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Succession Planning

Published March 2008

Creating Consistency: Enterprise-Wide Succession Plans

 

  Agatha Gilmore

When its CEO left, the Northeast Georgia Health System (NGHS) celebrated his 40 years at the company.

When its COO left, the company celebrated his 27 years at the organization.

When several other 20-plus-year executives left, senior executives at NGHS started to panic.

"We went from a 40-year CEO with a community-minded culture to a growth plan that really just defies the imagination," said Jack Fulbright, vice president of human resources at the NGHS. "It's amazing."

The plight of the NGHS isn't unique. In fact, the scenario might become commonplace during the next few years. With more than 70 million baby boomers eligible to retire and not enough skilled workers to fill the ranks, the U.S. Department of Labor estimates the workforce will be short 10 million employees by 2010.

And according to research from the Aberdeen Group, fewer than half of organizations surveyed for the 2007 report "The Looming Leadership Void: Identifying, Developing, and Retaining Your Top Talent" currently have a succession planning strategy in place, though this number is expected to jump to 75 percent by the end of 2008.

"Succession planning, once reserved for the most senior positions at organizations and considered a component of leadership development, is being viewed more holistically across the organization and its stakeholders," wrote Aberdeen Research Director Kevin Martin.

Further, the concept of a successful succession plan has evolved. Gone are the days of the hush-hush, case-by-case replacement process. Today's market requires organizations to look at succession planning as a visible, integral, enterprise-wide part of their overall business strategies, plot out projected growth and be clear with employees about how they fit into the equation.

The Push to Promote From Within

"One of the reasons succession planning is so key is the way that we work is changing," said Ilene Ringler, principal of Ilene Ringler Associates, a consulting firm based in Phoenix. "So to have the right people ready to move when you need them is more critical than ever before."

This certainly became clear to those at the NGHS, who, without an integrated succession plan, had to wait until longtime employees retired before scrambling to find replacements.

"The organization knew these people were going to retire, and yet we still had to go out and replace the executives that we lost," Fulbright said.

This resulted in external hires of more than 60 percent in top executive jobs. Recruiting talent externally — perhaps one of the most costly and unwieldy side effects of not having an enterprise-wide succession plan — can have a debilitating effect on a company's bottom line.

For example, research done on CEO succession by the Hay Group showed hiring externally can result in shorter employment terms, less stable company culture and morale and compensation-related costs, as organizations often have to bump up pay to attract external hires.