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Succession planning

Succession planning is a critical part of the human resources planning process. Human resourcesplanning (HRP) is the process of having the right number of employees in the right positions in

the organization at the time that they are needed. HRP involves forecasting, or predicting, the

organization's needs for labor and supply of labor and then taking steps to move people intopositions in which they are needed.

Succession planning is the systematic process of defining future management requirements andidentifying candidates who best meet those requirements. Succession planning involves using the

supply of labor within the organization for future staffing needs. With succession planning, theskills and abilities of current employees are assessed to see which future positions they may take

within the organization when other employees leave their positions. Succession planning istypically used in higher-level organizational positions, such as executive-level positions. For

instance, if a company predicts that its Chief Executive Officer will retire in the near future, theorganization may begin looking months or even years in advance to determine which current

employee might be capable of taking over the position of the CEO.

Succession planning is aimed at promoting individuals within the organization and thus makesuse of internal selection. Internal selection, as opposed to hiring employees from outside the

organization, has a number of benefits and drawbacks. With internal selection, the organizationis aware of current employees' skills and abilities, and therefore is often better able to predict

future performance than when hiring from the outside. Because of access to annual performanceappraisals and the opinions of the employee's current managers, the company can have a fairly

accurate assessment of the employee's work capabilities. Additionally, the organization hastrained and socialized the employee for a period of time already, so the employee is likely to be

better prepared for a position within the organization than someone who does not have that

organizational experience. Finally, internal selection is often motivating to others in theorganizationopportunities for advancement may encourage employees to perform at a highlevel.

Despite its many advantages, internal selection can also have some drawbacks. While theopportunities for advancement may be motivating to employees who believe that they can move

up within the organization at a future date, those employees who feel that they have been passedover for promotion or are at a career plateau are likely to become discouraged and may choose to

leave the organization. Having an employee who has been trained and socialized by theorganization may limit the availability of skills, innovation, or creativity that may be found when

new employees are brought in from the outside. Finally, internal selection still leaves a position

at a lower level that must be staffed from the outside, which may not reduce recruitment andselection costs.

Many companies organize their management training and development efforts around successionplanning. However, not all organizations take a formal approach to it, and instead do so very

informally, using the opinions of managers as the basis for promotion, with little consideration ofthe actual requirements of future positions. Informal succession planning is likely to result in

managers who are promoted due to criteria that are unrelated to performance, such as networking

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within and outside of the organization. Organizations would be better served by promotingmanagers who were able to successfully engage in human resource management activities and

communicate with employees. Poor succession planning, such as just described, can havenegative organizational consequences. Research indicates that poor preparation for advancement

into managerial positions leaves almost one-third of new executives unable to meet company

expectations for job performance. This may have negative repercussions for the newly promotedmanager, the other employees, and the company's bottom line.

STEPS IN SUCCESSION PLANNING

There are several steps in effective succession planning: human resources planning, recruitment

& selection, management development, performance management.

Human resource planning

Engaging in human resources planning by forecasting the organization's needs for employees at

upper levels is the first step in succession planning. Some staffing needs can be anticipated, suchas a known upcoming retirement or transfer. However, staffing needs are often less predictableorganizational members may leave for other companies, retire unexpectedly, or even die,

resulting in a need to hire from outside or promote from within. The organization should do itsbest to have staff available to move up in the organization even when unexpected circumstances

arise. Thus, accurate and timely forecasting is critical.

Recruitment & Selection

The second major step for succession planning is to define and measure individual qualificationsneeded for each targeted position. Such qualifications should be based on information from a

recent job analysis. Once these qualifications are defined, employees must be evaluated on thesequalifications to identify those with a high potential for promotion. This may involve assessing

both the abilities and the career interests of employees. If a lower-level manager has excellentabilities but little interest in advancement within the organization, then development effortsaimed at promotion will be a poor investment.

To determine the level of abilities of employees within the organization, many of the same

selection tools that are used for assessing external candidates can be used, such as general mentalability tests, personality tests, and assessment centers. However, when selecting internally, the

company has an advantage in that it has much more data on internal candidates, such as recordsof an employee's career progress, experience, past performance, and self-reported interests

regarding future career steps.

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Development management

The third step of succession planning, which is actually ongoing throughout the process, is the

development of the managers who are identified as having promotion potential. In order toprepare these lower-level managers for higher positions, they need to engage in development

activities to improve their skills. Some of these activities may include:

y Job rotation through key executive positions. By working in different executive positionsthroughout the organization, the manager gains insight into the overall strategic workingsof the company. Additionally, the performance of this manager at the executive level can

be assessed before further promotions are awarded.y Overseas assignments. Many multinational companies now include an overseas

assignment as a way for managers to both learn more about the company and to test theirpotential for advancement within the company. Managers who are successful at leading

an overseas branch of the company are assumed to be prepared to take an executiveposition in the home country.

y Education. Formal courses may improve managers' abilities to understand the financialand operational aspects of business management. Many companies will pay for managersto pursue degrees such as Masters in Business Administration (MBAs), which areexpected to provide managers with knowledge that they could not otherwise gain from

the company's own training and development programs.y Performance-related training and development for current and future roles. Specific

training and development provided by the company may be required for managers toexcel in their current positions and to give them skills that they need in higher-level

positions.

Performance Management

In the final step of succession planning, the organization identifies a career path for each high-potential candidatethose who have the interest and ability to move upward in the organization.

A career path is the typical set of positions that an employee might hold in the course of his orher career. In succession planning, it is a road map of positions and experiences designed to

prepare the individual for an upper-level management position. Along with career paths, theorganization should develop replacement charts, which indicate the availability of candidates and

their readiness to step into the various management positions. These charts are depicted asorganizational charts in which possible candidates to replacement others are listed in rank order

for each management position. These rank orders are based on the candidates' potential scores,which are derived on the basis of their past performance, experience, and other relevant

qualifications. The charts indicate who is currently ready for promotion and who needs furthergrooming to be prepared for an upper-level position.