The pandemic created one of the most challenging environments for this generation’s corporate leaders. Faced with personal and professional crises (many situations not seen in 100 years or more), leaders across all industries have been on high alert and it takes a personal toll.
Challenger, Gray, and Christmas found that CEO turnover surged 27% late in 2020 versus a more “normal” period in the year prior. More workers could be leaving the workforce over the next several years due to retirement than new entrants, and yet less than 35% of all companies in the US have a formal succession plan in place.
Many of us dealt with the prospects of our own health and what would happen to our organizations if we were unable to work for some reason, like an accident or serious illness. That also applies to critical employees and understanding just how deep our “bench strength” is through a situation like the pandemic or any other number of events that could create similar risk.
Why Succession Plan?
In the broadest sense of the term, succession plans help identify talent that have the skills and qualifications to assume key leadership roles, and likewise identify gaps where talent acquisition or development is needed to fill those potential gaps. It is not just focused on an owner and their desire to retire with their wealth.
It can apply to continuity planning and keeping the organization running if someone leaves on their own volition, is ill, or unexpectedly wants to retire. At this time, ownership succession planning is a hot topic, and the pandemic emphasized just how important it is for all key positions to have a succession plan whether they have ownership stakes or not.
There is another risk that is unrelated to a leader’s personal retirement plans that can have a more profound impact on a corporation than any other. Since the end of the pandemic, ‘job jumping’ is hitting a fevered pitch. Top talent is rethinking their personal futures and if there is no significant plan in place to elevate them into a future leadership position, many are taking this time to look for other opportunities. The current “quits” data at a federal level show that despite a high unemployment rate of 6%, there were more than 3.5 million workers switching jobs in March (latest data available).
Talent retention and senior leadership employee satisfaction is a key component of succession planning.
Even if the succession planning process shows an actual transition in leadership is a decade or more away, just letting senior leaders know that there is a plan in place and that they have a vested interest in their future within your organization could make the difference in whether they stay or not. Pay is not everything.
Studies have also shown that the ability to contribute to corporate strategy and having a succession plan in place (that gives an employee an idea of what their personal growth can be and the progression plan for that) has been shown to be equally as important as compensation. Locking top talent into your organization by making them a part of the succession plan can be a critical retention mechanism.