If you are new to succession planning metrics and would like to learn how to use the most popular metrics in your succession plan effectively, then this article is for you.
Growth is a process, and organizations grow over time just like a tree grows over time. As the organization grows, people will leave for one reason. People leave organizations for different reasons. It could be retirement, resignation, or termination from the position.
You will need to develop contingencies to prevent leadership gaps. You will need to make sure talented individuals are developed to succeed those that leave. This is where succession planning comes in. According to Erik van Vulpen, an HR thought leader at AIHR, succession planning is choosing and developing key talent to ensure the continuity of critical roles within the organization.
Measuring succession plans assists organizations in ensuring that their succession plans are effective. It also assists them in making modifications when necessary. This can be done by using metrics. The metrics you choose should mirror the aims of your succession plan. So make sure they are outlined and mentioned clearly in your official succession plan. When weighing the impact of your succession planning strategy, there are two types of key metrics you can consider:
1. Objective Metrics (Quantitative Metrics)
The type of metrics that the board likes to hear is numbers. This contains numerical data, statistics, charts, and graphs, among other things. These are metrics that you can put numbers to.
2. Subjective Metrics (Qualitative Metrics)
Employee engagement and job satisfaction are two of the most common subjective metrics. These measurements are more subjective, but they nevertheless provide useful information. They extract various sorts of feedback, such as open-ended comment analysis, sentiment analysis, etc.
Metrics for Succession Planning That Are Frequently Used
These are the Metrics that are frequently used during succession planning:
1. Succession Bench Strength
Bench strength means the talent you may have sitting on the bench. It is a measurement of people who are in good enough shape to participate but are not in the field.
To measure bench strength, ask yourself: Who is showing promise or drive to move to a critical role? Do they have the ability to move to the new rank? These questions will assist you to zoom in on the qualities or personality traits these employees may have. It will also allow you to see if these traits are required for the role. After asking these questions, you will also be able to select from your talent pool the employees with high potential.
There are a variety of approaches for selecting the best candidates for growth, including evaluating work histories in terms of performance, psychometric testing, and learning about individual career goals. "The target employee for succession planning should be those who have high potential and whose investment in them will benefit the company".
Related: Is Succession Planning Important?
The percentage of high-potential employees you've identified as ready for promotion is a standard technique to assess bench strength. To get your result, divide the headcount ready for promotion by the entire high-potential management headcount.
2. Career Path Ratio
Workplaces are changing and growing. We must ensure that our employees on the bench are encouraged to develop their talents to know how to manage and stay prepared.
The career path ratio measures how much growth your employees have within your company. "A simple way to check on this progress is to compare the representation numbers of your employees to the representation of your successors. " (Phil Schrader, 2022). Another quantitative method to use is to divide the total number of promotions in your company by the sum of all position changes to get the career path ratio.
Hint: If the answer is above 1 then you are advised to check your calculator and try again
According to Erik van Vulpen, if the answer is 0.7 it signals frequent promotions, and if it is 0.2 it signals that there might be an issue with the promotion process and little movement within the organization.
3. Retention and Flight Risk
How well is your employee retention rate doing? If the retention rate of high-potential employees is low, it is an indication that the organization's succession plan is failing. Keep in mind that your high-potential employees have their career ambitions, so you must not keep them on the bench for too long.
You must learn how to empower, engage, and retain your employees for your organization to work at all levels. You may not always be able to measure flight risk precisely but some signs can be used to predict when a high-potential employee will quit. This will ensure that the flight risk also known as the risk of loss, will be at a low rate.
Paying your high-potential employees below the market rate will allow head-hunters to poach them. Michael Timms (2017) agrees with this statement, as he believes that companies that fail to cultivate their existing talent are handing over that obligation to the organizations from whom they wish to recruit. No other organization is better equipped to develop its leaders than yours! You can undertake a salary analysis to see if employees are being paid below market. Internally compare the outcomes and use external benchmarks as well.
You can use a variety of methods to figure out if someone is about to abandon the ship. For example, they're updating their LinkedIn page or whether their absence days have increased. Based on prior trends, you can use these to see who is likely to leave next. For example, you can look into the traits that have been shared by employees who have resigned in the recent past. You can use these traits to identify others who are most likely to depart.
Over 90% of young employees, aged between 18 to 34, state that working for a company with a clear succession plan will boost engagement levels (Talexes, 2017). Employee engagement, as well as job satisfaction, should be considered in succession planning. This will enable you to offset flight risk.
4. Percentage (%) of open roles to be filled
When you have an available job, how often do you fill it by promoting someone from within the organization? This refers to the number of internal promotions that your company can do. While external hiring is not bad, increasing the number of positions filled internally can indicate that you are better preparing your employees for progressive responsibilities. It will also show that you are making better use of your existing talent pool.
Your ability to cultivate internal talent will be measured by the percentage of essential roles filled by internal promotion. This can be compared to the percentage of important posts filled by outside candidates. This percentage can be used to determine if your organization's succession planning is working. It can also be used to measure your Bench strength.
The time-to-fill should not be confused with time-to-hire. This refers to the time the organization has to fill the open positions. The difference between the two is that time-to-hire assesses the effectiveness of your recruitment efforts, whilst time-to-fill assesses the effectiveness of your company's hiring procedure.
To get a sense of time-to-fill on a team, department, or organizational level, you add the sums for each role and divide by the number of roles hired. This metric can provide insight into the genuine impact of turnover in your organization and the efficiency of your recruitment processes.
There will be costs incurred when hiring someone new to fill a position. According to Rectec, "When recruiting from outside of the company, there are always risks involved… you may end up recruiting the wrong person, and it could be a costly mistake." However, promoting an employee from your talent pool will save you time and money.
If you have a good succession plan in place, you can plan adequately for future hires and fill some of your posts without advertising externally. In most circumstances, succession planning can help you make better recruits or provide you peace of mind that you are not employing the wrong person.
Through succession planning, you can considerably reduce your hiring expenses and the time it takes to fill vacancies. Hiring from the existing pool will mean that the costs of preparing and training them for future positions will be reduced. This will mean downtime will be decreased, and promotion may encourage employee loyalty.
When assessing the quality of succession planning at your company, you must select the appropriate metrics. So choose your metrics carefully, collect and evaluate data regularly, and make data-driven decisions based on the findings. As a result, you'll ensure that your company's succession planning process is as efficient as possible.
Natasha Chimphondah is an organizational development consultant at Industrial Psychology Consultants (Pvt) Ltd, a business management and human resources consulting firm.
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