Succession planning is a strategic HR function. Its purpose is to map out key positions in the organization and identify potential successors who are (or will be) ready to step into those key positions when they become vacant.
Organizations with effective succession planning programs are more resilient. When a critical role is vacated, they already know who can step up and fill the role. Succession management also boosts employee motivation because they can see a path forward within the organization.
Strategic HR activities like this go hand in hand with people analytics. In order to effectively plan for the future, you need clarity around what you want to accomplish and whether you are improving.. Metrics help you create that clarity. How many of our plans have successors? How ready are they? What’s our bench strength? Are our successors representative of the wider talent pool?
So let’s dig in and talk about that union of strategy and analytics. How do you measure your succession plan readiness, and what are the key metrics for succession planning and leadership development?
Here are the key elements of measuring succession planning.
Scope: What are the critical roles that require identified successors. Ideally, your program covers all non-entry level roles, but time is scarce so prioritize.
Coverage: Given the scope above, do you have plans set up for all critical roles?
Readiness: Have you evaluated each successor’s readiness for each plan they are in? Remember that one person might be a successor for multiple positions, and they might be more ready for some roles than others. Readiness can be categorized in high level groupings. For example, “Ready Now”, “Ready in < 1 Year”, and “Ready in > 1 Year”.
Bench Strength: Given completeness and individual readiness, how strong is your bench? Can you fill all critical roles? Is it still strong if you net out the successors, i.e. account for people who are selected in multiple plans.
Diversity: Does your plan make full use of the available talent in the organization? Have historical tendencies caused you to overlook strong successors because they have different backgrounds and experiences from the incumbents? Will your leadership ranks become more or less diverse when your plans move into action?
It took me 44 minutes and 56 seconds to pull together the metrics above to answer Question #25 from the People Analytics Challenge.
Here are the key metrics you can use to address the strategic questions above.
Bottom line. What does your successor coverage look like right now? Count up the number of leaders who have a successor that is ready now. Divide that count by the total number of roles in your succession planning program (see Scope above).
For example, if you have 10 positions that you’ve identified as needing a successor and you have a ready now successor for 7 of those roles, then your percentage of leaders with a ready now successor is 70%.
Now flip that number around and say to yourself, “Ok if one of our really key people left today, there’s a 30% chance that we’d have no one ready to take over that position.” Don’t let that be you.
Use the detailed data from this calculation to create an operational list of the positions without a successor. Then work the list!
The first metric tells you how ready you are to move on from one key person. Gross and Net Bench strength give you a sense of how resilient your organization would be in the face of multiple changes.
Technical note: These calculations will assume that your program has set out to have 3 successors identified for each key role.
Gross Bench Strength: Total successors divided by total successors needed, ignoring whether the successors are used in multiple plans.
Net Bench Strength: Total successors divided by total successors needed, only counting each successor once. i.e. taking into account whether the successors are used in multiple plans.
Watch the beginning of this video to learn more. VIDEO: Succession Planning Metrics Delivered in One Model + Some Thinking on Pool-based Succession Planning
So let’s look at these calculations together. Let’s say you have 10 key roles and you have determined that you should have 3 successors for each. That means your total successors needed is 30. Now go through your plans and add up all the listed successors. Perhaps you have 26. That means you have 26 successors out of the 30 you need making a gross bench strength of 87%. Awesome.
Ok. Now let’s get more nuanced. Let’s deduplicate the list of successors. Maybe there are 2 high potentials in that pool who are listed on all 10 plans. Extreme example but useful for our illustration. That means that there are really only 8 unique successors. That makes your net bench strength 8 / 30 or 27%.
This difference between a gross bench strength of 87% and a net bench strength of 27% tells you that you have good immediate coverage but low resiliency. You can effectively respond to 1 or 2 people leaving, but beyond that, your bench will be depleted.
Generally speaking, today’s organizations are looking to take full advantage of their available talent by ensuring that traditionally underrepresented groups are considered for advancement. A simple way to check on this progress is to compare the representation numbers of your incumbents to the representation of your successors.
Let’s suppose the current pool of employees in key roles is 10% diverse while your pool of successors is 20% diverse. This is a signal that your succession planning process will contribute to greater diversity in your key positions in the future.
Remember to align your successor diversity metrics with the key groupings defined by your organization’s DE&I program. These could include gender, ethnicity, or other employee attributes.
If you make progress on the metrics above, then you’ll be leading your organization into a more resilient future. Good job! But remember, resilience is great for the organization, up to a point.
Remember that the high potential employees in your plans have their own career goals. If they feel stuck on the bench, they’re likely to find their next role outside the company. If you are so resilient that you could back up all your key leaders for the next 25 years, then you are fooling yourself. Those high potential employees listed on your plans will be long gone by then.
So keep an eye on the promotion rate of your internal candidates over time. (Number of promotions / average headcount). They’ll be making their own estimates as well. Alternatively, you might calculate the time on bench for your successors. When one of your successors leaves the company, check to see if they were on the bench too long. Or just ask them in your exit interview.
Pay particular attention to the time on bench for your diverse successors. It’s not enough to say, “Look at how diverse our bench is!” if those candidates are continuously passed up for the next big job.
The metrics above are just a starting point. The key to strategic HR and people analytics is a willingness to ask important questions and use data to answer those questions. Ideally your succession planning process fits into a larger talent management vision that is supported by a wide range of interconnected datasets and measures.
For example, you may be ready to fill key roles with external candidates. Your time to fill for similar positions will help you know if that’s a reasonable backup strategy.
Alternatively, your employee pulse survey data and turnover by attrition analyses may indicate that you are having a hard time retaining diverse employees. Perhaps this will link back to the time on bench calculations discussed above.
You are unlikely to find meaningful answers in a single data source, so invest in building the right underlying data architecture to connect data from succession plans, core HR, recruiting, engagement, compensation, and other workforce data.
At the same time, keep the strategic focus in mind so that you’re not just doing analytics for analytics sake. Come back to the important questions like, “If we lost someone in a key role today, what’s the percent chance we’d be totally flat footed with no idea how to replace them?”