Comparing Silicon Valley and the Imperial House of Japan In September 2018, the co-founders of Instagram, Kevin Systrom and Mike Krieger, announced their resignations. Many put this down to reported tensions between the pair and Mark Zuckerberg, founder of Instagram’s parent company, Facebook Inc.
Following their exit, Facebook saw over $11 billion knocked off its stock market value, partly over the fear that the platform would not survive.
In contrast, the meticulous transition plan for the Japanese Crown Prince, which began in earnest in 2016 when the Emperor expressed his intention to abdicate, is expected to result in very little disruption.
Why succession planning is important
Succession planning is crucial for every business, regardless of size or industry. The departure of any senior leader can lead to a loss of confidence from investors or customers and possibly the departure of other employees.
Whilst it is not possible to predict all departures, having a plan in place can help mitigate the effects by smoothing out as many bumps as possible, which in turn gives the business time to consider its messaging to stakeholders at such a critical time.
Despite the benefits of succession planning, many businesses fail to do so. This is often because they would prefer to avoid difficult conversations around the potential departure of senior employees and the subsequent process to identify staff who do (or do not) demonstrate the skills required to replace them.
However, such conversations do not have to be awkward and the task of identifying successors does not need not be a daunting one. Conversations about succession planning are rarely effective if employees are not open and honest, as they involve disclosing career plans and frank assessments of skills.
Employees are less likely to be candid if they do not have trust in the process
One of the most important ways to engender trust is to ensure conversations are kept confidential. Another way to ensure trust in the process is to maintain a degree of objectivity.
Using objective criteria aligned with a business plan to assess skills and having decisions made by more than one individual can help with this.
Indeed, these can also help avoid employment claims from disgruntled employees who feel overlooked for a promotion. Employers should be mindful of the legal risks too, particularly in the context of retirement succession planning. Gone are the days of automatically retiring an employee when they reach state pension age.
Making assumptions about how long an employee will want to continue working based on their age could result in costly age discrimination tribunal claim. Instead, employers should approach discussions about retirement with caution and without pre-judging the situation.
Talent development and expectation management
Developing future leaders is central to successful succession planning, and should not be limited to individuals in roles directly below the senior executive level.
Whilst talent development and leadership training is likely to be focussed at the senior end, employers should consider it at more junior levels to prevent stagnation, provide a sense of progression, and minimise attrition rates.
Indeed, the departure of a senior leader can have a domino effect in the business, requiring a number of employees to make the step up. Without the necessary training, this can be problematic.
Mentoring can be a particularly useful tool to help nurture talent. This is most likely to be effective at a senior level given the greater scope for 1-2-1 time and more focussed mentoring.
However, a culture of mentoring across the business can have a positive effect on motivation and should be offered where possible.
In growing organisations, it is important to consider future expansion and how the creation of new roles might impact employees. Training employees to develop skills which are transferrable across different areas of the business can be fundamental in successfully managing such growth as it enables employees to take on responsibilities across the business.
If there are no suitable internal candidates, organisations should consider where they might require external recruitment and how this might impact the existing workforce.
Hiring externally can have a demotivating effect where internal candidates feel that they have the necessary skills to carry out the role in question.
Having the honest conversations discussed above will help manage employee expectations and lessen any disappointment in feeling overlooked in favour of an external hire.
Businesses should also consider the best ways to mitigate the competitive risk exiting employees might pose.
Individuals with close relationships to customers and those with access to highly sensitive or confidential information should be required to enter into contractual restrictions limiting their ability to act in competition or cause other damage following their exit.
Such restrictions might cover a range of activities, such as preventing them from working at a competitor altogether or poaching customers or colleagues.
Crucially, these restrictions should be kept under review as the individual’s career progresses and updated where appropriate, to ensure that they will be enforceable at the critical time.
Unlike the Japanese monarchy, departing employees rarely give 3 years” warning of their intentions. Having a plan for departures in place at all times is therefore crucial and even a modest amount of time invested can pay dividends.
By ensuring that the development of its workforce is consistently prioritised, a business can reduce its exposure to employment claims and reduce instability during periods of transition.