Succession in Uncertain Times
“There is nothing certain, but the uncertain.”
-Proverb
During times of uncertainty leaders must focus on what they can control, rather than worrying about what they cannot. Unfortunately, future-focused succession planning is often considered too burdensome or beyond the scope of control, so these strategic processes are the first to be neglected when times are tough. But succession planning doesn’t have to be as daunting as it seems. Using the right tools and techniques, you can easily identify and develop top talent so that despite uncertain times, the future of your company remains certain.
Importance of Succession Planning in Times of Change
Most executive boards and leaders feel they have prepared for the future of a role if they have a successor in mind. This, however, is not true succession planning. Succession planning is the proactive, long-term development of talented employees such that they are on track to become qualified candidates for particular roles. This is different from “replacement hiring,” which is retroactive and does not include employee development. Succession planning is about strategically creating a succession bench of qualified candidates, developing employee skills, and providing your company with options for choosing new leaders. The succession planning process is about engaging and developing the future leaders of your company, rather than simply finding a suitable successor.
Succession planning is especially important in uncertain times. Studies have shown that turnover increases significantly during times of change due to factors like early retirement, illness, and unexpected resignation.[1] Succession planning enables organizations to facilitate these transitions in a way that benefits, or at the very least does not detract from the pursuit of the company’s mission and vision. This type of agile operation is critical in helping companies navigate already uncertain environments.
Types of Change
Leaders will encounter many different types of change throughout their careers:
Job Change
Over the past decade, job change has been continuous and accelerating. Gone are the days when employees stayed with their company for life. Today, over 64% of professionals polled think that changing roles every few years is beneficial, largely due to an increase in salary.[2] This trend is amplified among young professionals; a study done by Gallup revealed that in the past year more than 1 in 5 young professionals changed their job (over three times the number of older professionals).[3] Consequently, the average tenure for employees aged 25 to 34 is now only 3.2 years.[4] This indicates that the rate and prevalence of job change is on the rise.
Industry Change
Across nearly every industry, the go-to-market cycles are shortening and the pace of innovation is growing. This is called “industry clockspeed.” Industry clockspeed is accelerating rapidly everywhere from information and technology to automotive manufacturing. Industries also change with new entrants who bring innovation and disruption, as well as new modes and mechanisms of competition.
Environmental Change
Environmental changes can include those related to the business: mergers and acquisitions, retirement, and resignation. It also includes changes in corporate culture such as the shift to remote work, open workspaces, or interdepartmental collaboration. But environmental change can also refer to economic crises such as the Great Depression (1929-1939), Dot-Com Bubble (2000), and Global Financial Crisis (2007-2008). Socio-political changes in education, gender equality, and governance also have a direct impact on business, as do environmental changes like the shift to sustainable development. Finally, there are global crises: World War I, World War II, and pandemics such as COVID-19. These environmental changes are especially difficult to manage because they are often the most impactful, but the hardest to predict.
Benefits of Succession Planning in Times of Change
One of the greatest benefits of succession planning is that it helps leaders take control of what can be controlled, allowing them to react efficiently and effectively when unexpected changes arise. The key to succession planning is that it is future-focused, carried out in advance, and includes employee development. This makes it much less costly than replacement hiring, which impedes operations, lowers morale, and accelerates attrition. Unlike replacement hiring, succession planning has psychological, operational, and financial benefits that are particularly advantageous during times of change.
Psychological Benefits of Succession Planning
The psychological benefits to succession planning lie in the structure it provides. This structure reduces strain on shareholders, board members, and clients who count on organizational stability. Having a succession plan also reassures employees by providing a clear and transparent plan. Studies show that anxiety is significantly correlated with “structuredness” and ambiguity.[5] Succession planning adds structure to future transitions and can therefore serve to reduce anxiety during already turbulent uncertain times.
Operational Benefits of Succession Planning
Succession planning also has operational benefits. Improved knowledge translation, stronger employee buy-in, and reduced transition time allow resources to be invested in other pursuits. This is especially important in times of uncertainty, where additional capacity is needed to make decisions and manage change.
Financial Benefits of Succession Planning
Last but not least, succession planning is accompanied by financial benefits. Economists estimate turnover costs at 50% of salary for entry-level positions, 125% of salary for mid-level positions, and 200% of salary for senior executives.[6] Direct costs include those for separating with an employee (exit interviews, severance pay, and unemployment taxes), temporarily covering an employees’ duties, replacing employees (search and agency fees, screening applicants, employment testing, hiring bonuses, applicant travel and relocation costs), onboarding, and training. Indirect costs include reduced productivity, lower morale, lost clients and institutional knowledge. These costs can all be reduced or prevented by investing in proactive succession planning, which is especially beneficial considering the unexpected costs and revenue reductions incurred during times of change.
Succession Planning Tips and Resources
Here are a few helpful recommendations your company can use to implement succession planning in times of change:
- Look internally. Hiring externally requires more screening and onboarding than promoting from within. During uncertain times, these resources may be better used elsewhere. In addition, bringing in new leaders will only add to the uncertainty that already exists during times of change.
- Start small. Succession planning is strategic planning. Strategic planning usually has a long-term focus, but during times of change it becomes difficult to accurately predict inputs over extended periods of time. Do your best to anticipate and plan, but remain focused on making reliable decisions with the information you have and the factors you can control.
- Be objective. Change can be threatening, and emotions will be heightened during times of uncertainty. Choose your leaders based on reliable data and past performance, rather than gravitating towards subjective impressions of confidence and charisma.
- Play to your strengths. SIGMA’s science-based assessments can help you identify your employees’ leadership skills so that you can optimize your team when you need to be performing best.
- Be proactive. SIGMA’s Succession Planning Launch Series delivers everything you need to build succession plans today that will help you execute tomorrow. Check out our Succession Planning Webinar, Guide, and other resources here.
[1] Morrell, K.M., Loan‐Clarke, J. and Wilkinson, A.J. (2004), “Organizational change and employee turnover”, Personnel Review, Vol. 33 No. 2, pp. 161-173. https://doi.org/10.1108/00483480410518022.
[2] Park, M. (April 5, 2018). Does Job Hopping Help or Hurt Your Career? Robert Half. http://rh-us.mediaroom.com/2018-04-05-Does-Job-Hopping-Help-Or-Hurt-Your-Career?utm_campaign=Press_Release&utm_medium=Link&utm_source=Press_Release.
[3] Adkins, A. (NA). Millennials: The Job-Hopping Generation. Gallup. https://www.gallup.com/workplace/231587/millennials-job-hopping-generation.aspx.
[4] U.S. Bureau of Labor Statistics. (September 20, 2018). Employee Tenure Summary. Economic News Release. https://www.bls.gov/news.release/tenure.nr0.htm.
[5]Dibner, A. S. (1958). Ambiguity and anxiety. The Journal of Abnormal and Social Psychology, 56(2), 165–174. https://doi.org/10.1037/h0049064.
[6] Conerly, B. (August 12, 2018). Employee Turnover. Forbes. https://www.forbes.com/sites/billconerly/2018/08/12/companies-need-to-know-the-dollar-cost-of-employee-turnover/#6096f5a8d590.