Aided by Software, Succession Planning
Expands Beyond the C-Suite
IndustryView | 2015
Succession planning is a critical component of successful talent management and organizational growth, but it is not a simple undertaking. Through the results of a recent Software Advice survey of employers and employees, this report will investigate how implementing a succession plan can bring benefits—chief among them employee engagement. It will also explore how businesses can use succession-planning software to identify and develop future leaders more quickly and effectively, particularly for job roles beyond the C-suite.
Succession planning is defined as “the identification of job vacancies that can be expected to occur through retirement or attrition, and the strategic consideration of where and how internal candidates might fill those vacancies.” In other words, it is the process of identifying and developing current employees for future leadership roles.
An example of a successful plan would consist of the following: An employee is hired as a cashier at a national retail chain. On day one, an employee profile is created for them in the company’s human resources (HR) software system. Each year, the employee undergoes a review process in which strengths and weaknesses are identified and recorded in their employee file. A training plan is created for them to shore up gaps in their skill set that are uncovered through these reviews. As the employee completes these trainings and accumulates positive annual reviews, they may be put into a talent pool that will be eligible for a managerial position when the current manager is promoted or moves on.
Succession planning is far from simple: Companies must track employee performance, training and development, and ensure that potential candidates for leadership roles have the necessary skills and competencies. However, the benefits of succession planning can be numerous. They include increased employee engagement (increased productivity and positive feelings toward their work) and the ability for a company to more easily and quickly adapt to changing business conditions.
To learn more, Software Advice surveyed a sample of employees, as well as employers currently implementing succession plans, to find out how these plans impact employee engagement and what tools companies are using to implement them. We also spoke to industry experts to learn how succession planning impacts business performance, and how companies can use software to create and execute effective plans.
According to Donald Delves, director of executive compensation at Towers Watson, a global professional services firm, a succession plan can serve as an incentive for employees. Knowing they have a future with a company “keeps people engaged and motivated, and retains them,” he says. “It keeps them at the company if they’re looking elsewhere.”
Our survey findings validate Delves’ statement: 94 percent of employers say that succession plans have a positive impact on employee engagement. Meanwhile, well over half (62 percent) of employees note that working for a company with a succession plan in place would make them feel “significantly more engaged” than working for a company without one.
Ashish Chauhan, product manager at Halogen Software, has also noticed this trend. He says that buyers of Halogen’s succession-planning module report increased employee engagement, and that one of the main factors driving this engagement is employees’ ability to be involved in deciding their future with a business.
“The more an employee feels ... they’re managing their own career, the more engaged and efficient and productive they are in their day-to-day work,” he explains.
There are two steps to succession planning: The first is identifying potential future leaders, while the second involves nurturing this potential. After all, in order to help employees advance to more senior positions, employers must provide training to help them learn the skills required to become effective leaders.
“[Employers can] clearly identify what skills [employees] need to develop and what experiences they need to have to be ready to move to the next step or level in their career,” Delves says.
Career development is therefore a crucial component of succession planning. Results of previous Software Advice research show that over half of younger workers (age 18 to 34) say access to professional development training would positively affect their decision to remain at a company. As such, we wanted to know whether employee age plays a role in the degree to which succession planning affects employee engagement.
Indeed, we find it does. After breaking down our employee data by age, we find that the implementation of succession plans has a greater positive impact on younger workers. In fact, over 90 percent of workers age 18 to 34 say their engagement level would improve if working for a company with a succession plan in place, compared to a company without one.
Workers in this age group are members of what is known as the “millennial” or “Gen Y” generation. As this demographic is set to make up 75 percent of the workforce by 2025, employers would be well-advised to ensure these employees are engaged and committed to the company now in order to be prepared for stability and growth in the future.
Mark Brandau, vice president of product solutions at SuccessFactors (an SAP company), points out that, in the past, companies used to create succession plans almost exclusively for high-level leadership positions—primarily out of fear. Succession plans provided “a little bit of assurance in larger companies and public markets,” he says, serving to show owners and stockholders that the company’s stock and value would be protected in the event of a change in leadership.
Today, however, attitudes toward succession planning are changing. In fact, according to Brandau:
There’s been a significant trend over the past three to five years to take succession planning and career development planning much further down in the organization, and across the board.Mark Brandau, SuccessFactors
In other words, succession planning has shifted from a track reserved exclusively for potential C-suite executives to a business process that is applied to lower-level positions across all departments, in companies of all sizes.
Our data likewise reflects this trend: Many companies are implementing succession plans for mid-level management positions. When we ask employers what job positions they implement succession plans for, 79 percent say they have plans in place for employees manager positions, while 56 percent say they have them for assistant managers.
Chauhan agrees that this is a reasonable level of seniority for companies to begin implementing succession plans at. For example, let’s return to our example of a national retail chain: Chauhan notes that such a company would “suffer a lot when they lose an area manager, or when they lose even a store manager.”
In these instances, someone else—potentially, another area manager—must take over communication with suppliers and manage employee schedules and assignments at the impacted stores. As a result, management is spread thin until a new area manager can be found. Chauhan points out that it’s situations like these where companies “have to have a strong succession plan, because that’s where they lose a lot of efficiency."
If the company did in fact have a succession-planning process in place, the cashier we described earlier—who went through company-assigned training and garnered positive performance reviews—would be able to step in. The company would save time and energy, as it would not need to scramble to find a replacement.
As this example shows, companies should target positions not just based on their level of seniority, but also on how much they impact the business. Often, the positions that most disrupt a company’s workflow—and, therefore, its efficiency and profitability—are those on the front lines, rather than those in the C-suite.
To investigate whether, as Brandau suggests, smaller businesses are implementing succession plans, we next analyzed the size of companies in our sample.
Indeed, our survey data confirms that even small to midsize businesses (SMBs) have succession plans in place. Over 40 percent of businesses in our sample employ fewer than 250 people, while another 16 percent have between 251 and 500 employees.
Chauhan points out that, in his experience at Halogen, companies that purchase succession-planning software are usually those experiencing growth.
Typically, he says, these organizations have reached a size where it is difficult “to tackle [career development] individual by individual. This could be as many as 100 to 250 employees. I think of that as the line where it becomes extremely critical for organizations to start thinking about succession.”
According to Delves, however, companies of all sizes should have a succession plan in place.
“It doesn’t matter how big or small your company is,” Delves says. “There’s a need for it.”
So how do smaller companies—often with limited manpower in the HR department—manage to create succession plans for all levels of employees?
“The software is pretty important,” Delves says. “It makes [succession planning] systematic and organized. It makes it easy to summarize ... and present [plans], and keep the data consistent from one year to the next.”
In fact, Chauhan points out that it may be the software itself that has made it feasible for smaller organizations to implement succession plans for less-senior employees in the first place.
Jim Bowley, vice president at PeopleFluent, agrees.
Putting aside potential budget considerations that smaller organizations may [have], it’s almost more critical for small and midsize businesses to have this type of software deployed—particularly those in high-growth industries where one leader ... can make a tremendous difference.Jim Bowley, PeopleFluent
Chauhan’s and Bowley’s impressions are reflected by the experiences of SMBs in our sample. In fact, 81 percent of employers say they use some form of software to help create and implement their succession plans—whether it is commercial (created and sold by a vendor) or proprietary software (custom built in-house by the company).
Since all of our experts praise software for its ability to make succession planning more feasible for small businesses, we decided to dig deeper into what specific aspects of the software help simplify the process. As it turns out, software can help businesses better track employee information and improve how assessments are distributed.
The first step in the succession-planning process—identifying potential future leaders—begins with employee assessments. As previously noted, these assessments analyze job performance, competency and skills, and are typically reviewed on an annual basis. Assessments are thus an accumulation of the work each employee performed over the course of a year—for example, the training and deliverables completed and feedback received on projects from peers and supervisors.
Clearly, this can be an overwhelming amount of information to collect and organize manually. With software, however, Chauhan notes that it’s much easier to gather and pull insights from employee data.
Software can help employers centralize and review that data, and then help them “come up with a decision on whether an employee is ready to move up, whether they are ready to be put into a succession path or [whether there is] a risk [of losing] this employee,” as Chauhan explains.
Collecting the data in this way allows users to more easily search through all employees and review how they perform in key areas. Employees can also be organized into talent pools that will be eligible for certain open leadership positions—whether that role is HR manager or Chief Information Officer (CIO).
PeopleFluent directory of potential future leaders
Meanwhile, Brandau points out the difficulty of sharing and communicating about succession plans when using manual methods, such as spreadsheets. There may be multiple copies with notes from various stages of the succession-planning process, and they may not be stored in one place. Accumulating up-to-date feedback from all relevant parties—HR, managers and coworkers—about an employee’s performance can be a daunting task.
“[The process] becomes very complicated,” Brandau notes. “I think one of the big advantages is that [software] really simplifies the approach.”
In fact, to tackle this issue, most succession-planning software systems store all employee data—from performance reviews to completed trainings—in one place, and if changes are made to an employee’s profile, it is updated in real time. When using software that is deployed in the cloud, employers can even pull up employee information by logging in through an Internet browser on any Web-enabled device.
This can be especially helpful for managers when presenting succession plans to a company’s decision-makers. In fact, some vendors allow users to create interactive slideshow presentations, which means they can simply click on an employee’s name within a slide to see that individual’s performance history at the company.
Example of interactive assessments in SuccessFactors’ succession-planning module
Succession planning is an integral part of any company’s talent management strategy, and its implementation can impact how effectively a company is able to develop its employees and prepare for and adapt to growth. According to Brandau, succession planning is an important function for all organizations.
“It’s simply a best practice,” he says. “Across the board, it helps reduce organizational risk and helps assure growth in the business.”
In order to succession-plan effectively, most companies use some form of software. The ability to track and store employee data, create and manage employee assessments and share that information with company decision-makers are among the primary benefits of using software.
Successfully implementing succession plans can help increase employee engagement. And by creating development plans for employees, companies can also create a better-trained and more efficient workforce that is poised to help the company adapt and expand.
To find the data in this report, we conducted two online surveys. The first was a survey of three questions, gathering 387 responses from random adults in the United States. We screened our sample to only include respondents who were currently employed on a full-time basis. The second was a survey of 13 questions, which gathered 180 responses from random respondents worldwide. We screened this sample to include only respondents who were in management positions at their current place of employment. Software Advice performed and funded this research independently.
Results are representative of our survey sample, not necessarily the population as a whole. Sources attributed and products referenced in this article may or may not represent client vendors of Software Advice, but vendor status is never used as a basis for selection. Expert commentary solely represents the views of the individual. Chart values are rounded to the nearest whole number.
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