Succession planning is a priority in the utility industry as an aging workforce, changing technologies, and turnover reshape the sector. The utility sector faces unique challenges, striving for seamless transfers of institutional knowledge while recruiting young talent and preparing the next generation of leaders to navigate complexities and emerging trends.
Succession planning is defined as the strategic, ongoing assessment and development of pipelines for critical positions within an organization, conducted in a collaborative nature between the human resources (HR) department and management.
Succession planning should be a priority for executives across the energy value chain as it ensures organizations are prepared for the departure of key executives (whether it’s from retirement, promotion, or a new opportunity), ensuring skills and knowledge are transferred, and leadership voids are filled with qualified employees.
All roles in an organization are important, but when it comes to developing a strong succession plan, it is a priority to focus on the roles that are vital to operations and continuity. The best way to do this is to first focus on strategy by identifying internal and external factors that can shape future workforce needs. Consider the following:
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How will the state of the industry affect operations for the next five to 10 years?
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What operations are important to the future of the industry?
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Which operations will grow, stay consistent, be downsized or discontinued?
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Will any job functions be consolidated?
Once these questions are answered, conduct an organizational scan by gathering and analyzing data by department or division to pinpoint critical roles. This scan should identify which roles will be open due to retirement. Often, companies use their payroll or enterprise resource planning (ERP) systems to quickly identify potential retirement dates based on employee demographic data and any employment rules that govern when employees are eligible for retirement. Another priority during this scan is identifying which positions have high turnover rates. Internal conversations can help identify which positions are experiencing more resignations or terminations. After conducting the organizational scan, the team should analyze any additional factors that may impact succession planning. Think of roles that may have impacts on regulatory compliance and safety, or may require specialized skills. What would occur if this role were vacant? Could operations continue without major impact? The last step combines everything that has been learned throughout the process by creating a list of critical positions. When creating this list, start off slow by only including about 10% of the company’s total positions. From here, the organization can slowly build up its succession plan.
A competency is a pattern of behavior associated with effective performance that helps an organization achieve desired results. Applying competencies to drive organizational effectiveness and enhance employee performance is known as competency modeling. Competency modeling acts as a framework to define what good performance looks like across different roles. Competency modeling is critical as it ensures that employees are evaluated and developed against the right standards for their roles.
Competencies are separate from but equally important to education, certifications, or specialized technical knowledge required to perform a job task. For example, financial acumen may be a competency for any senior leader in the organization. This would be demonstrated by a repeated ability to interpret and use financial data to make business decisions.
Depending on the organization, you will identify your role levels. For example, the levels we often use in the utility industry are individual contributor, first line supervisor, middle manager, and strategic leader. From here, competencies should be incorporated into hiring, performance evaluations, and development plans.
The basis of workforce succession planning is developing a pool of talent within the organization to draw from when leadership change takes place. To begin identifying internal talent, conduct a scan to create a pool of potential succession candidates. In the internal candidate assessment, start with a larger pool of candidates and narrow it down to only a few after reviewing their skills and competencies. Once you begin narrowing the field, it is time for the “9-box assessment.” This visual chart combines past performance reviews, certifications, and special skills for each employee. The 9-box assessment looks at two key factors: performance and potential. At each end of the assessment, employees are scored on a scale of low, medium, and high performance, as well as low, medium, and high potential. It is possible that a utility company works through the 9-box assessment and finds that the existing workforce does not possess the required competencies or certifications to fill the needed roles, which is common in the utility industry as many positions require multiple certifications. In this case, external recruitment becomes part of the workforce succession plan.
By the end of the talent identification process, core competency gaps will be identified, which can guide where training and development dollars should be used. Training and development programs are also a key part of a succession plan so current employees are provided with the resources and opportunities to grow into future roles.
Succession planning is not about “cherry-picking” the next in line to fill a position. Rather, it is an opportunity to strategically assess the current skills, knowledge, and competencies in your organization, and determine how you can better prepare the workforce—both internal and external to your organization—to fill critical vacancies when they arise.
At this point in the process, you should have a clear picture of the gaps between your current workforce and your future needs. This can be used to pinpoint training and learning budgets to the skills that are most critical, and ensure that you are devoting coaching and mentorship time to the soft skills that can only be learned through osmosis.
Institutionalizing knowledge so that it can be transferred to the next generation is a core feature of succession planning and makes a world of difference during transition periods. Documenting policies and procedures is an important component of knowledge transfer, but it can also be hard to juggle during busy workdays. Organizational leadership must prioritize the investment of time and resources, but there are several paths to ensure documentation is created including dedicating employee time to the effort using special project teams or positions, using consultants to do the heavy lifting, and leveraging artificial intelligence (AI)–powered software tools.
The final step is implementing your succession plan. This can vary by organization, but building a succession planning task force, setting timelines and goals, developing action plans, and engaging employees throughout the process will ensure successful implementation. Ideally, succession plans should be revisited and adjusted annually. The time is now to begin succession plan development for your organization to guarantee operational excellence, organizational continuity, and a culture where employees can grow their careers.
—Caitlin Humrickhouse is a principal with Baker Tilly’s Public Sector Advisory Practice.
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