Strategic Succession: Managing Internal Candidates During Leadership Transitions

Succession planning is crucial for ensuring an organisation's long-term stability and success. It involves identifying and developing internal talent to fill key leadership roles as they become available, thus minimising disruptions and maintaining continuity in operations. Effective succession planning prepares the organisation for inevitable changes, such as retirements or unexpected departures, and fosters a culture of mentorship and professional growth. Investing in future leaders can safeguard its strategic vision, enhance employee morale, and secure a competitive edge in the industry.

Navigating the Internal-External Dilemma.

Your Head of Tax has resigned, and you've decided to launch an external search for their replacement. However, within your tax function, there's an internal candidate who could be the perfect fit. Promoting from within would validate your succession planning process and send a strong message to the team that high performers have real opportunities for advancement. This can be an ideal scenario—if handled correctly. If mismanaged, however, you risk facing a second resignation down the line.

The transition will likely be smooth and straightforward if the internal candidate emerges as the best choice. However, several factors must be considered if the decision is made to go with an external hire. Failing to manage the internal candidate’s expectations can lead to feelings of being overlooked and devalued, leaving them disengaged and more likely to leave the organisation.

Retaining and Repositioning.

When a new Head of Tax is announced, internal candidates who were expecting the role often face disappointment. Retaining these passed-over senior leaders can offer valuable experience and insights to the incoming Head of Tax, as their deep knowledge of the company is a strategic asset—and a potential risk if they depart for a competitor. However, their presence can also create tension, potentially undermining the new leader’s objectives. The incoming Head of Tax must approach this relationship with thoughtfulness and care. The search firm and HR team must collaborate closely, crafting a fair, well-structured interview process to ensure the overlooked candidate understands their feedback and why the external candidate has been hired ahead of them. Get this part right, and they’re likely to remain motivated and committed to the cause.

While some companies may be left confused about how to approach the overlooked candidate, forward-thinking organisations take a more strategic approach. By carefully managing second-in-command leaders, companies send a strong message about valuing leadership and retaining talent. Companies may also look to reassign such candidates to new, meaningful roles or offer the opportunity for an overseas secondment. The ideal outcome occurs when the new Head of Tax and the passed-over candidate share mutual respect, enabling them to work together as a solid and effective team.

Retaining Talent: The Importance of Transparent Hiring.

Three key steps to help you navigate the hiring process effectively while retaining your top talent:

Open Communication - Be transparent with your internal candidates by clearly explaining that an external search will soon begin and encouraging internal applicants to apply.

Fair Evaluation - To ensure a fair and unbiased process, all internal candidates must undergo the same rigorous assessment as external candidates. HR departments must work in partnership with their chosen search partner.

Constructive Feedback - This approach allows for a level playing field. It ensures that, at every stage, your external search partner can provide detailed, constructive feedback to your internal candidate. If not selected, each candidate?should receive clear, tangible insights on where they fell short compared to external contenders. Collaboration between the search firm and HR can help guide internal applicants on areas for growth and improvement.

Summary

By maintaining transparency and fully involving internal candidates in the process, they will feel they had a fair opportunity for the role. Even if they are not selected, providing clear, constructive feedback will help them exit the process positively and remain engaged. This will significantly increase your chances of retaining top talent and avoiding awkward resignation conversations in the future.