Over the past five years, competition for leadership talent in financial services has increased, while regulatory bodies place greater pressures on financial institutions to improve and expand talent mapping. At the same time, the number of leadership roles considered ‘critical’ have broadened, placing more demands on talent requirements.

In response, CHROs and other HR leaders have implemented various strategies to improve succession planning in financial institutions. These approaches can be applied across different sectors, providing HR leaders with valuable insights to enhance their own leadership succession plans. Below, I explore how HR leaders in financial services are adapting their succession planning strategies to ensure robust and effective leadership transitions.

Succession planning is evolving

The scale of succession planning is growing. Specialist roles in technology, digital, and data are increasingly considered critical. This has necessitated the implementation of two succession programmes – one management and one technical specialism.

Unlike management succession, which prepares individuals for leadership and general management roles, technical specialism succession planning develops talent in specific technical areas critical to the business. HR leaders in financial services tell us this is growing in importance, and if they don’t already have a technical track, they know they need one.

Succession planning is also changing, focusing more on skills development and a greater alignment between personal and professional goals. The shift is placing more priority on skills and behaviours, with HR leaders implementing programmes on mindset, self-awareness, emotional intelligence, and culture alignment. Part of this change aims to make succession more individualised so HR leaders can ensure the successor’s career goals align with the role’s objectives.

How HR leaders are aiming for excellence

There is now a clear drive toward enhanced quality, resilience, and timeliness of talent management strategies in order to improve succession planning. In financial services, the process is evolving from a discrete activity to more continuous monitoring where accurate information is key.

HR leaders now categorise their identified successors into three development groups: those who are ‘ready now,’ those who will be ready in ‘one to two years,’ and those who will be ready in ‘three to five years,’ along with emergency cover candidates. Most HR leaders agree that successor candidates should be individuals capable of managing one to two levels above their current position if needed.

Some CHROs are now also considering ‘successor cohorts.’ These are groups of senior managers five to six years away from leadership roles, who are encouraged to work together. While CHROs recognise some will leave along the way, this is outweighed by the benefit of eventually having a more collaborative and aligned leadership group.

Many HR leaders now recognise development must be maintained, even when the successor has made it into the role. They offer coaching and mentoring post-succession, both as a way of supporting the successor and integrating them into their new team. This also mitigates the ‘non-acceptance’ that can sometimes occur among peers, impacting productivity, teamwork, and collaboration once they assume the role.

How HR leaders manage unexpected departures

Unexpected leadership departures can be a serious blow, with the impact permeating throughout the organisation. In these circumstance, HR leaders in financial services often bring in an interim executive to fill the gap. For smaller organisations with a smaller pool of internal talent to draw upon, this is often a necessity.

While turning to external talent is common, many HR leaders also maintain a list of emergency or ‘acting’ candidates as part of their succession plan. These individuals understand they are only temporary while the permanent replacement is found.

Strategies for preventing unwanted departures before they occur are also increasing. These include planned rotations and secondments incorporated into succession plans, which provide succession candidates with different professional experiences.

When faced with an unexpected departure, HR leaders often enlist the assistance of a trusted executive search partner. Given their role, these organisations can move much more quickly toward shortlisting and candidate selection, and so minimise the impact of a leadership gap. What’s more, by leveraging an established candidate network, an executive search firm can expedite the creation of a shortlist while simultaneously enhancing diversity in the candidate pool.

Pillars of a successful succession strategy: Insider tips

As succession moves away from being a discreet activity to a fully incorporated, business-wide plan, HR leaders tell us an open dialogue with candidates is not only beneficial but necessary. This helps HR to understand career motivations, accurately assess whether the candidate could do the role, and provide early intervention for poor performance.

With succession’s evolution, many HR leaders advise less reliance on methodology, such as the nine-box matrix, and instead to concentrate on assessing true leadership commitment, potential and learning agility, while also ensuring a reliable frequency, flexibility, and stability in the process.

Unsuccessful candidates departing is now too costly ignore, and so rewarding candidates for being part of the succession programme is now an element of most succession plans. Whether through external business education programmes or providing coaches and mentors, HR leaders are taking steps to ensure their unsuccessful candidates feel appreciated and so stay with the organisation.

Finally, incorporating external talent into the succession process brings serious advantages. In addition to gaining a broader view of the talent market it improves performance, competitiveness, and diversity. For HR, understanding how their organisation’s talent, practices, and performance compare to the external market helps reveal competitive strengths and weaknesses. Through regular benchmarking HR leaders gain insights into what competitors offer, and so can better position their organisation as an attractive employer.