Why succession planning is key to retaining supply chain expertise

The supply chain industry is aging, and attracting younger talent is becoming tougher. According to the U.S. Bureau of Labor Statistics, the average age of someone employed in the transportation and warehousing sector is 43.1 years, with 45% over the age of 45.

That offers companies tremendous institutional knowledge, but what happens if that knowledge leaves? Or retires? Who steps into those roles?

“Some supply chain leaders in the transportation sector lack the succession planning strategies needed to fill leadership positions. The failure to create succession planning strategies will negatively impact an organization’s supply chain through tacit knowledge loss,” wrote Dana M. Beal, in a Walden University doctoral study titled “Guiding the Future of the Supply Chain with Succession Planning,” published in July 2020.

 

Many organizations don’t consider succession planning, or at least don’t pay it the attention it deserves. In essence, succession planning becomes the key to business continuity. It can ensure that the culture continues, that the company seamlessly transitions to the next stage of leadership, and that the company is protected against an unexpected departure of a key executive. But, it starts with developing internal talent and the willingness to promote that talent.

Promoting from within can be a powerful strategy for fostering a positive work environment, retaining talent, and ensuring organizational continuity and there are several benefits to promoting from within, including employee motivation and morale, faster transitioning, retention of company and industry knowledge, leadership consistency and positive employer sentiment for external candidates.

There are times where internal promotion may not be right. These include when the organization feels it needs fresh perspectives, when an internal promotion may trigger office politics that may hamper the business, or when promoting an employee may create a gap lower in the organization that will be difficult to fill.

Dan Pellathy, an assistant professor of practice and director of operations of the Advanced Supply Chain Collaborative at the University of Tennessee, Knoxville’s Haslam College of Business, recently concluded a four-part series on SCMR.com that looked at leadership development in the planning function.

“Recent disruptions have led companies to emphasize multifunctional business processes that require integrating individuals across different reward systems, cultures, data, and leadership. At the same time, heightened customer expectations have increased demand for customized products and services. In response, companies have increased the speed of innovation, with a corresponding increase in system complexity. More than ever, businesses are turning to planners to manage these trends,” he wrote, adding that “organizational support for talent and leadership development has trailed behind the demands placed on the planning function.”

Educating tomorrow’s leaders

When looking to the next generation of leaders, companies must start by looking at what they are doing to educate those leaders. It turns, though, that many companies are lacking in this area.

A recent report called The Great Potential from global talent solutions provider LHH, found that 64% of workers believe companies should upskill and train for roles across the company before hiring externally. In manufacturing, 67% believe companies should prioritize internal development and placement, yet just 37% believe their managers would support such a change.

“Companies should empower managers to view their teams through the lens of skills,” the report said. “Employees want help knowing where their skills can take them next.”

Career progression was cited by employees as a top reason for leaving a company.

“For employers with open roles to fill, uncertainty in the workplace presents its own unique challenge,” LHH said. “On the one hand, the unease has created a significant ‘passive talent pool’ of people who are eager for new skills and opportunities. Almost half of workers (47%) are looking at open roles, and a third (33%) say they think about their career plans daily or weekly. In total, 72% of workers contemplate their future plans—such as their next job, reskilling, and upskilling—no less than quarterly.”

Employees clearly want to learn and advance, but companies are not always as willing—until it is too late and a manager leaves.

“Nurturing effective talent isn’t just a great business advantage—it's a fundamental workforce planning strategy for organizational growth, adaptability, and long-term viability,” a blog on workforce HR company TalentNeuron noted. “Cultivating future leaders and business stakeholders through succession planning provides stability in uncertain times and guides organizations through inevitable challenges. Their vision, decisiveness, and strategic acumen are indispensable for creating agile, productive workforces and navigating the future of work.”

Developing tomorrow’s leaders

In a separate article in the leadership series, Pellathy noted that a key to success in developing leaders is mentorship.

“The experience of benchmark supply chains suggests that new hires and top talent do significantly better with an active sponsor, mentor, or coach. Mentor and sponsor practices are not new. A mentor is someone in the hierarchy who owns the success and development of their mentee over the long term,” he wrote.

However, Pellathy noted that “most companies only create formal mentors for top candidates,” even though mentorship has proven successful for anyone. “Mentors do not have to be friends but must be effective role models. They must be able to support and represent the person they mentor in key management systems reviews (e.g., promotion, assignments),” Pellathy said.

TalentNeuron suggested several tips to identify potential internal candidates for promotion. They are:

1. Start early in identifying potential candidates
2. Identify critical roles that will need to be filled
3. Assess your current talent level
4. Develop a talent pipeline of individuals with individualized training
5. Communicate openly the commitment to internal talent development
6. Monitor progress and continually update succession plans to ensure the right talent is in place when the time is right.

Regardless of the individual, though, successful succession planning begins with education and ensuring that person will be successful in their new role. Failing to do this will result in an unprepared candidate that could set the organization back years.

It’s also important to note that it is not just for upper management where succession planning should be taking place. A 2022 Pew Research survey found that 63% of employees cited a lack of advancement opportunities as a primary reason for leaving their jobs.

University of Massachusetts’ Global research tried to quantify the value of promoting from within.

“When you promote from within, people see opportunity and become less likely to move around in their careers,” Greg Chansler, senior manager of human resources for Kawasaki Motors Corporation, is quoted as saying in the research.

The research found that external hires typically cost a company six to nine months worth of salary expense in onboarding and training, and they were paid an average of 18% more.

“Yet their performance evaluations over the course of the first 24 months are typically worse. This is because new hires from outside the organization typically need about two years to get up to speed. Internal employees, conversely, already possess an intimate familiarity with their company and its culture,” the research found.

It all starts, though, with a look inward to identify talent and educating that talent to succeed. Regardless of whether the hire is internal or external, if the right resources are not in place for success, then success will not happen.

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