Career advice, insights & tips for HR professionals
How to design a succession planning strategy 19/09/2011
Succession planning can apply to any type of company, whether it is a small family-run business, a company owned by private equity funds with their own exit strategy or a multinational corporation that invests heavily in its graduate and management training schemes.
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- Do you need succession planning?
- Do you develop talent internally?
- Looking to external candidates
- Ensure you have the right policies in place
- Ensure you can justify your decisions
Do you need succession planning?
When the next new intake of graduates, trainees or apprentices walks through the doors of your business each year, it might be difficult to imagine looking at them that any will one day hold management positions, or even become CEO. However, such short and long-term succession planning is a key part of ensuring your organisation’s continuing success.
Anecdotal evidence suggests that relatively few businesses overall have a formal succession plan in place. However, with a renewed focus on employee relations as the economy comes out of recession, not to mention the desire to make your remaining employees feel valued and to get the most out of them without necessarily paying them more, now might be as good a time as any to consider whether your business would benefit from a succession scheme of some sort.
Do you develop talent internally?
Most of us begin our careers on the bottom rung of the career ladder. Our professional development and progression through the ranks comes as a result of exposure to different situations, key clients and involvement in different areas of the business.
An individual’s ability to move onto the next level relies on his having had at least some of this experience. Where there is a slow, natural progression, most of this will come naturally. When a key employee leaves your organisation suddenly, however, there is rarely time to train someone to fill their role without interruption.
The ability to call on an internal candidate to take over the position at short notice has obvious financial advantages when compared to recruiting externally, and the attraction that an internal candidate may help to foster the continuity and culture of the company.
A company might also feel that its business strategy will be better served by promoting an individual who already knows the relevant markets, as well as the clients but that can only be the case if he or she is fit to be promoted.
Promotions may also be an opportunity to introduce clients to different employees, perhaps because you feel that there is growth potential in the relationship or because there have been problems with the previous set up. A departing account executive can leave the client at risk unless there is someone ready and able to step into their shoes.
Looking to external candidates
Succession planning need not be an entirely internal process, although it often is. Knowing when to go to the market to recruit talent from outside is an important skill. This might also be the easiest way to ‘freshen up’ your organisation.
Equally, while the culture of the organisation will be important, and employers will want to maximise their investment in home-grown talent, the greater range of experiences or different perspectives that external recruits will provide could also help the organisation reach the next level.
In certain sectors, recruiting external candidates might give you access to a new set of clients that can generate additional profit. In each case, you need to have a considered view on what you will need from the role as and when the current incumbent moves on, and then work backwards from there.
Ensure you have the right policies in place
The most obvious issue when it comes to succession planning is age discrimination. If your succession plan is simply designed to replace the long serving employee of 60-odd with a younger individual (even if you refer to it as being an opportunity to ‘freshen-up’ the team, introduce a new ‘vibrant approach’ and so on and so forth), the chances are that you might be faced with a Tribunal claim.
In reality, whether or not the chosen successor is of a different age, gender, religion, etc. it's all too easy for the incumbent to see your grooming the successor as the thin end of a wedge which will lead ultimately to their actual or constructive dismissal. In most circumstances it therefore makes sense to be open about this planning process and even to solicit the incumbent’s assistance in it by way of his or her own mentoring responsibilities.
The recent removal of the default retirement age has removed what some people saw as a useful tool for removing older employees, although this should encourage more objective thinking when it comes to succession planning. There's no reason to be afraid of the post-default retirement era as sound objective reasons and processes will still work for employers seeking to dismiss staff aged 65-plus.
It is, therefore, important to ensure that any succession planning documents clearly state the rationale behind any scheme and accentuate the positive benefits for the business.
Ensure you can justify your decisions
If you review client relationships and decide that a particular team would be better served by having a different individual in charge, or if you have identify good personality fits between your employees and your clients, it's vital that care is taken in the manner in which this process is effected.
Make sure that you have objective reasons for changing things round, removing responsibilities or creating a new position within the team. Trying to take away too much responsibility might lead an employee to claim that you are demoting them without good reason, or worse, that he or she has been constructively dismissed.
If any of the protected discrimination characteristics come into play, you might also find that there's a discrimination claim added in for good measure, so you will wish to be able to identify why your planning appears to favour X over Y as the likely successor.
David Whincup, employment parter, Squire Sanders Hammonds
David's expertise covers a wide variety of employment-related issues, including recruitment, drafting contracts of employment at all levels, disciplinary and grievance procedures, redundancies at individual and collective levels, and the defence of employee discrimination claims.