Explaining the Business Need for Talent and Succession Management

Doris Sims
Posted: 02/15/2011

Talent management and succession planning is one of the most strategic and value-added processes any company can implement. Why? Because it is good for the company and it is good for the employees. In this article, we’ll explore the key business values of talent management that are applicable for every size, shape and type of organization.

Talent Management is a Risk Management Business Function:
Talent management and succession planning is a critical risk management strategy. Virtually all companies have many other risk management strategies and plans in place—if the computer system goes down, there is a plan to follow to address this issue as a high priority and a process to follow to correct the problem. If a fire threatens a company facility, there is a plan to evacuate employees and to contact emergency personnel. If a safety or security breach occurs in the company, there is an emergency process to follow.

But many companies do not have a plan in place to follow if a key employee leaves the company, or if an executive leader announces a retirement, or if a leader experiences an emergency leave of absence. In these situations, many times the company will either experience months of instability and lost opportunities due to a vacant leadership position, or the company will make an urgent hiring decision that may or may not be the best decision for the organization. A company could even lose a line of business or lose a competitive edge due to a leadership vacancy. This is analogous to experiencing a company computer system outage that would take months to correct—if this type of system outage is unthinkable, an extensive leadership vacancy in the company should also be unthinkable.

All companies should be discussing vacancy risk of key talent in the organization, and all companies should have valid succession plans in place as part of their overall risk management business strategy.



Take a Page from the World of Sports:
Every successful sports team has a plan in place to prepare for a sudden loss of key talent. The second string players practice with the team and they "suit up" so they are ready to play when they are needed. Everyone knows who the first-string players are, and who the second string players are, and no one tip-toes around someone’s morale to try to keep this a big secret—the second string players know what skills they need to develop and what experiences they need to be groomed for a potential first-string spot on the team. Talented second-string players with ambition work hard and persevere to achieve a first-strong spot.

A successful coach plays their second string players at the right time in the game to give these team members "on-the-job" experience for their development, and the coach knows that successors must be developed to replace players on a long-term basis, as the first string players will always eventually retire or move to other teams. A successful team is always scouting for top talent to bring into the team. Any coach who does not effectively take all of these actions will soon be looking for another job. All coaches know that they are nothing without top talent on their team, and that effective coaching and leadership skills are needed to lead the team to victory. What if all organizations took a page from the World of Sports and to implement these same talent management functions as a top priority in their company?

Talent Management is to Employees as Due Diligence is to Mergers and Acquisitions:
Let’s look at the process of due diligence that all companies engage in prior to a merger or to an acquisition. Due diligence is the process of 1) gathering data about another business, 2) reviewing the data, and 3) making better merger and integration decisions. Does this mean that all mergers and acquisitions are executed flawlessly? Of course not—but without the due diligence process, more problems and issues would surface. Therefore, we know that the due diligence process increases success and decreases business problems and expenses. Any company who would merge with another company without executing a due diligence process first would be seen as a highly ineffective company.

Now consider the employee application and interview process, which is the process of 1) gathering data about a potential employee, 2) reviewing the data and 3) making the best possible hiring decisions for the company. Does that mean that this process will eliminate all employee performance problems and all employee relations issues? Of course not—but the idea of saying, "Just come on in and join us" in a company without an application and an interview process seems ridiculous to us, because it is ridiculous. The hiring process helps the company to make better hiring decisions, and to make legal, fair and consistent hiring decisions.

This is the same way we should look at the strategy of implementing a regular talent review and succession planning process. These processes are designed to 1) gather current data about employees, 2) to review the data as a leadership team, and 3) to make better decisions regarding talent utilization, career movement and employee development.

This does not mean that every potential successor identified by the leadership team will go on to fill the incumbent’s position. This does not mean that every high potential employee identified and developed in the company will stay with the company for many years. But it does mean that leaders will make better talent movement and development decisions, that more high potential employees will choose to stay with the organization, and that external recruiting expenses and leadership vacancy risks will decrease. This is a measurable strategy that will decrease external recruiting costs and retain key talent. To not have a talent and succession strategy in place should be seen in the same light as not executing a due diligence process prior to a merger or not executing an application and interview process prior to hiring an employee.

Today’s Employee Expects Career Discussions and Career Development:
An effective talent management strategy includes manager and employee career discussions prior to leadership talent review meetings. Employees want to be asked about their career interests, and if we make succession plan decisions and employee career and development decisions in a vacuum, without factoring in the employee’s career needs, we often make decisions that won’t actually be executed. This is one of the issues that can contribute to validity problems within succession plans—when the position becomes vacant the potential successor either wasn’t interested in the position or is not prepared for the position. Or, the successor candidate leaves the organization for another company, thinking that he or she doesn’t have a career path in their current organization.

Of course we must be clear with employees to ensure that employees understand that there are no promises of promotion or promises of lateral movements prematurely. But this can be managed through effective communications and documents provided to employees to ensure employees understand the company’s talent management strategy, processes, criteria and policies.

The bottom line is—employees like to know that their managers will discuss potential career paths with them on a regular basis, and they like to know that their leadership teams have regular discussions about talent and about potential development actions that will enhance their skills and careers. The most talented employees will thrive in this environment, knowing that all leaders will see and discuss their business results and their interpersonal leadership abilities.

Gone are the days of the career ladder, where an employee worked hard for several years and then moved up the ladder primarily based on tenure. Today’s world is about top talent—it is about hiring and developing employees who can take on cross-functional and lateral moves to broaden their mindset, as well as taking on promotional opportunities to expand their leadership roles and responsibilities. And like every other business function in your company, these talent decisions must be analyzed, discussed and planned together by the leadership team to increase your competitive edge and to retain your top talent.

Doris Sims
Posted: 02/15/2011

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