on the requirements of positions, and then managers identify some high potential successors and their developmental needs. After observing their working for periods of time, their supervisors will evaluate those potentials. The candidates for promotion to higher level responsibilities should be considered against the background of the future. In other words, every individual who wants promotion is really working to be developed on an escalator because the competitive environment within which the organization performs is not static. Things are changing as individuals are being developed. It is not enough to suppose that successful performance in the past will make sure successful performance in the future. Instead, decision makers should find impersonal ways to determine how well potentials will perform at a future time or at a higher level of management.

7. Create Development Plans

To better help candidates improve themselves to make them qualified to the higher level positions; organizations should create development plans for them. This step focuses on closing developmental gaps found by previous step. To carry out this step successfully, managers should establish an individual development plan for each employee to narrow gaps between what the individual does now and what he or she must do successfully in the future to function at higher levels of responsibility.

An individual development plan is like a learning contract. It is usually completed between an individual and supervisor. Candidates are inspired to take advantages of resources to help them build the competencies they need at higher levels of management. Resources may consist of training courses inside the organization, seminars or conferences outside the organization, internal job rotation experiences, and many other competency building efforts.

Different plans apply to different level, job and function. Candidates should be given opportunities to express themselves. Not just tell them what to do, let them deal with problems by themselves to train them how to be a manager in the future.

8. Measure, Monitor, Report, and Revise

The results of a succession planning program can be evaluated by measuring program success against the objectives established for the program in step 2. By tracking selections from talent pools, listening to leader feedback on success of internal talent and internal hires, analyzing satisfaction surveys from customers, employees, and stakeholders and assessing response to changing requirements and needs.

Key Issues in Succession Planning Process

Now let’s look at one of the most famous business leaders, Jack Welch, who started his working at General Electric in 1960. As he raised his position in the organization he displayed leadership qualities that distinguished him from his peers. What did Jack Welch think about succession planning? One of his most admired skills was the ability to develop his subordinates so there was always someone ready to take his place when Jack was offered a promotion.

How successful was his strategy? In 1981 he became the CEO of General Electric and served in that position until he retired in 2000. Furthermore, in 1991, Jack Welch stated: “From now on, choosing my successor is the most important decision I’ll make. It occupies a considerable amount of thought almost every day.” That’s a very strong statement for someone who owns the prospective and leadership competency to increase the value of General Electric from $13 billion to $410 billion dollars during his tenure.

It’s clear that succession planning and development of future leaders does not exist lonely. It needs to reflect the company’s strategic goal. For any organizations to implement an effective succession plan, a number of key issues that need to be considered:

  • The succession planning program must have the support and backing of the company’s senior level management.
  • Identify what skills the organization will need in 5, 10 or 15 years.
  • Identify high-performers that are almost ready to step into those critical positions.
  • Analyze the workforce and identify who will be eligible for retirement within the next critical positions must be identified and included in the Company’s succession planning program.
  • Succession planning must be part of an integrated HR process that includes training, development and performance appraisal.
  • A system for communicating succession planning information to managers must be established.
  • Managers need to identify the responsibilities, skills and competencies that will be needed by their replacements.
  • A systematic approach for identifying, nominating and selecting potential successors must be established.
  • Background information on potential successors, such as education, experience, skills, appraisals and potential should be reviewed.
  • The training and development requirements of potential successors need to be determined.
  • The skills of potential successors must be developed through work experiences, job rotation, projects and other challenging assignments.
  • A system for monitoring candidate’s development plan progress by senior management should be established.
  • Succession planning must include a system for providing feedback and encouragement to potential successors.
  • Succession planning is basically a “numbers game” that requires good organizational skills and the ability to pay attention to details.
  • Finally, the succession plan must belong “to the organization” and not to the HR department in order to make sure it has the attention it deserves.

Any succession planning will be organized to integrate all its components and emphasizes the internal development of existing employees in the organization.

To conclude, succession planning is not something a good company can ignore because the consequences of not being prepared to replace key personnel will have a major impact on an organization’s ability to achieve its goals and strategic targets. The succession planning process needs to be considered as part of the company’s strategic planning process because it deals with projecting future changes by anticipating management vacancies and then determining how to meet these challenges.

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