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Succession planning – more important than ever

5 common succession planning mistakes

By Brian Kreissl

While succession planning is not the trendiest topic in human resources right now, perhaps it should be.

This is particularly true given current demographic challenges relating to the aging workforce and predicted talent shortages brought about by the eventual retirement of the large cohort of baby boomers currently occupying many senior leadership positions.

While poor economic conditions, the end of mandatory retirement, the introduction of phased retirement, increasing longevity, changing assumptions about aging and fears about inadequacy of income on retirement have all contributed to the delay of this “demographic time bomb,” the reality is boomers will have to leave the workforce at some point. And with less certainty around when employees will retire – or indeed what “retirement” will actually look like – succession planning becomes even more challenging.

In spite of the importance of succession planning, so few companies do it right. From what I’ve seen, the following are some of the most common mistakes.

Relying on performance without considering potential

One of the biggest mistakes is choosing top talent and making succession decisions based solely on performance ratings. While performance should always be part of the equation, current performance isn’t always an accurate predictor of future potential.

A useful yet simple tool to use in evaluating current performance and future potential is the nine block matrix, which plots individual performance on the X-axis and leadership potential on the Y-axis. Within the grid are nine boxes, with three levels for performance and three for leadership potential. Employees are then plotted on that grid.

While performance and potential are both important, a minor deficiency in performance is generally less important than an equally minor deficiency in potential – especially if performance can be improved through appropriate coaching, training or mentoring.

Choosing top talent based on current position

Organizations need to understand the best candidate for a future leadership role isn’t always in the same department or line of business as the current incumbent. Instead, succession candidates could potentially come from anywhere in the organization.

As long as they have the potential to move into the role in question, it shouldn’t matter where a succession candidate currently sits within the organization or whom they report to. To some extent, a high potential employee two or three rungs down the ladder can even be groomed to fill a senior leadership role through appropriate stretch assignments, coaching and mentoring.

Forgetting to consider external candidates

Many organizations lack sufficient internal talent to conduct effective succession planning, especially at the most senior levels. This is often caused by a shortage of suitable development opportunities available within the organization due to limited organizational size, a flat organizational structure, downsizing or limited movement among the organization's senior leadership team.

For this reason, it’s often appropriate to include some external candidates as part of a succession plan. This can be facilitated by using search firms, creating alumni and referral networks, communicating informally with well-known industry players and formally partnering with customers, suppliers and strategic partners to provide secondments, sabbaticals and rotations so succession candidates can obtain the necessary development experience for moving into senior roles.

Conducting succession planning only for the CEO

While few organizations need to be convinced of the importance of conducting succession planning for the CEO position, many fail to conduct proper succession planning for other senior leadership roles. Depending on the skills and competencies required for the job, it may even be prudent to conduct succession planning for certain key or difficult to fill roles at the middle management level.

Failing to conduct proper succession planning in family businesses

In highly entrepreneurial environments, it’s sometimes difficult to separate the personality of the business from that of its founder. It can also be hard for an entrepreneur to step down or to hand over the reins to someone outside the family in the case of a family run business.

Yet, we often see situations where the second or third generation in a family business isn’t capable or even interested in taking on a leadership role once the founder steps down. For this reason, it’s important to ensure someone within the family is capable of running the business, and that person is actually interested in being in charge.

If there is no one to take over within the family, succession planning can be facilitated through a sale of the business, by hiring an external candidate, or by grooming an existing employee from outside the family to step into the role.

Brian Kreissl is the managing editor of Consult Carswell. He can be reached at brian.kreissl@thomsonreuters.com. For more information, visit www.consultcarswell.com.

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Brian Kreissl

Brian Kreissl is the product development manager for Thomson Reuters Legal Canada's human resources, OH&S, payroll and records retention products and solutions.
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