“Succession planning means having the right leaders at the right place and time.”
“How ready is your department for your retirement?” I asked the senior leaders of a global firm during a workshop. Their collective response was a resounding “not ready.” They expressed concerns about the future of their organization once they leave.
Data from the Economic and Social Commission for Asia and the Pacific indicate there are 3.87 million Filipinos between the ages of 60 and 65 in 2024. As these remaining Baby Boomers will formally leave the workforce in the next few years, a leadership vacuum is expected to emerge.
This void threatens to drain valuable knowledge and experience as successors may lack the knowledge and skills of previous leaders, chipping away at competitive advantage. Additionally, other external factors such as inflation, political concerns, the advent of technology such as generative AI, sustainability issues on climate change, diversity, equity and inclusion, transparency and, accountability leave organizations in a limbo of unpredictability and uncertainty.
Organizations need to be ready with their human capital in an unstable environment. Unfortunately, all else being equal, top performers have a higher tendency to leave companies because of their confidence in finding a new and better-paying job. These external and internal factors squeeze the necks of organizations as they struggle to compete and survive in the market.
Establishing succession plans is imperative for organizations to avoid another scramble for Band-Aid solutions and managerial fads once Baby Boomers fully leave the workforce.
Succession planning means having the right leaders at the right place and time. It involves recognizing reliable and ethical employees, choosing individuals who can advance beyond their current positions, and assessing their suitability for promotion and job alignment. It also means anchoring these steps with the business’s culture, values, competencies, and strategic intent. Leadership experts Garman and Glawe pointed to it as a structured process for identifying and preparing potential successors.
While business strategy drives growth and management secures profitability, succession planning plays a crucial role in ensuring an organization’s long-term sustainability. It helps bridge the expected gap between retirees and employees who left the organization. It increases company profitability, job security, and a positive career attitude.
Unfortunately, research suggests that succession planning efforts fail within one to two years. Ben Dattner and Tomas Chamorro-Premuzic found that a lack of top management support may drive this failure, the absence of an actual succession plan and criteria, high turnover rates, or discrediting the identified successor. Furthermore, organizations opt to hire external leaders. However, the study by Rakesh Khurana and Nitin Nohria, experts from MIT and Harvard Business School, discovered that while external leaders may succeed in a struggling organization, mature organizations may benefit more from hiring internally, as the latter can have a better understanding of the company’s dynamics and operations.
Apart from obtaining top management approval and formalizing the succession planning process in alignment with strategic goals, organizations can take the following steps to strengthen their succession planning efforts.
1. Reassess your competencies. Given an era of digital transformation, do your existing competencies reflect the ability to adapt to rapidly changing environments? How about leadership soft skills of agility, resilience, and emotional intelligence?
2. Identify high potentials with exceptional curiosity, insight, determination, and engagement. Claudio Fernández-Aráoz and colleagues, who are global experts on talent and leadership, highlighted in their research and Harvard article that aside from identifying key business competencies, the four traits of curiosity, insight, determination, and engagement can indicate the potential of leaders. While successors will often not rank highly on all expected competencies, these traits can signify if they will develop these gaps. Searching for employees’ potential requires conversations with the pool of successors, their employees, peers, and bosses, as well as reviewing their work experiences.
3. Integrate leadership development and succession planning practices. A study by Kevin Groves of the best practices of top organizations indicated that CEOs and HR executives combined leadership development and succession planning by creating a mentor network, identifying high potential employees, immersing them in project learning experiences, and conducting leadership development workshops. Given our culture of close family ties and a sense of community, these activities can expose high potentials to multiple stakeholders and provide them with a supportive organizational culture. Filipino work relationships often transcend the demands of the job, and retired leaders may even make themselves available to their mentees for consultations in the future.
4. Identify ways to retain high potentials. You also need to identify retention tactics to increase the probability of your high potentials staying in your organization. You may empower them with external coaching, higher decision-making authority, autonomy, recognition, stretch assignments, and special learning activities. While you want to have a retention strategy for your overall workforce, these tactics can help the present and future of the business while signaling to top talent that you value their contributions.
5. Make succession planning an ongoing process rather than a one-time event. This ensures that organizations are not caught off guard when key people leave. Michael Kerlin and colleagues from McKinsey reiterated the importance of having a regular cadence of succession planning meetings. This helps ensure that critical processes and value-adding activities remain ongoing. Anticipate the need for succession planning before it becomes urgent, ensuring a smooth and effective transition process.
Overall, take proactive steps now by implementing a robust succession plan, mitigating disruptions in leadership, and ensuring organizational stability. This requires reviewing capabilities that can adapt to rapid changes in the environment, identifying high potentials with specific traits, integrating leadership development and succession planning, and iterating several rounds of succession planning.
Hannibal George Marchan is a learning and development consultant and executive coach for Lee Hecht Harrison, Quintegral, and Kaizen Leadership Asia. He is a PhD student and faculty at De La Salle University. You can reach him at hannibal.marchan@dlsu.edu.ph.
The views expressed above are the author’s and do not necessarily reflect the official position of DLSU, its faculty, and its administrators.