Identifying and developing strong leaders for future roles is critical to the ongoing success of an organization. Without an effective succession planning program in place, companies will face greater challenges than those incurred during the implementation of a program, including:
- Waging the “War on Talent”
- Fewer leaders prepared to take on new roles
- Obstacles to achieving strategic goals
Attracting and retaining high-potential employees is costly. However, it is not as costly as the turnover of high-potential employees. Studies have shown that superior performers are 50% to 100% more effective than the average performer.
Using these statistics, if an average performer generates $250,000 in new business each year, a superior performer will generate between $375,000 and $500,000 in new business. By developing and promoting the superior performer to a leadership role, they have the potential to increase the productivity of the team.
Given the possibility of increased profits, meeting the employee’s desire for career growth is both a financial and strategic advantage.
Because growth and development are benefits highly sought after in a potential employer, organizations with highly publicized succession planning initiatives and career management programs become “employers of choice,” thereby making it easier to attract top talent and reduce turnover.
Most employers are unaware of how much high turnover can cost them each year or how to reduce this number. Assuming a 15% turnover rate and turnover costs of 25% of an employee’s annual compensation, an organization with one thousand employees and the average compensation of $50,000 will incur $1,875,000 in costs each year. Given that half of all turnover is avoidable, this organization could save $937,500 each year by investing in employee retention strategies.
Utilizing a coach in your succession plan initiative allows leaders and human resource professionals to focus on effectively managing and evaluating the program. An external career coach provides a confidential environment where the employees are free to discuss the challenges and opportunities they face in their careers and establish plans to overcome them.
One of the greatest benefits the coach offers is preparing the organization’s existing talent for future leadership roles. They take the organization’s human capital to the next level through the use of assessments, powerful questions, and individual development plans. Promoting from within provides benefits, such as:
- Reduced recruitment costs. The need for external recruiting is lessened for the executive level position, which reduces headhunter fees (between 25% and 33% of the candidate’s total compensation) For example, an executive placed by a headhunter with an annual compensation package of $200,000 would incur fees between $50,000 and $66,666.
- Reduction of executive compensation. According to Towers Perrin, external candidates are generally paid 20% to 30% more than those promoted from within because external candidates need a financial reason to make a career change.
- Promoting internal candidates offers the employer the benefit of knowing their track record, strengths, and development needs. External candidates, unless personally known, only reveal as much or as little information as they deem appropriate, leaving the organization to rely on the interview process, assessments, and references to complete the picture. How many people do you know who interview really well, and after you’ve worked with them for a time you come to realize they misrepresented themselves in some way?
Thriving succession planning initiatives balance the strategic direction of the organization with the career aspirations of high potential employees. They also rely on external consultants and coaches to provide expertise, an objective perspective, and additional resources.
Executives who engage in coaching during the succession program have a clear direction of where they are going and how they are going to get there. In contrast, executives who are not offered coaching are not as well-prepared to map out their career paths or develop the skills they need for future promotions. Executive career coaching facilitates the process of creating successful careers and developing future leaders.