Is succession planning important? This question is frequently asked in the corporate environment. We must first understand what it is to assess whether succession planning is important. Succession planning involves identifying key roles within an organization and deliberately identifying and developing people who can take over from incumbents in case they leave. When I read some of the books on succession planning, I realized that succession planning came to prominence when organizations only realized the need for succession when they lost a Chief Executive through sudden death or the CEO got fired immediately. Such developments prompted boards to start thinking about replacements for key positions. While succession planning has been restricted in most cases to senior roles, it can extend to all key roles within the organization.
Is succession planning necessary? At the highest levels, succession planning is even more critical. Check out these statistics; when a new person becomes the CEO of a company, they may struggle to do a good job. 40% of new bosses fail within the first year and a half of their tenure. It's even more difficult when the new CEO is an outsider; more than half of those individuals fail. Surprisingly, even when the CEO is appointed from within, one-third fail within the same time frame as outsiders.
Henri Fayol (1841-1925), a French pioneer in management history, recognized and documented the universal organizational need for succession planning. The fact that succession planning ensures an insider takes over when a key employee leaves has its advantages. Insiders have intimate knowledge of the company. They will also have established relationships with key stakeholders inside and outside the company. The inside successor ensures the company has strategic continuity.
Failure to plan for unexpected losses of key employees can paralyze an organization, so a succession plan is important to ensure a smooth transition.
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Many interesting incidents of unexpected loss of key executives amplify the need for succession planning. Do you remember hearing about some important people who died suddenly? Frank Wells was in charge of Walt Disney. But one day, he was in a helicopter crash and didn't survive. Ron Brown worked for the government as the Commerce Secretary. He was on a plane in a faraway place called Bosnia, but the plane crashed, and he didn't make it out alive. Lastly, there was a man named Jim Cantalupo. He was the boss of McDonalds. But after only one year of being in charge, he had a heart attack and passed away unexpectedly. Is succession planning important? The stories above point to the importance of having a succession plan, as key executives can die or exit unexpectedly and put the business in trouble if there are no ready successors to take over.
Why is succession planning is important
Succession planning is important because it creates continuity in key organizational roles. We all know individuals in any role can exit the organization unexpectedly, creating risks for the business. The negative impact of such abrupt departure of key staff is higher as you enter senior roles. When key employees leave suddenly, organizations may fail to deliver on their mandate. Succession planning, therefore, ensures that the organization has ready individuals to take over key roles should the incumbents exit.
The other reason why succession planning is important is that it compels the organization to focus on developing top-notch talent ready to take over when ready and when opportunities arise in the organization. Because succession planning involves identifying high-potential individuals and putting together development initiatives to capacitate them, the organization will have a pipeline of capable individuals ready to take over.
Succession planning is important because it can help an organization retain talent. When employees are identified as having high potential and then put through a development program, they value that, and it may encourage them to stay with the organization for longer.
Is succession planning important? Yes, the succession planning process is important because it mitigates continuity risk. One of the advantages of having a succession plan is that it mitigates the risk caused by the sudden departure of key employees.
Succession planning can help the organization reduce recruitment and hiring costs. When an organization has developed a pool of candidates for key roles, it reduces replacement costs. Instead of hiring replacements, the organization can rely on a pool of ready candidates. This reduces other costs related to replacements, such as recruitment costs, lost productivity when the job is vacant, and the time to competence costs for the new hire are all important considerations.
This study found that succession planning reduces the chance of forced CEO exit as the incumbent will be part of the succession planning. The same study found less stock instability when the CEO exits when a succession plan is in place.
Is succession planning important? Yes, succession planning is important if it's done well. Most of the challenges in succession planning are found in two processes: identifying the high potentials to be developed for future roles and the development program quality. The third problem is the turnover of people identified for succession planning.
Research shows that organizations using less scientific methods to identify high-potential employees struggle to develop successful succession plans. Such organizations tend to rely only on the employee's performance when identifying potential successors. Current performance does not necessarily show the person can operate competently in a higher-level role. The other challenge is related to the quality of the development programs once the high-potential individuals have been identified. For this to succeed, the development programs must be customized for each individual. Lastly, without a robust retention strategy for the identified high potentials, the organization will lose money, and the succession plans will fail.
Succession planning is crucial to any company's long-term success. Organizations can smooth leadership transitions by identifying and developing key talent. Succession planning reduces risks of unexpected key personnel departures or retirements. It improves employee engagement and retention by providing clear career paths and development opportunities. Thus, today's fast-changing business environment favors organizations that prioritize succession planning. Succession planning is worth every dollar invested if the succession planning is done properly, especially in identifying and developing the talent identified as potential successors.
