CEO turnover is now at a record high, with the average term of a CEO being less than five years. Talent scarcity across all industries is one of the leading causes of this alarming statistic. Most organizations are usually unprepared when their promising talents quit, leaving human resources (HR) and L&D struggling in the dark.
The ones preparing for this predicament create plans of action that secure the future of their businesses when leaders quit. Succession Planning, a business strategy involving leadership roles being passed to one or more employees, is one of them. It entails selecting and preparing employees to take critical organizational positions as others retire or move on.
Here’s why succession planning is crucial for the success of a business and fostering excellent leadership.
One thing that distinguishes high-performing and profitable companies from underperforming ones is that they understand that succession planning is crucial for their continuous success. These are the reasons why:
- Develops a more diverse portfolio of leaders. A succession plan that focuses on people first while maintaining objectivity and procedural discipline leads to developing a diverse portfolio of leaders. Through this approach, your company can create a pipeline of emerging leaders, diverse in terms of their backgrounds, experiences, and perspectives. It’s this diversity that will bring a diverse way of thinking into your company, leading to new ideas and approaches in adapting to changing circumstances in the market. In the long run, a diverse and inclusive leadership team is bound to bring many benefits to your company, rather than a uniform and exclusive one.
- Aids in talent retention.
- Reduce the risks associated with leadership transitions. Abrupt leadership transitions can expose your organization to financial, strategic, and reputational risks. These unsuccessful transitions can result in high-stress levels for your employees, leading to low production and costly searches to replace lost leaders. With a proper succession plan, which includes information on who is qualified to assume the vacated position, you are assured of reduced costs of finding replacements.
When you clearly outline your succession plans, you’ll be better equipped to evolve and grow as a company. Through it, you are assured of the expertise of retired leaders being transferred to their successors.
Your succession plan will need to do more than offer leadership roles to most senior people in the company. Your approach needs to be integrated with proven technological methods to improve the planning process. These are some of the ways technology aids in succession planning:
Succession planning can be simplified through AI-driven insights. These insights aid in identifying future leaders in efficient and scalable manners. They do this through Talent Matching, a process considered the most complex and tedious in succession planning. The process is also prone to bias and mistakes since it depends on your HR and managers’ capabilities to decide candidates’ qualifications for specific roles.
AI-driven talent matching solves these issues by providing automated fit scores of potential candidates. The process involves taking candidates’ data directly from HR systems and connecting those data points against the candidate’s current/potential role. This makes the candidate suitability process objective, data-driven, and capable of being done at a large scale.
These systems provide a framework for evaluating your employees’ performance and potential. One notable feature of these systems is that they enable employees to be nominated for a set of next-level roles, making it easier to groom them. This also helps to keep track of the succession planning.
These systems also utilize Key Performance Indicators (KPIs) attached to objectives to measure if goals are being reached. By tracking KPIs, you can identify high-potential employees and develop strategies to prepare them for future leadership roles. You can also use KPIs to measure your employee’s alignment with the company’s culture and values and their ability to lead and inspire greatness in others.
You can use LMS systems to provide personalized and targeted training for your leadership development programs. For example, after training employees in various fields, such as financial planning, management, and communication. You may find that some of your employees lack certain qualifications — this discovery offers you a chance to train them and impart the necessary skills rather than hiring new talents. These systems also provide online courses, webinars, and training modules. When leveraged well, these resources will provide continuous training and skills for your potential successors.
Do you want to learn more about how succession planning can guarantee the future success of your company? Follow MRINetwork to find out more about how executive firms like us can be an invaluable addition to your succession plan.