May 24, 2024

Why Succession Planning Is Important & How To Strategize It?

Employees leave a company for various reasons. Some retire as they age, while others leave for better opportunities elsewhere. Certain duties that an employee performs cannot stop because the person has left the firm. The company should be able to immediately find someone to fill the vacancy and ensure that work is not affected. But it is not possible for someone to suddenly come and take up the job. It is why succession planning is important, and companies must implement this to continue business activities.

The Advanced Executive Certificate Course In Supply Chain Strategy And Operations Management deals with succession planning in detail. More information about this course is available on our website.

What Is Succession Planning?

Succession planning is a strategy that ensures that no position in the company remains vacant if a person in that post leaves suddenly. It is especially useful for leadership positions but is also applicable to other posts in the company. Succession planning is all about having a person ready to take up the vacant place. Employees with the potential to handle other jobs are trained and kept ready to take over in the event someone suddenly leaves the organisation. It can be applied even when a place falls vacant due to retirement, which is not an unexpected event.

The unexpected resignation of a person at the senior level can cause grave danger to the company. When a C-suite member resigns, it becomes news, and the company’s share prices can come crashing. It also becomes difficult for the organisation to make critical decisions when such a person leaves suddenly. It is why succession planning is important, and every establishment must have a suitable person ready to take up the position. It is highly important to ensure a supply of suitable successors for current and future senior jobs. It also

Promotion Or Hiring?

This leads us to the crucial question of whether the successor must be from within the company or a new person from outside. It will purely depend on the company and the availability of suitable people. There are advantages to both methods. When you select and train someone from within the firm, it gives hope to employees that there is a good future for them. It makes employee retention easy and creates a better environment in the organisation. The advantage of promoting someone from the inside is that the person knows about the firm and its culture.

Some companies may have a shortage of qualified and skilled people to promote to higher positions. In such cases, the firm will be forced to take someone from outside. Though it may be more expensive for the firm, complete dependence on the internal talent pool may lead to stagnation. Getting people from outside will help the company get new ideas and innovation. Whether from outside or inside, there must be an immediate replacement or else the company’s working will suffer. That is why succession planning is important for all companies.

Internal Vs External Filling

Internal Filling

Short recruitment process as the top management knows the person’s skills and capabilities.
The company can give specific training to the employee in skills needed to take up the job.
Short induction process because the successor knows the procedures and culture of the company and most of the colleagues.
Better employee loyalty as they see the future of the company
Motivates other employees to work harder to reach higher positions.
External Filling

Newcomers come with fresh ideas and will drive innovations. They will also not be blind to the company’s shortcomings.
Outsiders bring with them new opportunities to network.
Previous conflicts and issues in the company don’t distract them from their job.
Someone from outside may enjoy better acceptance, especially in a leadership position.
They come with additional knowledge and skills.
Why Do Companies Need Succession Planning?
To Ensure Continuity

A succession plan helps uphold the firm’s vision and mission, ensuring that the focus on the company’s long-term plans remains intact. The board members of most companies wish to maintain the culture, which is possible with good succession planning.

Identify High-Potential Future Leaders

Another reason why succession planning is important is that it allows the company to identify high-potential employees. It allows the top management to understand their strengths and weaknesses. Such people exhibit high skills and a willingness to take up higher responsibilities. The awareness of employees’ skill levels makes the company future-ready, which is essential in a competitive market.

Motivates Employees

Another big reason for implementing succession planning is that it motivates the employees. Knowing they are all being considered for higher positions makes them work harder. The knowledge that the firm values them highly gives them extreme happiness, which motivates them to improve their work and learn new skills.

Manage Disruptions

In a competitive market condition, companies cannot afford to have any disruptions in their operations. The resignation of a top-level employee can temporarily put a stop to all company’s plans. It can greatly affect their competitiveness in the market. The reason why succession planning is important is that it allows the company to have a competent person to replace and continue the activities without any break.

Saves Money

It is common knowledge that hiring a person is more expensive than retaining an existing employee. Having a succession plan ensures that there is someone to replace executives who leave the company. It means the organisation doesn’t have to spend money and effort looking for suitable people outside.

The Dangers Of Not Having A Succession Plan

Uncertainty

Without succession planning, the company is exposing itself to an uncertain future. When top positions in the company are left vacant for a long time, it will not achieve the firm’s objectives. It will also create a feeling in the stakeholders about the security of their investment in the company. A company with such an uncertain future will also lose its credibility in the market leading to a fall in the business. It is why succession planning is important for all organisations.

Reducing Loyalty

When there are no clear succession plans, the company will be forced to make hasty decisions about replacing people. It could result in promoting the wrong person to a top position leaving out those more capable. Such action frustrates good workers and makes them think about leaving the firm. Employees may also not cooperate very well with the new person if they feel that the promotion was given to an undeserving person.

High Attrition

All employees are looking forward to growth in their careers. Most of them would prefer to move upwards in the same company instead of looking at opportunities outside. If they feel that the company doesn’t have a proper succession plan, they will be left to wonder if they have a future in the organisation. They will also feel that the company is not interested in their growth and development. It could lead to high attrition and is another reason why succession planning is important.

Wrong Hiring

Another danger of not having a proper succession plan is that it could lead to hiring the wrong person. When a leader resigns suddenly, the organisation will be looking to fill that position as soon as possible. This can lead to recruiting the wrong people without seeing if they are suitable for the position and the company culture. But when there is a succession plan, the company has time to hire correctly and train the person for the job.

You will learn the need for succession planning and the dangers of not doing it in the Advanced Executive Certificate Course In Supply Chain Strategy And Operations Management. You can visit our website to learn more about this course.

The Objectives Of Succession Planning

Improving Retention

Employee retention is crucial to all companies as finding suitable persons and hiring them is time-consuming. Recruitment and training new people are also expensive. It is why companies do everything in their power to retain employees. One of the main reasons someone leaves a firm is the feeling that there is no future in it. Training them and preparing them for higher responsibilities gives them hope that they have a chance to move upward in the firm. The ability to retain employees is why succession planning is important for all organisations.

Employee Development And Engagement

Succession planning allows the company to understand the capabilities of their employees. It also provides the chance to give training to the workers and make them ready for more responsibilities. Companies can also have a clear training and development process. Training and developing staff members also help to increase their engagement with the company. They become more involved in the job and perform better, knowing that the establishment values their work. It is another objective of the exercise and why succession planning is important.

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