Leadership turnover has remained high over the past few years in the health ecosystem, with recent research by the American College of Healthcare Executives reporting an 18% turnover rate for CEOs. As executives leave, human resources (HR) leaders are left with tough questions around who will take their place. What does success and growth look like for their organization? How does a company find, and hire, an executive who wants to create the workforce of the future - diverse, technologically competent, and global? Who, whether they are inside or outside of the company, is in a position to replace the incumbent?
Questions around succession aren’t new to the health ecosystem, though. For decades, healthcare organizations have had a notoriously high turnover rate. And when hospital CEOs leave their organization, research shows that many claim their departure causes “community relations, medical staff relations, hospital culture, and employee morale” to suffer.
To offset the massive impact of healthcare leadership turnover, leaders must create a thorough succession plan.
What is a Succession Plan?
In general, a succession plan is just that: a plan that identifies individuals who are capable of filling critical leadership positions. Strategic succession management is ongoing, and starts before an incumbent leader considers his or her departure. It’s the responsibility of HR leadership to continually work alongside members of the organization’s leadership team to understand what’s required for success in critical roles today and in the future.
Organizations that strategically manage the succession of an executive are well prepared for both planned and unplanned departures. Organizations with a formal succession plan can implement the process quickly in the case of an unplanned departure, or systematically in the case of a strategic year-over-year process. In either case, it’s paramount to evaluate internal and external candidates against the critical success factors identified for someone to excel in key positions.
The rewards of proactive management of succession far outweigh the work required to create the process. Below we outline a simple 4-step approach to building a strategic succession management plan.
How to Build a Strategic Succession Management Plan
A well-thought-out succession plan ensures that not only do you have the right people in key leadership positions in the present, but that these positions continue to be filled by highly qualified and competent people in the future.
Strategic succession planning doesn’t offer a quick fix, but it does help to ensure that the right people end up in leadership positions. As the proverb says, “the best time to plant a tree was 20 years ago. The second best time is now.” In the same way, the best time to start strategic succession management is before you have a senior leader depart, and the second best time is now.
We recommend these steps for HR leaders to create an effective, future-focused succession management plan that allows organizations to thoughtfully develop leadership potential throughout the organization.
- Identify your organization’s strategic priorities and potential business challenges. Consider where your organization wants to go, and how you can build talent in the face of volatility, uncertainty, chaos, and ambiguity. Determine which positions will provide support to weather potential challenges and change.
HR leaders will also need to consider how those strategic priorities and potential challenges translate into leadership requirements. What will it take to successfully lead through those challenges? What skills and capabilities are needed to drive strategic goals to completion?
- Consider what success looks like in senior leadership roles, and which current employees have potential to take over those roles. Map out the core competencies, skills, and knowledge that are required for top leadership roles, the expectations for those roles, and begin to assess existing talent against those requirements.
Long-term leadership success often depends on where the replacements come from, and hiring from within can help ensure a new leader’s success. Who better to take over a top leadership role than an employee who has been with the company for several years (or decades), worked various roles from the bottom to the top, and expresses great interest in continuing their tenure? Research shows that outsiders have an 84% greater chance of leaving after three years than an internal candidate.
- Create a culture of future-focused development. If you may be able to hire a leader from within, ensure that your succession plan clearly outlines the route that potential internal candidates need to take in order to develop themselves to reach the top. This path planning and providing meaningful opportunities for development also aids in retention efforts. Happy employees will stick around for longer if they can see a way to achieve their goals within the company, which helps combat the potential for turnover.
- Make succession planning a part of your talent management framework. Having a sustainable succession management process requires you to meaningfully integrate succession into your overall talent management and culture. Meaningful integration helps ensure all talent practices work to drive cultural and leadership development in support of the organization's strategy and spans across all talent processes such as recruitment, selection, and performance management.
If your organization is hoping to move towards a proactive, forward-thinking succession management strategy, TLD Group can help. We’ve supported countless organizations through succession changes and have the expertise to build a strategy that’s centered around your team and organization’s unique needs and goals. Hear from a client who we supported through strategic succession management:
"With the help of The Leadership Development Group, we were able to shift from a reactive succession planning process (replacement-focused) to a proactive, future-oriented process with the intent to build a pool of leaders who have new future-oriented competencies to lead the organization in any job. We are thoughtfully building our talent to be positioned for future success."
- Audrey Weiner, PhD, President, Fund for the Aged, The New Jewish Home