Most large companies make a commitment to succession planning. Mid-size and smaller companies are more likely to weigh the pros and cons of making the time commitment to succession planning. Companies of all sizes benefit by planning to fill vacancies on the board and in their general leadership positions.
A high-quality succession plan helps boards keep talent in their pipeline. A good plan should assist the nomination committee in filling a vacancy within one to three years. Another benefit of succession planning for all sizes of companies is that it helps to cultivate the talents of current employees and to equip them to succeed in leadership positions.
The modern approach to succession planning gives nomination committees the proper nomination and governance tools so that companies of all sizes, and within all industries, can participate in succession planning without cutting too much into work time or breaking the budget.
The Value in Succession Planning
The demographics of governance are rapidly changing. A commitment to succession planning gives boards the chance to identify talent that meets the new demographics and corporate governance needs now and in the future.
The right talent is often closer than they know. Succession planning will identify the gaps in skills that are needed for board and executive positions. To dig a little deeper, succession planning will also indicate areas in which the company can work to develop training programs to prepare current employees to be the next generation of leaders. Achievement and recognition programs aim to keep employees invested in their work and to retain them for the long term. Opportunities to boost morale result in higher employment retention.
As the baby boomer generation enters the retirement phase, there’s the risk that institutional knowledge will be leaving with them. Succession planning offers an opportunity to pair older leaders with younger leaders to transfer institutional knowledge.
Most importantly, succession planning eliminates a sudden and unanticipated vacancy in a principal position because the nomination committee will have a cadre of qualified candidates in the pipeline.
Considerations in Designing a Succession Plan
In addition to doing searches outside of the company, it’s possible to draw talent from within the company. With the right organizational foundation, it’s entirely possible. In designing job descriptions, think outside the box and set up skill sets that complement each other or layer over each other to make employees more valuable.
In selecting employees to serve in various positions that could elevate them to leadership positions, some employees have certain natural talents, which should be considered. In addition, certain types of positions easily lend themselves to being good training grounds for other positions. It’s often a matter of getting the right employees into those positions to prime them for a higher position.
To set the right framework for promoting from within, companies need to create a learning mentality and make it part of the corporate culture. Companies that participate in cross-training, job enlargement, job enhancement, job shadowing, case studies and classroom training position themselves well for highly qualified future leadership. In designing a succession plan, nomination committees will need to establish metrics and standards so they can benefit from their efforts.
Nomination committees will always need to keep a matrix of current skills and talents and look for recruits where they can match current gaps with potential candidates’ skills at the earliest possible opportunity. The matrix will also help to document a timeline for when vacancies are likely to occur.
Challenges in Succession Planning
There are bound to be challenges in succession planning, most of which are fairly easy to overcome. First, there will always be people who simply resist change. In using digital tools for succession planning, the ease and accuracy of succession planning make this obstacle easy to overcome. Main leaders may be concerned about their positions or those of their colleagues, which amounts to poor reasoning, as board directors and executives have a fiduciary duty to put the interests of the company first.
One way to manage the challenge of managers who fail to develop their employees because they don’t want to lose them is to hold managers accountable for developing employees. For succession planning to be fruitful, boards need to do self-evaluations and they need to approach them honestly and ethically.
Finally, succession planning takes some amount of time and not all companies will give the process the time that it requires. Digital board management solutions with applications for succession planning can help to overcome this challenge, as they reduce the time and expense that manual processes demand.
Modern Governance Tools for Quality Succession Planning
How can you be sure that your company engages in quality succession planning? If your nomination committee is looking and thinking outside the box at the next generation of candidates that can function well in key positions, this is a sign of good succession planning.
Nominating committees should think of succession planning like a farm team for a sports league. If the company has created a learning organization culture and they expect employees to seek higher positions, they are well on their way to preparing the next wave of leadership.
Succession planning doesn’t have to be time-consuming or expensive. Diligent Nominations is a succession planning tool that gives committees access to information on over 125,000 candidates from over 5,500 companies. The information is drawn from 24 global markets and 40 indexes.
This digital solution analyzes director interlocks by individual and by company and highlights overlapping directorships. The tool uses a simple search engine to locate the shortest path to connect and the degree of separations to individuals through individuals or organizations.
The modern approach to board and executive nominations is to work on developing internal talent and keep a continuous search going for outside talent. Digital tools empower nominating committees with the insights and processes that fuel good governance that companies need to thrive and succeed in our fast-paced world.
Diligent Nominations succession planning tool integrates fully with Diligent’s Governance Cloud, a suite of board management governance tools. Having the right information gives boards a competitive edge to improve governance because it gives them the right information at the right time. Diligent Nominations is the right tool for modern succession planning.