Why only 2 out of 10 Companies Say Their Succession Planning is Effective

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With all the attention on succession planning over the past few years, one would expect to see progress in both quantity and quality of organization’s succession plans. However, in our 2016 Succession Planning Survey, the majority of companies believe their succession plans are ineffective – that is, if they even have one in place. In fact, 26 percent of respondents report, “it’s better than nothing,” or “not doing it all.”

While every organization is unique, our survey did uncover (#) barriers to effective succession planning that most companies are experiencing, and will need to overcome in order to move the dial on their leadership preparedness.

 

Barrier #1: Using an Informal Approach 

Our survey examined the type of approach organizations take today when it comes to succession planning. The findings surprised even us, with more than half (54%) of companies taking an informal or mostly informal approach – relying heavily upon discussions and decisions among leadership. Less than a third (31%) of respondents use a formal approach “supported by process, tools and/or technology.”

The problem with an informal approach is it typically occurs in an unplanned and ad hoc manner, which isn’t truly preparing and developing employees to take on the next level role. For example, imagine if we took a similarly informal approach to student graduations, one in which teachers simply guessed who might be the most qualified and ready to move on to the next grade rather than basing those decisions on performance data and measurements such as, tests, homework, standardized exams, etc.

The problem is, not only are your decisions based on gut feel, but in that scenario students aren’t being prepared to move on because their knowledge and skill gaps haven’t been identified and developed.

Similarly, in organizations with an informal succession plan, there is no oversight in terms of what is being developed and when.  It often wastes money and time in potentially developing the wrong things in the wrong employees.

 

Barrier #2: Absence of Data-Based Decision-Making

We have found that while many organizations have taken some steps to support succession planning, most don’t have the right data-driven processes to build an objective, science-backed program in order to achieve the best results. According to our research, when it comes to the kind of data respondents are using, “talent reviews/manager feedback” topped the list, while more than one-fifth (21%) say they aren’t using any data.

In addition, most organizations rely upon leadership recommendations (63%) in their succession-planning decisions. Only 41 percent of companies utilize competency assessments, while 38 percent implement the 9-box method and 21 percent rely on 360 reviews.

With the tools and methods mentioned above, there is little science behind the process and the inputs for the data used. Most are based upon opinions, which bring potential bias whether the raters are conscious of it or not. And, most methods are not focused on the employee’s next position, how prepared he/she is for the next role, and what he/she needs in terms of development to get there.

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Barrier #3: Not Putting Succession Planning at the Forefront

Could it be that companies view succession planning as important but not urgent – or at least not as urgent as some other demands? That proves to be the case for many companies, according to our research. Organizations report many barriers to implementing an effective succession plan, including lack of time, resources, expertise, funding, and the right tools.

Do some of these responses apply to you? We believe that part of the problem is that, against the pressures and demands of the real-time business environment, it just isn’t as urgent as driving results today.

If your organization has this bias to some degree, and tend to overlook the resources and commitment to succession planning that you need to be ready for the future, consider the costly consequences of not putting succession at the forefront:

  • Large companies forced into CEO turnovers miss out on some $1.8 billion each in shareholder value – a total of $112 billion.
  • Large companies could collectively add $60 billion in shareholder value if they could limit forced turnovers to only 10 percent of all turnovers.
  • Promoting the wrong candidates results in higher turnover costs and expenses to recruit new talent.
  • Not engaging high potential employees also contributes to loss of key talent and turnover costs.

The bottom line is companies simply can’t afford to utilize ad-hoc, informal succession plans and certainly can’t risk having no succession planning efforts at all. Get the help you need from external sources to set up the right planning processes from the beginning, and embed proven talent assessment and data solutions to deliver the data needed to inform decision-making.

Effective succession planning – using best practices with the data and processes behind them – is more than an option for those companies who want to be great. It is imperative for those that want to perform well, retain top talent, and ensure they’re ready for whatever comes their way tomorrow.

If you don’t pay attention to it today, where will you be when your competitors do? 

We’ve partnered with many leading brands to help build their business case for an improved succession planning process, and delivered quantifiable results after implementation.  Please contact our XBInsight team if you’d like help assessing your potential leadership talent, tools and processes.

 

 

Topics: Succession Planning, Performance Management