Picture this, you're a successful, thriving business owner. You've got an awesome team led by a key player who we'll call Dave. All of a sudden, Dave quits without notice. Dave is someone that oversees many projects and there’s a deadline coming up for an important project that is to be presented to the board of directors. What do you think will happen?
The lists of consequences can really hurt:
- The entire business can be adversely affected by power struggles and chaos, and the culture will suffer the negative emotional impact.
- Clients will most likely lose faith in the ability of the business to continue to serve them at the level expected
- Employees will seek other opportunities in lieu of clinging to a sinking ship
So, how can you prevent these misfortunes from happening?
That’s where succession planning comes into play! Now, imagine that there’s another employee who we’ll call Lisa, that has been groomed and tailored to do the same tasks that Dave was doing. Because Lisa has been trained with the necessary set of skills that Dave had, the transition will be smooth and efficient.
Now back to the first scenario where there is no Lisa. Instead, you’ll have to scramble to find a replacement for Dave. Finding a good replacement requires quality time and money spent. By having to take the time to look for a replacement, the project might not be able to meet the deadline. In addition, there isn’t a good guarantee that the replacement you hire might fit into the company’s culture or even be a good fit for that position.
If you were a manager, what scenario would you prefer? Which would be best for the company, Lisa or someone completely new from outside of the company?
While planning a successful succession plan keep in mind, that implementing that plan doesn’t happen overnight. The first step would be to integrate development programs in order to find the best internal candidates early. Even though you might not need a replacement in the near future prepping someone now creates a good safety net for the company’s best interest.
Look in all areas, regardless of their title. There is talent everywhere, so don’t discount anyone! Include employees in current leadership positions to hold mentor positions or to provide useful feedback on who you should be looking for. Make it known within the company that there is an implemented succession plan so that everyone is aware of what they can aspire to do.
When you identify your top performers, implement mentoring and training programs as soon as possible! You want them to be prepared to step up in case anything happens so that we don't end up in the first Dave scenario.
For even more things to include in your succession plan take a look at our article, Top 3 Things To Include in Your Business Succession Plan.
Succession planning is so vital to a company that it can greatly impact the company’s standing. Let’s take a look at HP. This company has gone through several different CEOs with each one being very different from the other. According to Market Realist, HP’s stock price has decreased by 16.25% since the beginning of 2015.
The reason for that?
The company lacked an internal succession process. Instead of grooming existing employees to take over, they replace CEOs with external hires. Since 1999 when Lewis Platt stepped down as the CEO of HP there has been five CEOs.
- Carly Fiorina (2000 to 2005)
- Robert P. Wayman (interim CEO, February to March 2005)
- Mark Hurd (2006 to 2010)
- Cathie Lesjak (interim CEO, August to October 2010)
- Leo Apotheker (November 2010 to September, 2011)
- Meg Whitman (September 2011 - present)
On the other hand, let’s take a look at IBM. In 2012, Virginia Rometty made a smooth transition to CEO due to a successful internal succession plan. Virginia started her IBM career as a systems engineer in 1981. Since then she has held various leadership positions in IBM such as, senior vice president of Sales and Distribution in 2009, senior vice president and group executive of Sales, Marketing, and Strategy to IBM’s current CEO.
Because she was so familiar with the company’s culture and had developed strengths required for that company she was able to succeed and continue the company’s success.
As you can see, succession planning is really important for company success. Here are some of the top benefits:
1. Lower Expenses
Hiring externally requires an expensive and time-consuming process. It involves advertising, evaluating, training, and more. According to SHRM, the average cost per hire is about $4,129. After doing so, how can you be sure that they are a perfect fit for the job? Keep in mind, getting familiar with a company’s culture doesn’t happen overnight. Instead, it is something that is developed over the time.
If you hire and train someone that doesn’t fit in or quits, that money spent would be wasted and you would have to start the process all over again. Proper succession planning can keep costs from rising and promote within. Hiring or promoting within makes a positive impact on your culture and your bottom line.
2. Employee Retention
No one wants to be stuck in the same position with the same pay for the rest of their career. Life is about achievements, big or small. Many companies are now offering opportunities for their employees to climb up the promotion ladder. ProSky’s pathways is an excellent tool that allows employees to see their progress and what they need to achieve. When your employees have that transparency and know they can advance, they are more likely to stay.
Imagine how disgruntled you might be if you have been working for a company for five years and when a promotion pops up, you get passed over for someone outside the company that has less knowledge of the company. Hiring internally will not only increase retention rates, but employees will have a boost in morale. Everyone wants to feel appreciated and valued.
3. Boost In Performance
Giving employees a chance to increase their skillset can only have benefits. It helps build strong leadership and strengths departmental relationships. There will be increased productivity and an array of creative ideas.
Who wouldn’t want to work in an environment full of productivity and strong skill sets? As talented as someone can be, there is always room to sharpen those talents. Often times, those talents would never have been able to grow without an opportunity.
Remember, no matter what you can’t predict the unpredictable. However, you can plan and be prepared for the unpredictable. By grooming existing employees that are already familiar with the company’s in and outs you will be able to be prepared in case a disaster strikes. By placing a series of contingencies throughout the workplace you will be able to keep the company in good standing. If anything, not only will the company continue being in good standing but it will thrive with proper succession planning.
For more information on how to implement these tools into your company please visit our website, www.prosky.co
Isabella Ang is a content marketing specialist at ProSky, a company that gives you the ability to innovatively evaluate candidates and develop employees through succession pathways, so you can recruit, hire, and retain the best diverse talent & culture fit. When she's not working on her next or ongoing projects for ProSky; she spends her days rock climbing, practicing yoga, completing her degree in Computer Science, and tutoring writing skills.