How to Develop Effective Leadership Succession Planning
September 11, 2023 – Poor succession planning processes stemming from a lack of leadership development and assessment can be extremely costly. Harvard Business Review, in fact, has found that this problem costs an estimated $1 trillion across the S&P 1500 annually. When employees feel engaged, valued, and supported through development opportunities, they are more likely to stay with a company for the long term and drive value creation, according to a study from GeniusMesh’s Neerja Bharti. As a result, “organizations will be able to collect data on employee strengths and development opportunities during the leadership development process so they can build comprehensive and objective succession plans,” she said.
What are the key factors that affect leadership retention? How does investing in leadership development work to help you retain your most valuable employees? How do these practices inform comprehensive succession plans? In her report, Ms. Bharti shared the best practices that help develop a robust succession plan.
Reduce Organizational Risk by Increasing Leadership Retention
High employee turnover, especially among high-impact and executive talent, can be detrimental to an organization’s productivity, culture, and the bottom line. According to a separate report from Upwork, retaining talented employees helps businesses maintain institutional knowledge, reduce recruitment and training costs, foster a positive work environment, and reduce the risk of reputational harm.
“Ideally, long-term employees that have positive experiences can become brand ambassadors, which can help attract new talent and customers,” said Ms. Bharti. “Conversely, when turnover is high, teams are left feeling overworked, burnt out, undervalued, and as if their talents are not fully utilized – resulting in further unplanned exits which cost the business.“ For example, research has shown that in organizations where turnover is low, profitability increases by 55 percent.
“Underpinning this issue, in environments where turnover within the leadership ranks is high, stagnating innovation and an increased risk of failure follow,” Ms. Bharti said. “It’s estimated that company valuations and investor returns would be 20-25 percent higher with adequate succession planning processes that capture the organization’s capacity to innovate – and that can only be derived through retaining high impact and high potential talent.”
Offering Opportunities for Leadership Development and Growth
Recruiters note that investing in employee development is a powerful retention strategy for all talent but might prove particularly valuable for employees deemed high impact and leaders for the future. In fact, a Gartner report found that 40 percent of employees leave their organizations because of a lack of development opportunities. Additionally, a DDI report found that only 40 percent of employees believe their leaders are high quality, a figure that has dropped significantly in recent years – showing the opportunities for leadership development programming.
“By providing leadership development opportunities, organizations demonstrate their commitment to employees’ growth and create a work environment where other employees, even those who aren’t leaders, benefit from increased leadership effectiveness,” said Ms. Bharti. “When leaders feel valued and supported in their professional aspirations, they are more likely to stay and contribute to the organization’s long-term success. What’s more, leadership development drives self-awareness. This is important because self-aware leaders are four times more effective than leaders who are not self-aware.”
GeniusMesh is an AI-powered recruiting technology platform built for executive-level hiring. It specializes in offering a commonplace for professionals from the world’s top business schools to network, work on their careers, and find new job opportunities. Neerja Bharti is the founder of GeniusMesh. Her goal in creating the firm was to provide an alternative to expensive executive agency recruiters and to facilitate the hiring of global leadership roles in a more timely manner.
Additionally, in any robust leadership development practice, data is collected that assesses a leader’s strengths and development opportunities, according to Ms. Bharti. “Data can also be collected to understand a leader’s functional skills,” she said. “That way, talent management professionals within the organization have a firm understanding of which future experiences will help valued leaders grow and have a clear picture of where to situate them in their succession pipeline.”
Increasing Leadership Effectiveness through Leadership Development
Ms. Bharti also notes that several interrelated capabilities stand out that impact leadership effectiveness. “These are the capabilities that organizations would be wise to capture and leverage for the future,” she said. “It’s important for leaders to become self-aware about their abilities, which drives their effectiveness – and only 10 percent employees actually are – representing a huge opportunity for growth in organizations.”
One characteristic leaders need to build and become more self-aware about is their ability to cultivate trust. “Trust is the cornerstone of a healthy work environment, and when it comes to retaining valued leaders, the level of trust in senior leadership plays a pivotal role,” Ms. Bharti said. “Talent who have confidence in their senior leaders are more likely to stay committed to the organization and contribute their best efforts.”
Secondly, says Ms. Bharti, the ability to build effective teams and create a positive working environment should not be overlooked. “Third, as we all know, the world has undergone more change the ever in just the last few years,” she said. “This means the most effective leaders of the 21st century are those who know how to lead change effectively. These capabilities – inspiring trust, building an effective team, and leading through change – are critical to understanding which leaders in your organization are those that employees want to follow for future success. An assessment of these capabilities needs to inform your succession plans.”
Inspiring Trust
It’s important to address the issue of trust in leadership because when trust in senior leadership is diminished, it can greatly impact retention, especially for women and other underrepresented groups, meaning less diverse and inclusive teams may result, according to a study from DDI. “Less diverse and inclusive teams can harm the potential to innovate,” the study found. Furthermore, doubts about the integrity, transparency, or competency of leaders erode employees’ faith in the company’s direction and their own career prospects. A lack of trust can lead to increased turnover as disillusioned employees seek opportunities elsewhere.”
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“Therefore, fostering trust in senior leadership is crucial for organizations aiming to retain their talented workforce and create a positive and effective work environment,” Ms. Bharti said. “In recent years, perceptions of trust in leadership have fallen – which illustrates the need for developing leaders to create strong, healthy, and trustworthy relationships within their teams and organizations.”
Building an Effective Team
Related to the ability to inspire trust in leadership is a leader’s team leadership capabilities. Ms. Bharti notes that employees thrive in an environment that values collaboration, open communication, respect, and autonomy and leaders need to be able to effectively manage these processes.
“Just because a leader has been effective in their function does not mean they know how to manage team dynamics and inspire people to follow them,” Ms. Bharti said. “Unfortunately, A key driver of turnover during the Great Resignation was a toxic organizational culture. Organizations must ensure that behaviors that positively impact teaming are rewarded. For example, ensuring a zero-tolerance policy for bullying, and encouraging employees to take their paid time off to reduce burnout while supporting these practices in both words and actions are hallmarks of healthy organizational cultures. Not surprisingly, this is highly related to the ability to create a trusting environment. Helping leaders understand how to foster a supportive culture and lead their teams effectively are extremely important skills to grow in leadership development programming.”
Leading Through Change
Ms. Bharti also says that a leader’s ability to be learning agile – to learn quickly in new situations when much is unknown – is a key competency of successful leaders today and a tenet of change leadership. “In fact, leaders who are learning and change agile are more likely to be high performing and high potential,” she said. “These are leaders you’d definitely want in your succession pipeline and you should focus your efforts on growing this capability in leadership development programming. Thankfully, these capabilities: build and inspire trust, manage teams effectively, and lead through change can be developed and grown through leadership development experiences.”
To be successful, a leader needs both the what and the how to navigate through a transition, according to Ms. Bharti. “If this process is managed poorly, the impacts on your succession plan can be disastrous,” she said. “Leaders may feel unprepared to handle challenges and can experience reduced trust in the organization, resulting in an unplanned exit. As part of your leadership development and succession planning strategy, leadership skills and functional skills should be assessed. Pairing your leaders with industry experts as part of your leadership development strategy can set them up for success.”
Such experts can help your leaders learn what has made them effective within their domain of functional expertise. Ms. Bharti says that pairing this learning with a focus on how they learn, usually in partnership with an executive coach, can be especially powerful. “Then, an assessment will give you comprehensive data that can be used to create a robust succession plan,” she said. “Such an assessment gives you a clear view detailing specifically which skills and abilities your leaders need to develop, accomplished through formal learning experiences and/or on-the-job experiences.”
“Leadership retention is essential for organizational success. Leadership retention begins with engaging high potential and high impact talent and meeting their diverse and personalized needs,” Ms. Bharti said. “By offering opportunities for growth and development in both critical leadership and functional skills, companies can increase leader retention. On the back end, talent management and leadership development professionals can collect and assess data about their leaders to understand strengths and developmental opportunities objectively. These objective data can then, in turn, be used to populate comprehensive succession plans.”
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Contributed by Scott A. Scanlon, Editor-in-Chief; Dale M. Zupsansky, Managing Editor; and Stephen Sawicki, Managing Editor – Hunt Scanlon Media
