There’s no excuse for the lack of an effective succession management strategy; the risk of ignoring it is far too high. CEB research recently found that finance employees’ intent to stay with their current organization sunk to a six-quarter low in Q2 2013. But, the problem is not only the risk of attrition, it’s how soon it will happen. Our survey also found that more than one-third of finance employees are planning to leave their current jobs within a year; and, among those planning to leave, more than two-thirds of them are high-performers.

That’s the downside. The upside of having a strong succession management plan is the ability to build a good leadership bench, build leadership qualities early on in careers, mitigate the risk of key person dependency, and provide stretch opportunities to high-performers.

So, why aren’t senior finance managers better at this? Well, most are actually pretty good at the first and most basic step of succession management: identifying potential candidates. However, they stop there. To have a great succession management strategy, the best companies do more.

Add More to Your Succession Management Strategy

The best succession planning approaches that we’ve seen incorporate the following six capabilities:

1. They have a multi-dimensional approach to attrition risk. They break up attrition risk into four key categories: vacancy risk, readiness risk, transition risk and portfolio risk. Each risk type requires a different talent strategy.

1. Vacancy Risk: The risk of vacancy in leadership positions. Leading companies mitigate vacancy risk by planning for key talent departures within the most vulnerable areas of the business, such as hard-to-fill and business-critical positions.
2. Readiness Risk: The risk of underdeveloped successors. To ensure that executives are prepared to assume leadership roles, leading companies identify and match executives to the necessary development experiences across the organization.
3. Transition Risk: The risk of poor assimilation of executive talent into the organization. As executives move into new roles or are promoted within the organization, leading companies make sure there are systems in place to ensure their success. Prevent executives from derailing by understanding each new executive’s specific need for development, providing feedback early and frequently, and ensuring accountability for their success.
4. Portfolio Risk: The risk of poor deployment of talent against business goals. Leading companies get the maximum return on their talent by basing succession decisions on the evolving needs of the organization and aligning talent capabilities and executive roles with strategic priority.

2. They identify future talent needs. Most finance departments do not look further than the most senior-level finance executives when drafting succession plans. Companies should partner with leaders to surface all positions critical to the organization’s success. Leading companies proactively address vacancy risk by prioritizing hard-to-fill positions. They reach deep, often evaluating the criticality and retention for as many as 20 positions within the function.

3. They assess leaders for future role requirements. Leading companies don’t just evaluate present performance when identifying and selecting potential successors – they look at the capability and aspiration to succeed in a future role. The best-in-class companies go beyond current role requirements so that they focus not on only on the short-term capability requirements of leaders, but also building a pipeline of successors that possess the capabilities that can help meet changing and more complex business needs.

4. They ‘develop’ succession candidates, not just hire them. The most effective succession plans prioritize development of critical leadership capabilities proactively, rather than simply replacing individuals. Finance Talent Leaders transform finance leaders into talent champions and involve them as active participants throughout the entire succession management process.

5. They overinvest in transitioning the successor. A transitioning leader faces a number of challenges when moving into a new role: understanding and adapting to the way the organization does business, identifying and forming connections with key stakeholders, clarifying expectations for the role, defining strategic priorities, and executing transition initiatives. Leading companies get ahead of potential teething-troubles: they assign ownership of transition activities to other senior leaders to help the successor build a network early-on; they think of onboarding as a 6-12 month planned effort; they place early focus on capability development to close the successor’s skill gaps and they work with HR to manage the expectations-reality gap to avoid frustration in the early months of the new role.

6. They measure the success of their succession management strategies against business performance. Most organizations struggle to measure the impact of their succession management strategies due to high numbers of succession candidates and roles, as well as increasingly complex leadership needs. As a result, measurement often focuses on metrics such as time-to-fill for critical roles and number of identified successors. Finance Talent Leaders focus on the quality of succession management by tracking metrics related to the health of the leadership bench and alignment to current and future business needs.

Whether you are a CFO of a big company or a manager leading a team; no matter if your search for new executive leadership spans the globe or is confined to your own company; these six guidelines can help you develop a more comprehensive succession management strategy and help you achieve increased depth in your bench strength.