A guide to measure your succession planning strategy

Succession planning helps minimize leadership gaps for critical positions and provides opportunities for top talent to develop the skills necessary for future roles. However, for many companies, it’s a constant struggle. One reason could be that some companies view it more as an administrative task than a competitive advantage. Another reason could be that, though companies have a succession plan in place, there is no actual progression. 

In either case, before you start measuring your succession planning strategy, it’s essential to understand the current stage of your plan. Below is the succession management maturity model that describes each stage in greater detail. You can use it as a yardstick if you wish to attain the highest level of succession goals for your company.

It’s no surprise that organizations with talent management systems in place have successful business outcomes. These companies strive to build an employee-oriented ecosystem to enable workers to be successful. By building a talent experience, they can encourage a culture of growth, insight, understanding, engagement, and communication. 

Once your organization knows which level it stands on, it can intentionally adopt technology systems, processes, and practices that work mutually to develop its capabilities further to customize its approach. If your organization has already attained a maturity level of succession planning, then these metrics can help you measure its success rate.

In the 2016 Human Capital Benchmarking Report, the Society for Human Resource Management estimated that companies spend an average of 42 days to fill a position by external hire and at a cost of $4,129 per hire. There will always be costs when bringing in someone fresh to fill the role, whereas promoting an employee can save you time and money in the short term.

Suppose you’ve implemented succession planning goals to nurture a promising employee to move up to a new position (for example, a managerial position). In that case, training and preparation will pay off, downtime will be reduced, and you’ll potentially increase loyalty with a promotion.

However, if you would like to hire someone externally, as the role in question may require life experience and insight outside the industry, then external recruitment may be the most appropriate solution.

Using the methods below is one way recruiters can save time and money during this step.

The rate of internal hires can be calculated by:

Total internal hires / average employee headcount in the period x 100

The rate of external hires can be calculated by: 

Total external hires / average headcount in the period x 100

While it’s evident that specific jobs will disappear due to automation, others will evolve their core tasks and responsibilities. This succession planning metric is crucial to measure the missing skills and expertise in your workforce, along with which skills are essential for your organization’s optimal performance.

When you don’t know exactly where your employees stand right now from a skills perspective, it’s difficult to start planning for the future. Skills gap analysis helps to make sure you’ve got the right number of people with the right skills in the right place.

It’s important to know who could step into a key job when the current employee moves to another role or retires. This awareness protects the company from the risk of losing a top executive or key employee unexpectedly and helps prepare for planned personnel changes, such as retirement or promotion. 

Bench strength here refers to recognizing and nurturing a cadre of high-potential employees ready to step into senior leadership vacancies should the need arise. The higher the number is, the more potent the bench is. Bench strength can be calculated as below:

Bench strength = sum of the likelihood of bench employees filling a job/number of associated positions

When a senior manager announces that they’re leaving, it’s a massive opportunity if you can match somebody who is already successful in your environment, as your risks on the search are far lower. When you bring somebody from outside for a critical job position, the risk of incompatibility is greater.

According to Wharton management professor Matthew Bidwell, external hires cost 18 to 20 percent more than those promoted from within and have significantly lower performance for the first two years.

However, what do you do when that internal candidate isn’t a perfect fit for the job they seek?

A good yardstick for evaluating whether internal candidates could be serious contenders for a particular leadership position is to determine whether the candidate meets the specifications in the job description. According to LinkedIn’s Workplace Learning Report, 74% of talent developers put emphasis on evaluating employees’ competency and using internal skill matrixes to identify which employees are ready for promotion.

A skill matrix template allows organizations to understand what skills their employees are exemplary in – and in which skills they should prioritize training to prepare them for future roles.