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Succession planning is the process of identifying and developing new leaders who are able to immediately replace old leaders when they leave or retire. Essentially, it is the planning for the continuity of leadership by developing internal people who have high potentials of filling up the key business leadership positions in a company.
More than just the traditional mentality of coming up with a list of names of potential leaders, succession planning involves management and comprises of an intensive and comprehensive method. It has been shown that organizations who source for new CEOs at the eleventh hour forgo an average of $1.8 billion in shareholder value. This is often due to the one mistake that many organizations make: treating succession as a discrete event rather than as a process.
A succession planning program is enhanced with the consideration of a number of factors. A basic succession management process can be as follows:
For this stage, various definitions of terms utilised in the whole succession planning process must be made. Examples of definitions to be made include key positions, high potentials, preparation steps for successor, scope of the intended succession plans and the level of system transparency.
For this stage, it will be the identification of specific leadership positions that requires a succession plan as well as the potential individuals for successors. The review of the talents can be done through various methods such as the “Nine-Box” grid method or by checking the “SmithKline Beecham leadership competencies” list.
For this stage, it will be the preparation for the development of the talent. Trainings can be provided to them for them to acquire knowledge on the key strategic areas of the organization. Assessment of their skills can be determined, their viewpoints challenged, and their strengths and weaknesses supported and cultivated to complement each other.
An example extracted from the guideline below discusses the successful succession management process by Dow Chemical Company:
Step 1: Review of the talent pipeline by the CEO and his yearly direct reports
Step 2: Review of each business function and strategic area to determine any areas that needed to be upscaled with new capabilities
Step 3: Review of top 200 leaders utilising the performance/ potential guideline
Step 4: Identify the roles and leadership positions that require succession planning
Step 5: Developmental planning for this population
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Succession planning often take months, if not years, to see the value. The reason it takes so long is because each potential successor has to be developed and groomed to determine the best candidate among them. There are certain organizations that have shown a track record in grooming successors that are able to help alleviate the business’s financial results. Research has shown that these organizations have the habitual trend of exposing the pre-successors to a variety of industries to help them develop skills that can be transferred to different business environments.
Due to limited resources, organizations may choose to omit succession management planning, especially so for SMEs. However, the opportunity cost of omitting succession management planning in the long run may be much more drastic than the temporary joy of spending the resource elsewhere. An integrated succession management program that links succession planning with leadership development can be a source of competitive advantage for organizations.
For professionals in the business industry, the Society for Human Resource Management (SHRM) Foundation has published this guideline to distil the latest research findings and expert opinions on how to develop leadership talent. This guideline emphasizes on the importance of succession management and can serve as a beginning point for thinking about how your organization can best invest in its future. It provides information on the following areas: developing leadership talent, business case for succession planning and leadership development, succession management, leadership development and developmental practices.
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“Developing Leadership Talent (A Guide to Succession Planning and Leadership Development)”