June 24, 2011

The number of U.S. organizations with a formal succession plan in place decreased during the past five years from 29 percent in 2006 to 23 percent in 2011, according to a poll from the Society for Human Resource Management.

While less than a quarter of businesses have a formal plan in place, the numbers improve when informal plans are considered. More than one-third, or 38 percent, of HR professionals said their organization currently has an informal succession plan or process in place (up from 29 percent in 2006).

The number who said their organization has no intentions to develop a plan remained roughly unchanged from 16 percent in 2006 to 17 percent in 2011.

Sixteen percent said their organization’s staff size is too small to create a formal succession plan.

“The No. 1 reason organizations are not developing formal succession planning is because more immediate projects are taking precedence—not surprising given that organizations are focusing their energies on dealing with an uncertain economic outlook,” says Evren Esen, manager/Survey Research Center at SHRM. “Still, succession planning has significant strategic implications for organizations and should not be put on the back burner, especially during times of economic volatility.”

While roughly four in 10 HR departments lead the organization’s succession plan initiatives, 21 percent of efforts are led by the organization’s president or CEO. Thirteen percent of efforts are led by such executives as the chief financial officer or the chief operating officer. Only four percent are led by middle managers and three percent by the board of directors.

“This is an area that HR should lead in organizations,” says Esen. “Currently only 40 percent of HR departments lead succession planning efforts,” she noted. “Maybe planning would increase if HR ran the programs.”