Having a good succession plan in place plays a crucial role in the success of your company. What would you do if your company lost one of its leaders? The hasty need to replace a lost leader can disrupt a company and can affect its productivity levels.
Lack of a succession plan makes it difficult for companies to fill vacancies that are created from unexpected departures or retirements. If you do not have a succession management plan, you should consider getting it as soon as possible. Here are three reasons why.
1. Succession Management Mitigates Abrupt Leadership Changes
Many corporations must appoint a new CEO every year and with CEOs accounting for 45% of a company’s performance, an outgoing CEO could leave companies in a pickle without a strong strategy.
What makes these positions vacant? Leaving for a new position, retirement, termination or even death are reasons that can create a vacancy.
If it’s a foreseen retirement, then there’s a considerable timeframe where the company can identify the right successors. However, if the vacancy is created because of a resignation, ill-health or dismissal, the sudden change can be disruptive.
Companies should not start to plan for a transition after the announcement has been made. The best time for succession planning is years in advance. By identifying a pool of candidates in advance and keeping it continuously updated, the company will be well prepared for a seamless transition, even a sudden one. When a company is intending to replace a leader, it could be costly to start from scratch. The company could be forced to hire a talent scout to find a replacement immediately. Besides, hiring a replacement in a rush could potentially result in a bad hire. A hasty search is a recipe for disaster, and the chances of picking a disappointing candidate could be high.
2. Succession Management Promotes Clear Alignment and Communication
Succession management is important, especially for family-owned businesses, but only one-third say they have a succession plan in place. A robust succession plan helps prevent estrangements and hurt feelings that can occur when emotions run high during the process of leadership transition.
For instance, if the owner of a business has chosen an heir, a succession plan allows this to be communicated to every family member in advance to avoid conflicts during the transition. A business owner who keeps his or her intentions regarding succession concealed sets everyone up for conflicts, mistrust and failure.
Key leadership should be in complete agreement on the way forward to make sure that they’re operating collaboratively and not undermining the efforts of others. Ideally, succession planning should match the strategic vision that is established by the organizational leadership. Succession management forces the organizational leadership to investigate the future and evaluate where the company is heading. By looking at factors such as competition and the industry as a whole, a company can determine how its leadership will look like five and ten years from now.
3. Succession Management Allows the Successors Adequate Time to Prepare
Another reason why you can’t ignore succession management is that it allows your company enough time to avail the resources to prepare potentials for their new roles. During this evaluation period, every candidate will be assessed for strengths and weaknesses and be given the appropriate development opportunities.
When high-potential successors know that the organization is interested in them, they will remain engaged with the company. With the current labor shortage expected to last years, it is essential to hold on to your best employees. By communicating that the employee is part of the company’s succession plan, the company is telling them that they’re valued and a worthy investment. In turn, when these employees feel appreciated and valued, they’re likely to stay around and find out what their future holds.
Identifying potential successors also gives them an opportunity to interact with the leadership of the organization, understand their role better, ask questions and generally consider if they’d be a great fit. Prospective candidates need to find out whether they’re interested in a particular role before they commit to it. A bad hire could take a financial toll on the company, and it is in the best interest of everyone to take ample time to decide wisely. When a company grooms a pool of prospective candidates, that company has enviable options to choose from when a leadership vacancy becomes available.
Succession management takes plenty of knowledge and skill, as well as the right resources. Arcoro understands the benefits of succession planning and offers a wide array of HR management solutions to help your company. These solutions include Arcoro HR Succession and Performance Management solutions which can help in simplifying the process of succession management.