Some managers think of succession planning like they do writing their wills or purchasing their cemetery plots. They know they should be thinking about it at some point. But they would really rather not do it now. It is just too depressing. And it is easy to rationalize putting it off amid dealing with daily crises and firefighting. Additionally, in these days of everybody-for-themselves career planning, some managers actually worry that they might plan themselves out of their jobs if they do too well in identifying and grooming their successors. Still other managers’ reason that they shouldn’t worry about succession issues, since that is something only the CEO and other senior-level leaders should be concerned about.
But succession planning is no longer a topic that should be put off until a rainy day. It needs to be done now. It needs to be done for all levels in the organization, from CEO down to shop floor worker. And it needs to be done in small and medium-sized businesses just as much as it needs to be done in big business.
Why has succession planning emerged as such a hot topic? There are at least five major reasons.
- First, the 1996 crash in Bosnia of the plane carrying U.S. Secretary Ron Brown and over 30 senior executives from major U.S. corporations made succession planning a front-burner topic. That plane crash was a wake up call to corporate boards, CEOs, and Vice Presidents of Human Resources around the globe. It galvanized attention and led many corporations, government agencies, and even nonprofit enterprises to resuscitate otherwise dormant succession planning programs.
- Second, it is common knowledge in small business that inadequate succession plans are a common cause of small business failure when founding entrepreneurs retire or pass away. In fact, an entire industry has sprung up to offer financial, legal or management advice to small business owners about how to hand down their legacies to their heirs who may have ample cause for concern about inheritance taxes that can eat up their life work. Even worse, some entrepreneurs cannot find replacements to manage the business when family members are not interested. They may be forced to sell—or go out of business.
- Third, the downsizing craze of the late 1980s and 1990s has taken its toll. Middle managers, more than any other group, saw their ranks dramatically thinned during a continuing parade of cost-saving measures that were variously called by such euphemistic terms as reductions in force, downsizings, layoffs, smartsizings, early outs, early retirements, and buyout programs. While those programs looked good to investors on quarterly balance sheets, raised stock prices, and often enhanced earnings for the short-term, they also reduced the ranks of middle managers being prepared for promotion to the senior executive level. While that would have worked effectively for a few organizations, widespread downsizing depleted the middle management ranks almost everywhere–making traditional modes of recruitment such as headhunting less effective than ever before. Was it no longer always possible to rely on luring talent away from others when needed desperately–and usually on short notice? And, as immigration rules were tightened in the U.S., the old trick of finding talent from abroad became a proverbial rabbit that was tougher to pull out of the proverbial hat.
- Fourth, demographic trends point toward leaner times for recruiters and increased importance of making investments to grow talent from within. Between 1996 and 2006, those aged 55 to 64 in the U. S. will increase by 54%, while traditional entry-level employees aged 25 to 34 will experience a net decrease of 8.8% below traditional levels before that. This demographic trend has prompted doomsayers to predict that over 20% of all senior executives in large corporations will be at risk of retirement in just a few years.
- Fifth and finally, record employment levels make worker retention a key cause for concern. With national unemployment rates below 4% at this writing, employers who don’t invest in the development of their employees as a retention tool will find themselves in deep trouble fast. In some locales (where unemployment rates have dipped below 2%), it is not uncommon to place a job vacancy advertisement in the newspaper and get no responses for a year. In this market, employers who can give their employees development for the future will find, based on research, that investments in training or succession planning efforts are actually retention strategies that can preserve existing talent. What is more, employers are becoming more willing to tell people when they are successors for key positions–something that only one-fourth of U.S. employers did just a few years ago–because the hope of future advancement can keep workers from jumping from employer to employer for wage increases ranging from small to very large.
Taken together, these trends point toward the growing importance of succession planning as a daily activity to be undertaken at all levels. It is not just a cause for concern for the CEO. It is, and should be, the concern of any manager who wants to retain, attract, and develop a first-rate staff now and in the future. This trend will not just go away. To learn more about succession planning, register for our course on January 12-13, 2016 at the AIDT Center in Birmingham. More information on our website.
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Article by Robert K. Prescott, Ph.D. SPHR and William J. Rothwell, Ph.D. SPHR. Robert Prescott and William Rothwell are the instructors for the succession planning course offered by Bama At Work.
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