What if your top executives are recruited away to another firm? What if your CEO becomes ill? Do you have the next generation of leaders ready to fill those roles? If not, you may end up with an empty C- suite – or worse, underqualified people moving into leadership roles because there is no one better to take over.
According to Deloitte’s recent Global Human Capital Trends report, more than half of business leaders indicate they do not have confidence in their direct reports’ ability to become part of the C-suite. With the looming retirement of millions of baby boomers who are currently employed full-time; many of them in leadership/management roles, the effect of inadequate or lost leadership could be devastating if your organization is unprepared.
The best way to reduce the impact of lost leadership is through a strong succession planning program – one which requires more than just an organizational chart showing who holds what job. Best practice organizations use succession planning to develop and maintain strong leadership, to ensure that they address all the skills and competencies required for today’s business environment, and to serve as a powerful tool in motivating and retaining top leadership.
Succession planning is an ongoing, dynamic process that helps an organization keep pace with changes in the business, industry, and overall marketplace. To achieve outstanding results, requires an effective and highly focused strategy that centers on organizational excellence. Despite this reality, companies frequently make many mistakes when it comes to succession planning.
Following these key steps can help organizations avoiding pitfalls:
Set your strategic direction. Start with your current mission. Is your bank able to achieve its stated goals and objectives with your current team? Consider carefully your one-, three- and five-year plan and assess the talent you have on board in light of those plans. Although products and services are very important to any business, in the financial services arena, human capital is the key to success.
Start at the top with the CEO succession plan, and then move to the next level down, usually the EVP, SLO or CFO – all of the positions that constitute the senior management team. Keep in mind that in this new age of regulation, most regulators want to know that you have a written plan for multiple layers, not just senior management
Review your organizational chart. Begin with the positions at the senior management level, defining the profile for each role. Factor in everything that influences success in the position: education, licenses, experience, competencies. In the case of your CFO, for example, determine what is really important for the role: MBA/CPA License; strong financial and accounting experience; M & A experience. If department leadership wishes to conduct a broader succession planning initiative, you may go a step further by including mid-managers.
Analyze the strengths and weaknesses of your current organization, including the available talent pool. Put in place a formal evaluation process that allows all levels to communicate their interests, strengths and areas that need improvement. This will help you to understand your bench strength – or lack of it. In order to gauge bench strength, determine whether critical leadership positions have one or more persons ready to successfully assume the role and responsibility of each position. With this knowledge you can focus on strategy development and measurement where it is needed.
Strengthen your talent pool. Once you have determined the status of your bench strength, you can go about enlarging your talent pool, internally or externally, or a combination of both. Ideally, talent from the outside or inside would be balanced and the combination of possible successors would be high; unfortunately, talent management is not such an easy process.
Each path has its own pros and cons. Internally, there are generally fewer corporate conflicts and, since you already know them, clearer track records of candidates’ strength and weaknesses. Promoting from within also sends a positive message to your employees and promotes morale. On the other hand, the cost of developing talent can be high, and the tendency to think within the current corporate culture can be limiting.
Seeking external candidates encourages fresh perspectives, fosters diversity, and often brings intimate competitor knowledge, including best practices, to your organization. The downside includes the risk of corporate culture conflicts, a lack of clear indicators of strengths and weaknesses, and the cost of recruitment.
Develop your employees for advancement. Even if your immediate needs require the hiring of external candidates, you must design and implement career development strategies for the employees you want to retain and promote. It is critical to the development of your infrastructure and to keep your “A” and “B” employees on the right track. Components of your plan should include cross-training, professional development and leadership training. It should also stress participation – in projects and on teams, task forces and committees.
Further development activities should feature input from external providers, attending work-related conferences, membership in professional organization, coaching and self-study. A mentoring system also helps by having positive people promote your positive culture.
Monitor and evaluate your talent. Succession planning has the overall goal of providing the right leadership at the right place, at the right time, with the right skills. To ensure that this happens, at a minimum, annually assess each person’s successes and failures so that you can make changes to the organizational structure if needed. Look back the last 12 months and determine what positive moves were made and what still needs to be accomplished. Make adjustments accordingly or execute contingency plans for unexpected surprises and fine tune your written plan.
Determine your external needs. If you do not have any viable internal candidates for your key roles, you probably do not have the appropriate bench strength. You may have to look beyond the organization to find qualified talent. In that case, develop job descriptions, network and post to targeted job boards. Engaging with a search firm that specializes in your niche will give you access to their roster of potential candidates and to passive candidates you cannot easily reach on your own.
Demand changes over time and today’s marketplace is increasingly candidate-driven. Talent may not be readily available so you have to be prepared to compete for the best people. Scrutinize your current hiring practices and procedures and overhaul them if they are cumbersome and prolong the process. Most candidates have multiple job offers today and you will lose out if your process is too lengthy.
The confidence that comes with succession planning is worth the time and effort. Once the systems are in place, updating them is typically an easy task. It is implementing the systems and making sure the organization is relying on them that make employee transitions less stressful. Succession planning done right sets the growth course. It aligns with talent processes, mends gaps and develops future leaders for success. True planning for the workforce of the future – for the success of the future – means addressing succession planning today.