Pedro Angulo: Driving success through succession
A sound succession plan yields huge dividends for your people and your organisation, writes Pedro Angulo.
The only source of long-term sustainable competitive advantage is people and the culture they create by working together. While competitors can replicate our products, structures, processes and technology, they cannot do the same with our organisation’s culture.
Investing in people is the kingpin to executing strategic objectives as well as giving organisations the best chance to be successful. A Harvard Business Review article argues that companies can unlock up to 40% more productive power in their workforce through better practices in time, talent and energy management.
Succession planning is the proactive and future-focused talent practice of identifying, developing and investing in people to fill business critical roles. Its aim is to ensure that the right people with the right abilities are in the right roles at the right time in order to effectively execute the business strategy.
While succession is a critical business continuity issue, many companies fail to pay enough attention to their leadership pipelines and succession practices. According to a joint RHR International/Chief Executive magazine study, more than half (53%) of the Directors surveyed rated themselves as ‘ineffective’ in executing their responsibilities in this area and a shocking 48% said that they haven’t seen a copy of the succession plan within the last year.
So, how do we go about putting the plan in place? Here are the eight steps to successful succession planning:
Identify critical roles: Focus on identifying the 10% of roles that create over 80% of the value, the ones on which success or failure truly depends. According to research by McKinsey & Co., “60% of critical roles tend to be two layers below the CEO, and 30% three layers or more below the CEO”. Critical roles impact on bottom-line results and drive revenue, involve developing strategy or designing new products, or require using rare or a wide range of skills.
Nurture future-focused capabilities: The World Economic Forum estimates that up to “65% of children entering primary school today will ultimately end up working in completely new job types that aren’t on our radar yet”. Ensure the succession process is future-focused by concentrating on building current as well as future capabilities. OECD research has found talent requirements shifting from cognitive skills to technological (e.g. cybersecurity, AI, digital) and socio-emotional (e.g. curiosity, emotional intelligence, collaboration) skills.
Pick out your high performers and high potentials (HIPOs): When assessing the performance of employees, consider how well they perform today and how likely they are to perform in the future. Although most HIPOs are high performers, not all high performers are HIPOs. HIPOs tend to display the following characteristics: drive and ambition, self and social awareness, engagement, learning agility, optimism, curiosity, analytical rigour, and conscientiousness.
Match critical talent to critical roles: Assess the fit between critical roles and talent in an objective and unbiased manner and address any misalignments i.e. how to manage people in critical positions who are underperforming or blocking the growth of a high potential. This assessment should guide all talent decisions around recruitment, development, redeployments, restructurings and promotions.
Make succession a key responsibility for senior executives: Executives must make succession, as well as the professional growth and development of the critical talent across the organisation, a core element of their job. Promote a learning culture where leaders grow leaders, rather than hoard talent.
Utilise a Talent Portfolio Management approach: The traditional succession process of focusing on critical roles, identifying successors and developing them until ready to transition into those critical roles will not suffice to cope with the existing high levels of change and unpredictability. Organisations need to start utilising a talent portfolio approach where leaders are developed, not just for one, but for a variety of potential future roles, based on the future direction of the business.
Avoid succession biases: Avoid biases towards always selecting people like us or people who have previously held the role rather than someone with high potential. Research from Spencer Stuart concludes “first-time CEOs lead three years longer, with less volatility in performance than CEOs with prior experience, delivering higher market-adjusted total shareholder returns over the course of their tenure”.
Re-evaluate your succession planning and adjust: Keep track of the number of critical jobs unfilled and for how long have they been vacant; the number and readiness level of successors per role; the diversity / gender split of successors for roles; percentage of key vacancies filled by internal vs. external candidates; engagement levels of critical talent; and the percentage of people in critical roles leaving the business.
Succession planning is critically important to improve the resilience and sustainability of your business, as well as to develop the future leaders to execute the business strategy successfully.
This article was first published in the Irish Examiner on 13th May, 2022. Download the PDF here.
■ Pedro Angulo is an IMI Associate faculty member and Head of Learning, Talent and Engagement in Brown Thomas Arnotts.
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