In their drive for sustainability and growth, many organisations understand the value of succession management – building a system that ensures the next generation of leaders is in place, armed with the right skills and ready to take up the reins.
However instead of taking a holistic approach, it’s common for businesses to focus only on pipelines for their very top executives.
This trend is picked up in a recent survey by talent consulting firm Korn Ferry, which interviewed 1,000 executives in companies around the world.
The survey, titled Success Matters, found that only 38 percent of respondents said their companies’ succession programmes included mid-level managers. Indeed, succession management tended leave out managers and first-level leaders.
“The biggest constraint CEOs face in their long-term plans for their companies is not customers or capital, but not having the right talent to support their growth strategies,” Stuart Crandell, Senior Vice President at the Korn Ferry Institute, told a recent MBA leadership forum at NUS Business School.
“Succession planning does not go deep into the organisation where it needs to be, if you are going to have any kind of proactive and sustainable pipeline.”
In the survey respondents reported external hires making up 50 percent of the talent development efforts in their organisations. The same respondents said the ideal ratio for internal and external hiring should have been 2:1.
The report noted that talent development strategies in most organisations lack maturity, often resulting in management turning to outside hires to fill key roles.
Crandell said this failure to develop an internal talent pipeline overlooked a simple but important factor: internal hires understand the company culture and people better than someone who is brought in from elsewhere.
He added that ultimately the ideal mix of building talent and external hiring depends on an organisation’s business strategy and maturity level – a young company, for example, may have to rely more on hiring external talent.
Crandell pointed to a case where Korn Ferry helped one of its customers, a European pharmaceutical company, implement a talent review process that identified performing employees with both the potential and the readiness to be promoted.
The biggest constraint CEOs face in their long-term plans for their companies is not customers or capital, but not having the right talent to support their growth strategies.
As a result, he said, some 2,000 employees have been placed into new roles every year. Eighty percent of those roles are now filled by internal personnel, up from 20 percent when Korn Ferry started working with the company.
One recommendation from the report was that companies should identify employees in their late 20s and early 30s who have the potential to be future senior leaders, then manage their development and their careers to ensure they are ready and equipped with the necessary skills and experience when needed.
Crandell said companies who have successfully aligned talent with business strategy include Chinese finance giant ICBC, which attracts and develops talent to emphasise a performance-driven meritocracy.
Another is US-based conglomerate GE, known for cultivating leaders at multiple levels to help drive its entrepreneurial culture.
“It is not just about preparing for the future generations, but also to make sure you have the ready talent in the right roles at the right time,” he said.
According to Crandell, there are six strategies for creating a “gold standard” in succession that organisations should consider for creating a sustainable talent pool:
1) Align talent with business strategy
The talent management literature of today and those from 20 to 30 years ago say the same things, according to Crandell. “Identify the talent you need given your business strategy, understand what talent you have relative to what you need, know where the talent gaps are and close them by building from within or supplementing from outside,” he said.
2) Assess your talent pool
Assess multiple generations of candidates in the pipeline against target profiles, valid indicators of executive potential, and industry benchmarks.
“It is not just about finding who your top performers are. Identify your employees who have the potential to do the job in this generation and the generations after that,” said Crandell.
3) Go deep for your talent pipeline
Many organisations tend to only look out for immediate successors. Instead, they should be accessing multiple generations of candidates.
Crandells’ advice: “Go all the way deep down into your organisations.”
4) Cross-train your future leaders
Provide the employees with a mix of on-the-job training, intensive coaching, mentoring and education.
“It takes an average of 25 years to develop a top executive. Allow your people to experience a wide variety of functions and geographies,” said Crandell. “This gives them greater perspectives in their leadership development journey
5) Know your people
“I can’t tell you how many times that I have seen talents leave organisations because they did not believe they have any career opportunities,” observed Crandell.
To prevent that from happening, executives need to be more in touch with the organisation’s talent pipeline, and more importantly be familiar with their individual and potential development needs.
Also, every assignment and even every discussions are important coaching opportunities. “You should be thinking about how they can help develop the person,” he added.
6) Think succession, think risk mitigation
Finally, always make succession a key priority for both the organization and the individual.
Organisations should view succession as a long-term game, where leadership development must become an organisational lifestyle.
Think of succession as a form of risk mitigation, said Crandell.