Washington University defines succession planning as “the process of identifying the critical positions within your organization and developing action plans for individuals to assume those positions.” Most organizations understand its importance, but succession planning is difficult for many reasons, such as the difficulties of long-term planning and of understanding the company’s future needs. Perhaps this is why “only 35% of organizations have a formalized succession planning process in place” according to the Association for Talent Development. However, succession planning done right can put your company in the top tier of performance by improving promotional decisions, illuminating skill gaps, increasing corporate vitality, and improving retention.
Promote With Better Results
It takes 25 days to fill a role on average, with many positions staying vacant much longer. Having a succession plan and a bench of talented employees ready to be promoted can reduce that time. It saves money as well – the costs associated with recruiting outside candidates is around 18% more than promoting internally. Studies also show the results for outside hires are worse for the company than internal hires, giving less bang for more bucks. According to Forbes, 75% of internally promoted employees are successful in their new role, while on average external hires perform at 25% of their potential for months while acclimating to a new company. Internal hires are also more likely to stick around – 47% of promoted employees stay in the company for at least three years, while 21% of external hires are more likely to quit the organization within one year.
Eliminate Skill Gaps
Succession planning has positive effects long before promotions are decided. You will also be able to find any gaps in skills, expertise, or knowledge that you can train and prepare for now. While most succession planning efforts are devoted to C-Suite spots, skill gaps can be found at all levels of a company. Based on a McKinsey survey, 87% of global executives say that their organizations face a skill gap now, or expect to see them in the future. Developing a multi-level succession plan is imperative to address these growing skill gaps across the organization. If they are minimized, “the organization can reduce the risk of losing institutional memory, expertise, and relationships, and ensure a smooth transition to the next person in line.”
Promote Leaders Earlier in Their Career
Succession planning also allows you to promote employees to leadership roles at a younger age than you can to recruit from outside. In this day and age, more experience does not always mean a better leader. According to a recent Harvard Business Review article, promoting the right employees earlier and having them ready to lead at a younger age keeps the company more resilient in times of hardship. For example, according to a recent study, corporate vitality is negatively correlated with CEO age – the older the leadership, the less risks they are willing to take to keep the company going strong. Younger employees have different values and a different relationship with risk, which in many cases are beneficial for the organizations they work for – when they can listen.
Increase Overall Employee Retention
Finally, succession planning increases employee retention – even for employees who are not promoted. According to a Harvard Business Review study, “internal candidates who apply for but are subsequently denied a role that goes to an external hire are two times more likely to quit than employees who didn’t apply at all.” However, this attrition can be mitigated just by emphasizing consideration for internal candidates. Employees who apply for internal roles and are given an interview before being rejected quit half as often as those who are rejected without an interview. Turnover is also halved by selecting an internal candidate over an outside one. A LinkedIn study agrees: organizations that promote from within retain employees 41% longer than those that hire externally. When losing just one employee costs an average of $15,000, the cost of hiring an external candidate and replacing quitting employees can add up.
Conclusion
Leveraging the expertise of Partners International to improve your succession planning process can bring stability and sustainability to your organization by reducing turnover costs, eliminating skill gaps, and revitalizing the decision-making process. To get started, visit our website at https://www.partners-international.com/, or email us at info@partners-international.com