How Executive Compensation Improves Succession Planning

How to Use Compensation Planning to Attract, Incent, and Retain Top Talent

succession planning internal vs external

Succession Planning: Should You Keep it Internal?

The goal of succession planning is simple: to recruit top talent to fill key positions when they become available with as little transition time as possible. However, the process itself is often more complicated. Which positions are key, for example, and where does that top talent come from?

Key positions are whichever positions are vital to day-to-day operations. These generally include the C-suite positions, as well as the payroll manager, the president or CEO’s executive assistant, and other vital roles. In order to fill these positions, businesses can either look within their current employee pool or they can look outside the company for a qualified candidate.

Looking outside the company often means finding a candidate who is currently filling one of the identified key roles for another organization. When hired, that candidate then brings his current experience in the role to the new organization. Theoretically, that experience decreases training and transition time, imparting two huge advantages for management and the executive board and increasing the odds of success for the candidate.

Internal candidates, in contrast, don’t possess direct experience but they offer a number of advantages over external candidates. They already know – and fit in with – the company culture. They also have established camaraderie with other employees, which can be crucial to success in a new management or upper-level position, and they have a proven track record of success inside the company.

An employee recruited from within the company to fill a key position has already shown that she is a high potential employee. Competencies have already been demonstrated, and the management team or executive board can trust that she is going to succeed in the chosen role, because she has already succeeded elsewhere. That’s why she was identified as top talent in the first place.

External candidates may have more experience filling a role, but they cannot match the internal candidate’s knowledge of and familiarity with the day-to-day operations of the organization. And that, ultimately, is what translates into less downtime and greater success for everyone involved.

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