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United Airlines named Brett Hart, its executive vice president and general counsel, as the organization’s acting chief executive officer on Oct. 19, 2015, after Oscar Munoz was hospitalized four days earlier following a heart attack. Munoz had served as CEO since early September 2015, after the company’s then-chief executive, Jeff Smisek, stepped down amid an investigation over his dealings with a New York area transit official.
This scenario of the need to quickly replace a leader points to the importance of succession planning—something that 40 percent of organizations don’t do, according to a recent XpertHR survey of 505 chief human resource officers, chief financial officers, general counsels, business owners, consultants and assistants.
“Succession planning helps organizations ensure business continuity and performance when top talent exits, skill gaps are identified or tragedy strikes,” said Marta Moakley, legal editor at XpertHR U.S., in a news release. However, more than half (58 percent) of those surveyed said their organizations don’t have a succession plan in place because they replace staff as needs arise. Time constraints was the second most-cited reason for lacking such a plan (11 percent).
Turnover among the nation’s chief executive officers —128 left their role in July 2015—marked the highest turnover among CEOs in 18 months, according to a report from global outplacement consultancy Challenger, Gray & Christmas, although that percentage fell in August and September.
“The greatest risk in succession planning is failing to engage in the process at all,” Moakley said.
She suggested that a reticence to discuss the subject could be a major obstacle. It’s up to HR to take the initiative to ensure senior management understands the risks of not having a plan in place and to get them on board with the process, according to XpertHR.
Among those surveyed that have a formal succession process, one-fifth indicated that this was for roles critical to the organization; about 9 percent said they have a succession plan that’s only for executive-level positions. About one-third of organizations surveyed are in the process of creating a succession plan, XpertHR found.
“Implementing a succession plan helps ensure an organization’s bench strength, solidifies the viability of a corporation beyond certain charismatic executives and may inform future acquisitions,” Moakley said.
But such planning should not be limited to the C-suite, advised Tim Hird, executive director of Menlo Park, Calif.-based Robert Half Management Resources.
“When they make the hires, they think the job’s done,” Hird said of many organizations. “They don’t realize how many [job] opportunities there are now for employees” at other organizations. In fact, a Talent Attraction Study by the Indeed Hiring Lab, a global research institute, found that among more than 8,000 adults surveyed in 2015, 71 percent of those in the labor force are actively seeking or are open to a new job.
Understanding the Risk
Succession plans often aren’t viewed as a priority because organizations have other issues they’re dealing with, such as recruiting the talent they need right now. However, a failure to have such a plan in place can put companies at risk, Hird said.
A Robert Half online survey conducted in February 2015 with more than 1,100 accounting and finance professionals found that 64 percent said their companies would have to hire externally to replace an employee from the executive ranks, 52 percent said they would have to hire externally for management replacements and 34 percent said they would have to hire externally to replace non-management staff.
Hird offered the following tips for HR to help in creating a succession plan:
Members of Generation Z—the oldest of whom are barely out of high school—expect to become managers relatively quickly, Hird observed. Having this conversation is a way to attract top talent.
“That underscores the importance of making succession planning a consideration in the hiring process. It’s never too early,” he said.
“Career progression is not necessarily a promotion,” Hird said. “It depends on the individual—not everyone’s DNA is to be the next chief executive, but people want an opportunity to expand their experience.”
Avoid a cookie-cutter approach to career growth and succession planning, he advised.
“Every employee has [his or her] own motivations. When [organizations] build out these succession plans, it’s really important that they connect with the employee ... and customize according to the individual.”
“Work with different department heads to pinpoint their [skill] needs,” he advised, in order to “execute the [succession] planning efforts.”
*Communicate openly. Let staff know about the organization’s goal of preparing them for roles of increasing responsibility and make this a reward for their contributions. Explain the succession process, including what is expected of them, and provide prompt updates if there are changes to the process.
Kathy Gurchiek is the associate editor at HR News. Follow her @SHRMwriter.
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