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Human Resources | May 22, 2017

Succession Planning by the Numbers: 3 Best Practices

By: Mike Prizament | Product Marketing Director

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Most years, 10% to 15% of global corporations replace their top leaders because of resignation, dismissal, retirement, or health problems, and in 2015, more than 16% had to replace their CEOs, according to PwC research. Unfortunately, in many cases, those corporations are unprepared to hire a new leader: Almost 40% of respondents to a survey conducted by search firm Heidrick & Struggles and the Rock Center for Corporate Governance at Stanford University had no viable internal candidates who could immediately replace the CEO if needed.

And CEOs aren’t the only leaders that need replacing. To keep a modern company thriving amid constant technology changes and global competition, strong leadership is important at every level. 

Based on the research from PwC, Stanford, and others, few companies are able to successfully plan ahead for leadership turnover. But today’s HR leaders have new tools available to help design successful succession planning strategies. Using data about your employees already in your system, smart analytics tools can transform those figures into strategic information to develop succession plans. Here are three ways to do that well. 

1. Understand your internal strengths.

A growing number of companies look to external candidates to fill vacant leadership positions. For instance, in 2013, organizations filled 66% of positions with external candidates and only 26% with internal candidates, according to a survey conducted by the Society for Human Resource Management. In some cases, an external hire may be the best new leader, but industry knowledge, internal relationships, and the characteristics of proven leadership may be more important than locating a superstar talent elsewhere. 

And with the ability to harness all the employee data in your system, today’s HR leaders can quickly determine whether they already have the expertise they seek. For example, a strong data analytics system will show which employees have undergone specific training programs to prepare for more advanced roles, which ones have led teams, or which have reached specific performance goals. This information can help you maximize the potential of your current employees and save money on unnecessary executive searches and leadership recruiting.

2. Make succession planning objective.

One reason many leaders don’t work out is that they’re selected using improper criteria, according to a Gallup report. For instance, most existing leaders want their successors to share many of their own qualities, but those aren’t necessarily predictors of leadership success. 

“Many companies use a non-scientific approach to predict future leaders...,” write the report’s authors. “We have an exaggerated tendency to regard certain characteristics in others favorably—often characteristics where we also excel—and to discount less favorable characteristics. This affects our overall assessment of a person’s true capabilities and potential.” 

Instead of relying on an existing leader’s biased opinion, predictive analytics can use hard data to predict which employees will be best suited for future leadership positions. For example, if your company’s best leaders have educational experiences in common, your analytics program can track employees with those specific degrees or certificates. With those data-based predictions in hand, HR can provide training and leadership experiences for promising employees to prepare them for future roles.

3. Manipulate the data measured to meet your firm’s needs.

Oracle Human Capital Management Cloud includes HCM Analytics, built-in tools that can help HR leaders predict which employees are likely to perform well and would be good candidates for leadership, based on employee information already in your system. “In developing this tool, we defined variables for predicting which employees are likely to perform well, and when we ran it on 8,000 of our own workforce, it was about 80% to 90% correct,” says Julian Challenger, director of HCM Cloud product management at Oracle. 

Those variables will depend on the characteristics shared by successful leaders at your organization or other predictors of success. For instance, they may include specific scores on personality tests, participation in certain training programs, or a particular length of service. 

Oracle clients can focus on new attributes when they go into their systems to manage the predictive models. The key is to determine which types of measurable criteria current and past leaders have in common and measure current employees against the criteria to find those who may be a strong match. Because those criteria may be different for each organization, savvy HR leaders manipulate the analytics to meet specific needs.

To learn more about Oracle HCM Cloud’s succession planning capabilities, visit our new microsite here

Product Marketing Director
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