The number of U.S. organizations with formal succession plans has declined over the past five years, according to a survey conducted by the Society for Human Resource Management (SHRM). These processes aim to ensure that top employees have the necessary preparation to advance into key positions.
Only 23% of companies were likely to have a formal succession plan in 2011, compared with 29% in 2006, reports SHRM. On the other hand, informal succession planning rose from 29% of organizations in 2006 to 38% in 2011. The study notes that, if the staff size of the organization is too small, then those in charge may not see the need to formalize such a plan, although there may be an informal plan in place.
Whether formal or informal, such long-term planning benefits many organizations. Identifying and developing employees to take on more leadership can help make transitions such as expansion, restructuring, and the retirement of top-level executives more efficient. Experts believe that internal recruitment and development plans should be regularly updated rather than remain fixed or stagnant.
“The number one reason organizations are not developing formal succession planning is because more immediate projects are taking precedence—not surprising given that organizations are focusing their energies on dealing with an uncertain economic outlook,” says Evren Esen, manager of the Survey Research Center at SHRM. “Still, succession planning has significant strategic implications for organizations and should not be put on the back burner, especially during times of economic volatility.”
Esen believes that planning would likely increase if human resource departments were more involved. According to the report, human resources departments are in charge of succession plans approximately 40% of the time.
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