What Is A Succession Plan?
The succession plan is a process of identifying and developing people who are capable of assuming strategic positions within the organization.
Essentially, it is a process that allows the best use of what is the most important asset that companies have: the talents and skills of employees for the execution of the strategy.
It allows the clear definition of the important requirements for the exercise of the functions and the necessary skills to occupy certain positions.
It is a plan focused on the interests of the company, with the purpose of maintaining the relevance of the business in the segment in which it operates.
As a critical success factor, the existence of a well-structured succession plan promotes significant risk reduction for a company’s shareholders or investors.
What Are The Goals Of A Succession Plan?
With organizations having to face increasing complexity and uncertainties in their business environments, the succession plan makes it possible to make the organization’s purpose clear .
Promoting the shared vision of management , its elaboration brings closer the harmonization of people’s expectations with the organization’s objectives.
By reflecting on possible competitive scenarios, the company can make an effort to guide the development of critical competences for the execution of the strategy.
In the words of Jim Collins , in his book Built to Last , companies need to have “the right people at the right time”.
Therefore, the elaboration of a succession plan is the appropriate tool to make the business resistant to time and its changes .
Finally, the promotion of transparency in the selection process is also one of the benefits provided by the implementation of a succession plan.
The main gain of this appears in the maintenance of the organizational climate.
How To Implement A Succession Plan For Your Company?
The first step in implementing a succession plan must be to identify the expectations of shareholders and senior management.
The reason for this is the need to meet the objectives and purposes that support the business.
Next, it is necessary to map the critical positions , the competencies needed for each position and the people who can potentially perform these functions.
If the training of professionals is necessary, the definition of the evaluation criteria to be used must be clear.
The process is completed with the structuring of retention policies that can mitigate the risk of executive departure in preparation.
Main Points Of Attention About A Succession Plan
Even when well clarified in the minds of shareholders and employees, the structuring of a succession plan presents challenges for the calculation of results and perception of benefits .
One of the main problems is related to the underutilization of internal resources to the detriment of hiring.
What happens is that everyday life tends to erode awareness of the competencies of those already in the structure , while promises made by external candidates may seem more interesting.
Both the risk and the cost of a wrong choice are not always correctly measured by companies that adopt this line of thinking.
Another challenge lies in the management culture for short-term results, which promotes the demand for an immediate successor .
This perception tends to eliminate good candidates and promote a vacuum of decisions, which in the end makes the structure and execution of the succession plan unfeasible.
Another aspect that harms the results is the expectation that the successor must be a faithful copy of the current occupant of the position.
To eliminate all these limiting factors, it is essential to realize that people can achieve results in countless different ways.
In addition, there must be some flexibility in evaluating the candidate , while respecting the important criteria for the exercise of the function.
But there are also points of attention in the execution phase of the success plan.
As an example, there is the need to anticipate discussions about the necessary measures to replace employees who are about to leave the company.
This process is quite sensitive precisely for those who are leaving, and can generate a false idea of irrelevance and demotivate people who are still in executive positions.
Also, be extra careful with succession plans that contemplate more than one candidate for a position.
In these cases, policies for the management of those who have been neglected , who may feel undervalued, should be envisaged.
What some companies do is invest in relocating executives to other strategic areas.
Advantages And Disadvantages Of The Succession Plan
Structuring a succession plan is rarely easy, but putting it into practice can be even more challenging.
On the other hand, we are not talking about an impossible mission. And the main thing: this is a process that tends to be advantageous.
The main benefit appears in the integration of human resources management with the organization’s strategy.
The study of the information necessary for the elaboration of the plan allows a deep understanding of each one of the functions that are key for the company, as well as the essential competences for its execution.
Achieving this awareness promotes a sense of purpose and trust for the organization as a whole.
A good structure also favors the retention of qualified people .
After all, it puts the relevant short-term negotiation criteria in the background, such as salary and benefit packages, replacing it with more motivating factors, such as career projection and professional growth.
But there are also disadvantages in a succession plan, especially associated with situations of change and discontinuity due to force majeure.
It is also worth mentioning the possibility of disputes between people due to non-fulfillment of promises.
Also, exposure to risk relevant to future scenarios can weaken the relationship between managers and candidates.
Even the most detailed and elaborated plans with qualified information are subject to failure motivated by unforeseen internal or external factors .
At this point, the realignment of expectations may not happen as expected, generating discomfort and insecurity between the parties.
Another possible disadvantage is related to the engagement of professionals at a given moment in the organization, in order to allow a particular and transitory reading of the characteristics necessary for leadership.
As the company grows, mismatches may occur and the need to review agreed criteria .
These changes require negotiations, which may represent a significant cost in waiting time and loss of agility in decision-making processes.
What Are The Characteristics Of A Good Succession Plan?
A succession plan that promotes the efficient management of human capital and the continuity of the business must meet some basic conditions.
Let’s go to them:
- It is the result of in-depth reflection, seeking to meet the real objectives of the organization
- Has the commitment of senior management, the president and the board of directors
- Aligns profiles with the company’s internal and external realities and with medium and long-term strategic planning
- Evaluates in advance the impacts of choices on stakeholders
- Checks the real interest of candidates for succession
- Considers external options
- Grounds the legitimacy of success on technical skills and leadership skills
- Promotes an environment of support and support to the chosen ones
- Plans retention or replacement policies for lost candidates.
Examples Of Succession Plan
Succession plans at large multinational companies regularly attract media and academia attention.
From there, its actors focus on the experiences to detect strengths and weaknesses in each process.
One of the most challenging examples in the corporate world recently was the one implemented at Apple Inc. for the replacement of the iconic Steve Jobs by his then chief operating officer, Tim Cook , in August 2011.
The market, which had a symbiotic perception between the founder and the company, transmitted signs of insecurity regarding the maintenance of business results in the face of serious health problems presented by the main promoter of the brand.
However, with structured actions and transparent communication, Apple’s succession plan included extremely effective risk reduction actions.
Among them, we highlight the close monitoring of the successor in public appearances, in addition to the possibility of testing the position in two situations in which Steve Jobs had to leave for medical treatment, in 2009 and 2011.
But this is not the only case worth mentioning.
In the P&G example , we found that even large organizations find it difficult to keep the leadership funnel active and ready for action.
In 2013, when AG Lafley returned to replace Robert McDonald at the helm of the company, the market understood that the succession plan had failed.
The return of the executive who had retired in 2009 provoked fear in the market of the existence of a systemic failure in the process of filling strategic vacancies .
If for the most important position in the organization there was no candidate ready to fill the vacancy, what would be the situation of the other positions within the company?
This questioning not only intrigued the market, but also made clear the need for all organizations to properly conduct their succession plan.
Succession Map And Stages
Although it is more common to perceive the importance of the succession plan for the “C” level positions of companies, in its elaboration, the importance of the other functions linked to the execution of the strategy must be considered.
The management tool that includes all stages and interrelationships is the succession map.
It should carefully reflect the company’s view of the importance of people in achieving the organization’s goals.
It is not simply defining who should occupy certain positions, but also identifying the ideal moment for change , in addition to being clear about the challenges that will arise.
Among the several important aspects for the elaboration of the map, we can highlight three main ones:
- Job detailing : the description of each job must include, in addition to the tasks to be performed, the profile of the person who should occupy the position, including attitude, skills, knowledge, experience and personality
- Identification of gaps : knowing the minimum requirements for execution and the capacity of potential candidates, it is necessary to make a conscious effort in the planning and execution of the preparation stages
- Alignment of expectations : the map must be shared with people, including the alignment of goals, evaluation criteria and time for implementation.
Career Plan X Succession Plan
As we are talking about an instrument that can result in the promotion of executives within a company , the concepts of succession plan and career plan can be confused.
But they are not the same thing.
The main difference is linked to the point of view.
The career plan has the perspective of the employee , while the succession plan must be understood by the needs of the company.
In the first, the objectives and goals are detailed, as well as the necessary steps to achieve the purposes of each professional.
In the second, there is a structuring process so that the movement of people within the organization occurs in order to maintain the principles that support the business.
The harmony between the two plans is essential for the success of the strategy.
What Is A Career Plan?
The career plan is one of the most important steps in the succession plan.
It deals with aspects related to the people who should occupy key positions within the company .
Among many, the main benefits provided by structuring a career plan are reduced turnover and improved organizational climate.
While the succession plan has a more strategic and holistic view, the career plan focuses on people development .
Career Plan Steps
The career plan stages should focus on the following actions:
1. Identify The Professional’s Perception Of Their Core Competencies
A very common challenge in the executive career is related to the professional’s inability to diagnose the effect of his main contribution on the organization .
With the fragmentation of functions and the need for interdepartmental action, today’s professional is unable to clearly define the boundaries of his role, which makes it difficult to understand the skills and abilities that contribute to the company’s competitive edge.
The alignment of the professional’s perception with the organization’s purposes promotes the taking of conscious actions for training and preparation for the performance of key functions.
2. Communicate And Align Assessment Metrics
The execution of the plan provides for the fulfillment of steps that need to be evaluated and monitored.
The definition of evaluation criteria must be transparent and shared to avoid differences in expectations.
3. Raise Expectations For Career And Compensation
Source of disagreements and reason for failure in succession plans, regardless of the size of the organization , the failure in communication generates impacts that are difficult to repair.
If necessary, negotiation between the parties should take place in the early stages of plan execution.
3 Tips For A Successful Succession
To complement learning about succession plans, we separate three more important tips.
Take them into account when implementing the process in your company.
1. Use A Performance Evaluation Tool
To promote clarity in the criteria used for promotions, the objectives and behaviors foreseen in the career plan must be monitored by evaluation tools with shared metrics.
One of the most used for this purpose is based on the 9-Box Methodology .
This is a simple but extremely effective methodology for evaluating potential leaders and existing talent in the company.
2. Look At The Market When Proposing A Salary Plan
Decisions on compensation and benefit packages, for example, must be made using criteria compatible with the market and the reality of the company, before being shared with the people involved.
The tendency towards simplification should be avoided, assigning to positions personal criteria defined by the direct manager, or obtained through information from unqualified sources.
Management must devote itself to the salary issue with zeal .
Reflection on the subject needs to be constant, in order to avoid surprises and dissatisfaction at the moment when it is necessary to replace a position.
3. Ensure The Succession Of The Person Chosen To Ascend In The Company
A relatively common failure occurs when a professional cannot assume a more relevant position because he does not have someone to replace him in the position he holds.
It is necessary to understand that the promotion of a person causes the opening of a new position in the structure of the organization.
Therefore, a candidate must also be prepared for this position.
In a cycle of lesser responsibility, the professional must consider among his subordinates or peers someone who can occupy his position at the time of promotion.