The CEO of a successful Midwest bank was rapidly approaching retirement age. Under his dynamic and inspired leadership, the bank had enjoyed 25 years of successful growth, expanding to more than 400 employees. The bank’s board of directors recognized that their CEO would be stepping down in the next few years, and that they needed to start work on identifying a successor. But it wouldn’t be an easy challenge.

The CEO had founded the bank with a handful of carefully selected lieutenants, all of whom were about the same age, so the bank actually had to find a range of successors for the entire leadership team. Knowing that a change in leadership for any organization is stressful, the board wanted the transition process to be managed with minimal disruption and uncertainty. The board realized that a succession plan had to be created soon, before an immediate need arose.

 “Succession management should never be done on the fly. Taking the time to have a well-thought-out plan and a deep leadership pipeline ensures you have the tools to manage these leadership changes as they occur,” said Patty Prosser, managing partner of HR consulting firm Career Consultants OI Partners in Indianapolis.

Creating a robust succession plan for the senior management of any organization is a key responsibility for HR. Building a simple, effective talent management program is the best strategy for strengthening your organization and enhancing your credibility as the “people leader” of your company, said Prosser. Here are the four succession-planning steps that HR can implement.

Rally the Executive Team

In the case of the Midwest bank, the CEO embraced the importance of creating a succession plan and shared his enthusiasm with the entire team. When meetings were planned, he made sure that all of the key players were present and engaged. 

As time-consuming as it can be to pull the executive team together in person to focus on talent management, it is probably the most impactful people-focused meeting HR will have each year—or better yet, multiple times a year. For the greatest return on investment, the CEO, chief financial officer and/or chief operating officer should not only be present, but co-facilitate the talent review process with the head of HR. This sets the tone and ensures the engagement of the full team.  

Know What You Have and What You Need

The best way to launch a succession discussion is with an assessment of the senior management team. For each team member, strive to evaluate his or her performance and identify the employee’s potential succession plan ratings in a variety of competency areas.  

The leadership team needs to agree with HR on the competency areas most critical to its success. Direct managers also should be invited to the talent discussion process and bring the performance and potential succession ratings for their staffs. In the actual succession meetings, when each staff member is discussed, the direct manager will often benefit from valuable insight offered by colleagues that may influence the ratings. As 360-feedback instruments often reveal, an individual may be adored by his or boss, but coupled with feedback from a broader audience, a more realistic picture may emerge. In the competency areas where specific individuals are consistently rated poorly, those red flags must be dealt with, and the lessons learned should help inform how the organization recruits and develops talent moving forward.

Building Back-Ups

In the bank’s case, after the assessment efforts, the team proceeded to determine which individuals would be best suited to occupy future leadership vacancies. For some roles there were multiple candidates, while for others just one emerged. And for some positions, there wasn’t a viable choice available internally, which led to the development of new talent acquisition strategies.

The preferred outcome of an effective succession meeting is a commitment to developing the best-performing and highest-potential staff members who are ready to assume more-senior roles when they become available. To help achieve this result, create an organization chart during the talent meeting that displays the existing leadership team, with one to two boxes underneath each leader. Then spend time matching your best talent to the future roles that leverage their skills, which is an easy way to visualize who is “on the bench” for each key role. Take time to discuss and note if the potential successor is “ready now,” “will be ready in 1–3 years” or “will be ready in 3+ years.” This helps to determine if external recruiting may be needed to import skills in the short run, or may help accelerate the timing for replacements down the road.

Avoid Possible Detours

The benefits of a careful and deliberative process become obvious when surprises are uncovered. The leadership team at the bank found out that one key manager wasn’t interested in advancing. The team responded by developing an alternative plan that avoided a potentially embarrassing situation in which the selected manager would have declined the position.

Even a very good succession plan can run aground. Talented individuals whom executive managers name in their plans may not only be uninterested in advancement, but sometimes will surprise everyone by leaving the company. For this reason it is smart to make sure you communicate with potential successors often about how highly they are thought of, and make sure they are aware of the developmental activities you have them engaged in and why. Another potential setback is if the business has an immediate need and quickly hires a replacement without considering the succession plan already in place. In those rare cases, the head of the business needs to communicate the reasons behind this action or the credibility of future succession discussions are at risk.

As more Baby Boomers approach retirement age, the demand for talent and succession discussion facilitations will rise. To be prepared, make certain your leadership pipeline is well-thought-out, with successors lined up deep within your organization.   

Susan White, SHRM–SCP, is chief executive officer of Susan Tinder White Consulting LLC in Indianapolis, a human resources consulting practice that provides solutions regarding people issues and opportunities in corporations, nonprofit organizations and government agencies.  White teaches “Creating a Talent Acquisition Strategy” for SHRM, among other courses. To register for this course, click here

Story Continues Below