Succession planning is dependent on the available talent in the market, which requires the involvement of human resources skills. Simon Burgess reports
We all know that working in insurance is not a lifelong ambition for the majority of school-leavers or graduates. Reputationally it languishes at the bottom of the list along with estate agents and debt collectors.
Regular media coverage of job losses, mergers, acquisitions and offshoring does little to endear our industry to potential employees. Should we be surprised when CII research finds that 90% of students would not consider a career in insurance and 66% said a career in this sector lacked intellectual stimulation?
As fewer young people enter our market, owners of smaller and mid-sized companies are finding it harder to succession plan and pass over the reins when they near retirement. And with the emergence of the new age discrimination laws, I'm not convinced I should even be referring to potential new entrants as 'young'.
Such is the recruitment problem, that we often hear of firms raiding each other's staff. Rather than criticise school-leavers and graduates for their apathy towards our industry, we should be looking at ourselves and the minimal efforts we make to attract talent in the first place.
Recruitment is a huge issue and greatly impacts on our succession planning, or lack of it. So why are we allowing this skills gap to persist? The CII reports that 80% of recruiters do not give on-campus presentations, 50% do not have any contact with universities and 70% do not give information to careers people. No great surprise to find that 75% of employers fail to attract the talent they're looking for.
Having said this, strides are being made to dispel this 'men in grey suits' image. The CII launched its talent initiative and a banking, insurance and financial services academy recently opened in Orpington. This may go some way to addressing the skills gap at one end, but it will not address the immediate issues our industry faces when it comes to succession planning.
Increased regulation and competition has resulted in many smaller firms selling out to 'super brokers', negating the need to succession plan. But for those wanting to remain independent, succession planning must surely move higher up their boardroom agendas.
Remember last year's Insurance Times survey? Some 80% of brokers are planning to address their succession planning by developing and promoting from within, rather than preparing their business for a trade sale.
But do these brokers have the right people, processes and strategies to get it right? Are there defined guidelines or is it a case of 'who feels right at the time'? How much input does the human resources (HR) department have into the process, who's involved with the strategic planning and what's the timescale?
HR within smaller firms is often seen as the 'hiring and firing' department, it's very rare this area inputs to the overall business strategy and even rarer for a representative to sit on the board.
HR can be perceived as a tactical resource and even if there is representation at board level, a review of talent within the business is undertaken on a piecemeal basis. Can we really say 'hand on heart' that succession planning is properly integrated into the overall business strategy?
Independent HR consultant Carole Elliott defines succession planning as identifying potential leaders to fill key positions. Because of the differing needs of organisations, it is difficult to point to any single model of succession planning. In the past, people would move up to specific, often specialist jobs.
Nowadays the main focus is on identifying and developing groups of jobs to enable potential successors to be identified for a variety of roles.
Succession planning is concerned with developing longer-term successors as well as short-term replacements, so the talent pool may be larger than the range of posts it covers.
Most companies have frameworks for technical and generic competencies and, while these provide a useful starting point, they should not be over-relied upon as they may not assess leadership skills. Also, these frameworks relate to the past and present and not the future, which is where leaders need to look.
A close relationship between the business leader and HR is crucial - those responsible for succession planning need to be aware of future business plans, how they might change and how such change affects the numbers and skills-set.
Employees too need to understand the succession process, the methods used to judge potential successors and the kinds of jobs that are considered suitable for each individual. All organisations need a certain amount of new blood to bring in new ideas and approaches - some academic commentators suggest a ratio of 80:20 between insiders and outsiders is about right.
Succession planning needs to be owned by line managers, actively led by the chief executive and facilitated and supported by the HR function.
Business psychologist Mandy Messenger says succession planning is not just about recognising and developing ability. She believes for success a holistic view is needed, one that also considers an individual's commitment to the organisation and their hunger for greater challenges.
When an employee joins a company, a 'psychological contract' is made. If he or she does something for that firm, there is an expectation to get something in return. If the stability of that psychological contract is shaken, for example because of the threat of redundancy, the employee may look elsewhere in the market, have one eye on retirement or set up their own business. Is this why the number of start-ups is on the increase?
The recent age discrimination laws will also impact on succession planning. It will no longer be appropriate to use age and length of service as the criteria for successors. Ability and motivation must be the main considerations.
People are motivated by different things, such as power, relationships and feedback. Whatever you expose them to now, will impact on their motivation in the future. Aspirational people who are committed to a business should be given the experiences to develop their abilities to maintain that 'engagement' with the company.
According to the Corporate Leadership Council, 71% of high performers in current roles do not make senior managers. Often those higher up in organisations fail to recognise talent further down because middle management prevents them from being nurtured.
Given that HR is so crucial to succession planning, I'm relieved to find that more HR professionals want to work in the financial services than any other sector. According to a recent People Management and Frazer Jones Workstyle survey, 24% rated financial services as the top sector to work in (350 were questioned).
Better pay and benefits was the main reason for the popularity of financial services, coupled with a feeling that HR was more integrated in the business. There's hope for us after all. IT
Simon Burgess is managing director of britishinsurance.com