Succession Planning – Who Will Fill the Shoes of Retiring Executives and Managers?
Ready for what? Have you been planning how to fill the shoes of retiring executive team members and managers? Is your turnover rate telling you that key people are leaving for other companies.
If you have not addressed these two issues, you already have a problem that gets harder to solve every day. Here are the five TOP reasons why these issues matter:
1) The best talent leaves first.
When talent leaves, they take valuable knowledge with them that has usually not been passed on. Surprisingly few organizations put structures in place for capturing knowledge, much less for making that knowledge easily available to others. This creates a void in the understanding of best practices, effective procedures and thoughtful decisions.
2) Productivity decreases with turnover.
According to a study by the American Society for Training and Development, learning time to productivity for a new hire is anywhere from three to six months – time taken away from achieving core goals. According to Peter Drucker, the only way to high productivity in a service business is by “working smarter”. If knowledge, history and organizational norms have walked out the door, getting or staying smart is an uphill battle.
3) Recruitment and training costs are higher than ever.
The cost to hire a new employee rose an average of 33 % in 2000, and that percentage has continued to rise. The dollar cost of recruiting alone runs as high as 30% of the first year’s salary, not to mention the cost of training for the new position. And don’t forget the costly back-end: processing a departing employee, in whom the company has already invested. Did you train the employee well for your competitor?
4) The labor pool is shrinking at a frightening rate.
Forecasts from the US Bureau of Labor Statistics indicate there will be 151 million jobs in the United States, but only 141 million workers in 2006 – yes, it is already a problem. Even if baby boomers are more likely to keep working past age 65, eventually their exodus will negatively impact labor force growth. Then factor in security concerns that slow the free flow of workers across borders, and you’ve got a workforce “perfect storm.”
5) Who fills critical roles?
As key people leave and you feel the pinch, you will likely be tempted to promote people who are not equipped to step into the new role and responsibilities. Product knowledge, sales and service skills, experience and history are things that take time for a new hire to learn and internalize, causing drops in productivity and customer satisfaction. The potential costs are astronomical.
So what can you do?
As in every aspect of your business, the best cure for a workforce crisis is to create and implement a proactive plan of action.
A robust succession plan includes four critical elements:
o Progression Management: by having appropriate tools and resources in place for support, you create a strong foundation for succession planning and management. You also discover what’s not working and even may be getting in the way.
o Needs Assessment: know your current bench strength as a starting point and assess the gaps for maximum effectiveness. Putting in place objective criteria creates and supports a culture of open access and encourages initiative.
o Development: create targeted opportunities to increase bench strength and address known gaps, making a long-term investment in the organization’s success. One benefit is that self-identification and initiative both supports and rewards “diamonds in the rough” who previously slipped through the cracks.
o Mentoring and Coaching: assure knowledge transfer and continuous improvement by leveraging the expertise you already have. And support your star performers in leaving a legacy both they and you can be proud of.
Of course, this process looks different in each organization, based on factors such as size, specialized knowledge, organizational culture, and current practices. In addition, you may be implementing some or all of these initiatives now, and may only need guidance to tie them together or streamline the process.
One approach definitely does not fit all, nor does a written “plan” ensure appropriate implementation. Your next step is to create a tailored plan (and plan of action) for your organization. We’ve helped others to create feasible and successful plans, and we would enjoy tailoring our proven approach to your business needs.
