Succession planning is a growing imperative
Succession planning has always been critical within financial services as a regulated sector. Nonetheless, over the past five years, and in particular the past 12 months, succession planning has taken on heightened importance for all financial services firms.
Part of the catalyst for this is increased scrutiny from regulatory bodies, which are pressuring boards to bolster talent management and have plans go deeper into organisations, especially for critical business roles. This is driving a shift toward enhanced quality, resilience, and timeliness of talent management strategies. We are also seeing the process evolve from a discrete activity to more continuous monitoring where accurate information is key.
“It is becoming more important and more difficult,” said a global HR Director – a sentiment echoed by everyone we spoke to. Regardless of size or geography, financial services boards and CEOs are focusing more of their time on succession planning, and HR leaders are spending more time talent planning and mapping.
Increased regulatory accountability is making some senior leadership roles less attractive, while hedge funds and challenger brands drive greater competition for talent. The scale of succession planning is also expanding. Specialist roles in technology, digital, and data are increasingly considered critical. Furthermore, people and talent officers also need to consider diversity in their succession plans.
Across our cohort of HR leaders, the message was the same: succession planning is taking more time, is more focused, is harder to carry out and is broader in scope.
Time and depth of succession planning varies
Succession plans for board, senior management, and key roles such as compliance and risk are a regulatory requirement in financial services. Many of our interviewees told us they also need to meet and balance the succession requirements of local and regional supervisory bodies.
However, while many have succession plans that are “ExCo minus two, plus risk assessed roles,” a large number also went four to five levels down from the executive committee. Depending on size, financial services organisations could have succession plans in place for anywhere between 100 and 300+ roles with varying degrees of focus.
“Risk assessed roles” were typically in capital management, risk, actuarial, audit, compliance and tax, but could also include data protection, cyber and sustainability. In most cases, roles are identified as critical and therefore requiring succession planning regardless of seniority.
Size and structure also influence the time committed to succession planning. From our conversations, this ranged between one and six days a year at ExCo level. For example, one global People and Talent Director told us their executive committee and board spent two to three days on succession planning twice a year while another HR leader at the other end of this range told us their leadership team committed just ten hours annually. This very clearly the tip of the iceberg, with significant time given to preparation, assessment, iteration, collaboration and reporting behind the scenes.
Succession planning needs to evolve
It is clear from our interviews that succession planning in financial services will become more important over the next five years. HR leaders also expect it to evolve, focusing more on skills development, ensuring a greater alignment between personal and professional development, and to encompass a wider array of roles. “It must become more agile and iterative with greater focus on the functional and skill-based pipelines,” one global People Officer told us. “Succession planning should be more frequent and more specific,” another said.