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Human Resources
Jun 15, 2015

Succession Planning: Is It Better To Make Or Buy?

Sponsored Content provided by Dave Hoff - Chief Operating Officer and Executive VP of Leadership Development, EASI Consult

A year or so ago I wrote about succession planning in the context of a private family business. Typically the position to be filled is the top slot; in many cases a next-generation family member is involved or the choice is between a family member and an outsider. In this Insights I would like to look at succession planning as a practice you find in mid- to large-size organizations and that focuses on certain critical or senior-level positions in the organization.
 
I am currently working with an organization that is about to invest significant time and resources in improving its succession planning system for its top cadre of 120 employees. The organization has 6,500 employees in all. I have worked with another mid-sized company that has been experiencing significant year-over-year growth and is filling most of its positions with outsiders. Is one of these companies right and the other wrong? What are the issues both companies need to manage to succeed?
 
Let me give you one other piece of information. It is commonly accepted that if you don’t do anything to alter a person’s professional development that it will take about 20 years to “grow” a general manager. Growing a general manager (GM) means that you hire a person into a relatively entry-level position and then give him or her different jobs every few years until 20 years later, you make that person your next GM.

So what are the challenges associated with creating and maintaining a superior succession planning system?

  1. Having the system run by HR
     
  2. Lack of candor among the management team
     
  3. Lack of accountability
     
  4. Trying to boil the ocean
     
  5. Lack of precision in role definition
     
  6. Recognition that going outside is equal to failure
     
  7. Allowing “organ rejection” to occur
Let me try and answer these challenges one by one.
 
  1. HR Involvement. HR should be the collector of the data on succession candidates. Your HR team can capture key points and next steps in the succession discussions. Succession planning MUST be owned by line management.
     
  2. Candor. A succession planning system WILL NOT WORK if the senior management team is not brutally honest about the issues each candidate MUST address.
     
  3. Accountability. The CEO must be relentless in following up with the activities to be done coming out of a succession planning meeting. Each item must be “owned” by a line manager and reported on at the next meeting.
     
  4. Size. Too many brand new programs try and cover too many positions and implode due to their enormity. Start small and focus on a couple critical positions but run the system extremely well.
     
  5. Lack of precision. The REALLY hard work is being able to describe the behaviors connected to superior performance. If you cut corners in this initial phase, the tool by which you measure people will be useless.
     
  6. No internal candidates. A well-run succession planning system should always yield one or more “ready-now” candidates for an open position. Anything less means the system is not working. You can always override an acceptable candidate and choose to go outside to fill a position.
     
  7. Rejection. The chances are only 50/50 that a person hired from outside your organization will be successful and stay more than two years. Most organizations don’t take the time to ensure the outsider is accepted by their peers. When is the right time to start a succession planning program? In the example of our rapidly growing mid-size company, the consequence of not starting a program is that you have no option but to go outside. And when you go outside, search company fees and lost opportunity costs add up quickly. The odds that a person from the outside will be successful also are lower than you would like.
What are the consequences inherent in not introducing a succession planning process or system?
 
  1. Not defining superior performance
     
  2. Confusion on filling open positions
     
  3. Outstanding performers voting with their feet
     
  4. Weak overall HR and lack of feedback
For our second alternative, “buy,” I’ll offer a more elaborate explanation.
 
  1. Rapidly growing organizations often use expansion as a reason/excuse for not defining superior performance. But such information is critical to increasing clarity and preventing bad hires.
     
  2. When positions get filled continually (either real or imagined) from the outside, good and average performers become disillusioned about their future opportunities in this organization.
     
  3. Outstanding performers crave feedback. Why? It helps them improve their performance. An outgrowth of a succession planning system is that some people get more attention. No system means less attention.
     
  4. An organization that doesn’t embrace a succession planning system probably also has weak HR systems such as selection and performance management. Organizations with strong HR organizations have interdependent subsystems that are typically based on a competency platform.
Make or buy? There are no easy answers. It seems like you can better control your destiny by doing things in house, with a sprinkle of external hires.

EASI•Consult® works with Fortune 500 companies, government agencies, and mid-sized corporations to provide customized Talent Management solutions. EASI Consult’s specialties include individual assessment, online employment testing, survey research, competency modeling, leadership development, executive coaching, 360-degree feedback, online structured interviews, and EEO hiring compliance. The company is a leader in the field of providing accurate information about people through professional assessment. To learn more about EASI Consult, visit www.easiconsult.com, email [email protected] or call 800.922.EASI.

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