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Succession Planning: Beyond the C Suite
Lars Dalgaard / Business Week
May 15, 2008
Sure, you may have a plan in place for when your top execs go. But what about other key players? The disruption if they leave can cost the company twice as much as their salary.
In early February, the Seattle Seahawks announced that they had inked Assistant Coach Jim Mora to a new five-year contract, a typical, fairly nondescript off-season move for an NFL team. But atypically, the team also announced that Mora had been named as the successor for longtime Head Coach Mike Holmgren. Most NFL franchises conduct exhaustive, nationwide searches to find new head coaches.
Great story, but what does this have to do with business? What can a professional football team teach most typical companies? The Seahawks took an innovative approach to solving a major problem that most businesses are currently staring dead in the eye: how to fill important positions efficiently when employees retire or otherwise move on.
Succession planning has long been thought of in very narrow terms: a necessity for members of the executive team, but largely unimportant down the chain of command. But in today’s business environment, fraught with economic uncertainty, the impending retirement of the baby boomers and subsequent talent shortage, as well as the high cost of external headhunters—smart companies are waking up to the fact that there are real costs of not having a companywide succession plan.
MANAGING THE FUTURE OF THE WORKFORCE
The financial impact of scrambling to find replacements when a key employee a few steps below the C suite leaves unexpectedly is huge. If there’s no internal candidate that’s able to step in immediately, companies generally launch a time-consuming and expensive external recruiting effort. Once they go down that road, the costs usually pale in comparison to any productivity hit they take while a position remains vacant. According to a BT.Novations study, including wasted salary, benefits, time of other employees, and recruiting, it can cost nearly $100,000 to replace a $50,000-salary employee. That’s no lightweight hit.
Succession planning involves so much more than determining who’s next in line to run the company. It has the power to transform how companies manage the future of their workforce—from top to bottom—by ensuring business continuity, developing and retaining intellectual capital, and encouraging individual growth. A robust, active, and evolving strategic succession plan engages people at all levels to start a dialogue about their company and the future of its workforce and empowers executives to build the company’s bench strength, better individual employee’s career development plans, and save time and money.
To be sure, creating a succession plan that spans faraway from the executive suite does require a little effort from managers, along with upper-level buy-in and support, but the return is immediate and extremely valuable. Most important, it requires that those who are in charge of managing people really know their teams—the strengths, weaknesses, skills, experiences, and interests of each employee—and be able to identify the rising stars. Armed with this knowledge, employers can begin proactively grooming successors for key roles across the company. The benefits: You avoid costly attrition and also keep employees content, engaged, and productive by openly providing career development opportunities.
The first step to creating a succession plan is to ask six simple questions:
• What roles in the company are critical to the business?
• What is the average age of your employees?
• What percentage of them are retiring in the next five years?
• What is your company’s current process for identifying employees with high potential to take on leadership roles?
• How does your company identify internal talent that may be ready to step into key roles immediately?
• What would happen if a key employee, manager, or member of the executive team gave his or her two weeks’ notice today?
(By the way, the following responses to any of the above questions are wrong: Don’t know. None. Hmmm, let me check. Panic.)
