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Succession Planning: What the Research Says

  • Eben Harrell

succession planning definition business studies

While every organization inevitably must replace its CEO, most firms are ill-prepared for succession. In this article, HBR senior editor Eben Harrell reviews the most salient studies of succession planning and offers context from the experts. Some key takeaways:

  • Though turnover among CEOs is rising, only 54% of boards are grooming a specific successor, and 39% have no viable internal candidate. The consequences of poor planning are serious: Companies that scramble to find replacements forgo an average of $1.8 billion in shareholder value.
  • Grooming leaders takes years but pays off: Chief executives who have gone through executive development at “CEO factories” like GE deliver superior operating performance. But directors need to get more involved. The majority don’t understand the capabilities of the executives below the CEO, and only about a quarter participate in their evaluations.
  • The trend toward external hires is growing, and outsiders command higher median pay. But studies suggest that on the whole, insider CEOs deliver better returns.
  • More researchers are studying the traits of the ideal CEO. So far they’re finding that younger CEOs outperform, that execution matters more than interpersonal strengths, and that a military background makes leaders more honest, but this line of inquiry is in its early days, and the jury is still out.

Most organizations aren’t prepared.

All CEOs will inevitably leave office, yet research has long shown that most organizations are ill-prepared to replace them. In this article, we review the most salient studies of succession planning and offer context from experts on the process of picking new leaders for organizations.

  • Eben Harrell is a senior editor at Harvard Business Review. EbenHarrell

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While every organization inevitably must replace its CEO, most firms are ill-prepared for succession. In this article, HBR senior editor Eben Harrell reviews the most salient studies of succession planning and offers context from the experts. Some key takeaways: (1) Though turnover among CEOs is rising, only 54% of boards are grooming a specific successor, and 39% have no viable internal candidate. The consequences of poor planning are serious: Companies that scramble to find replacements forgo an average of $1.8 billion in shareholder value. (2) Grooming leaders takes years but pays off: Chief executives who have gone through executive development at "CEO factories" like GE deliver superior operating performance. But directors need to get more involved. The majority don't understand the capabilities of the executives below the CEO, and only about a quarter participate in their evaluations. (3) The trend toward external hires is growing, and outsiders command higher median pay. But studies suggest that on the whole, insider CEOs deliver better returns. (4) More researchers are studying the traits of the ideal CEO. So far they're finding that younger CEOs outperform their older counterparts, that execution matters more than interpersonal strengths, and that a military background makes leaders more honest, but this line of inquiry is in its early days, and the jury is still out.

Dec 1, 2016


Organizational Behavior

Harvard Business Review


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succession planning definition business studies

Literature Review of Succession Planning Strategies and Tactics

  • First Online: 08 March 2018

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succession planning definition business studies

  • Irina A. Weisblat 3  

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All organizations have one thing in common. At a certain point, they must deal with shifts of leadership, culture, politics, decision-making, power, and strategies for improvement. Organizations with clearly developed succession plans are the most successful in this transition, regardless of the industry, business model, or type of ownership. This literature review considers theoretical foundations, research on the topic, and best practices. The chapter also illuminates strategies, tactics, and development of future leaders. A common theme of the existing literature is that a successor must be an innovative thinker who influences the organization’s high performance, competitiveness, and sustainability.

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Weisblat, I.A. (2018). Literature Review of Succession Planning Strategies and Tactics. In: Gordon, P., Overbey, J. (eds) Succession Planning. Palgrave Macmillan, Cham.

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  • Business Leaders

How to Create a Business Succession Plan

succession planning definition business studies

For many small business owners, maintaining positive cash flow and a stable balance sheet can be an ongoing battle that consumes virtually all of their time. Even retirement often seems like a distant speck on the horizon, let alone plans to hand over the business. However, establishing a sound business succession plan is beneficial for most business owners and can be absolutely necessary for some.

For business owners that are at or near retirement, the issue of succession cannot be ignored. In this article, we will take you through the steps you'll want to take to create a successful succession plan.

Picking a Successor Isn't Easy

Many factors determine whether a succession plan is necessary, and sometimes the logical and easy choice will be to sell the business lock, stock, and barrel simply. However, many owners prefer the thought of their businesses continuing on even after they're gone.

Choosing a successor can be as easy as appointing a family member or assistant to take the owner's place. However, there may be several partners or family members from which the owner will have to choose — each with a number of strengths and weaknesses to be considered. In this case, a lasting resentment by those who were not chosen may happen, regardless of what choice is ultimately made. Partners who do not need or want a successor may simply sell their portion of the business to the other partners of the business in a buy-sell agreement .

How Much Is the Business Worth?

When business owners decide to cash-out (or if death makes the decision for them), a set dollar value for the business needs to be determined, or at least the exiting share of it. This can be done either through an appraisal by a certified public accountant (CPA) or by an arbitrary agreement between all partners involved. If the portion of the company consists solely of shares of publicly-traded stock, then the valuation of the owner's interest will be determined by the stock's current market value.

Life Insurance: The Standard Transfer Vehicle

Once a set dollar value has been determined, life insurance is purchased on all partners in the business. In the event that a partner passes on before ending his relationship with their partners, the death benefit proceeds will then be used to buy out the deceased partner's share of the business and distribute it equally among the remaining partners.

There are two basic arrangements used for this. They are known as "cross-purchase agreements" and "entity-purchase agreements." While both ultimately serve the same purpose, they are used in different situations.

Cross-Purchase Agreements

These agreements are structured so that each partner buys and owns a policy on each of the other partners in the business. Each partner functions as both owner and beneficiary on the same policy, with each other partner being the insured. Therefore, when one partner dies, the face value of each policy on the deceased partner is paid out to the remaining partners, who will then use the policy proceeds to buy the deceased partner's share of the business at a previously agreed-upon price.

As an example, imagine that there are three partners who each own equal shares of a business worth $3 million, so each partner's share is valued at $1 million. The partners want to ensure that the business is passed on smoothly if one of them dies, so they enter into a cross-purchase agreement. The agreement requires that each partner take out a $500,000 policy on each of the other two partners. This way, when one of the partners dies, the other two partners will each be paid $500,000, which they must use to buy out the deceased partner's share of the business.

Entity-Purchase Agreements

The obvious limitation here is that, for a business with a large number of partners (five to ten partners or more), it becomes impractical for each partner to maintain separate policies on each of the others. There can also be substantial inequity between partners in terms of underwriting and, as a result, the cost of each policy.

There can even be problems when there are only two partners. Let's say one partner is 35 years old, and the other is 60 years old — there will be a huge disparity between the respective costs of the policies. In this instance, an entity-purchase agreement is often used instead.

The entity-purchase arrangement is much less complicated. In this type of agreement, the business itself purchases a single policy on each partner and becomes both the policy owner and beneficiary. Upon the death of any partner or owner, the business will use the policy proceeds to purchase the deceased person's share of the business accordingly. The cost of each policy is generally deductible for the business, and the business also "eats" all costs and underwrites the equity between partners.

3 Reasons to Have a Business Succession Plan

Creating and implementing a sound succession plan will provide several benefits to owners and partners:

  • It ensures an agreeable price for a partner's share of the business and eliminates the need for valuation upon death because the insured agreed to the price beforehand.
  • The policy benefits will be immediately available to pay for the deceased's share of the business, with no liquidity or time constraints. This effectively prevents the possibility of an external takeover due to cash flow problems or the need to sell the business or other assets to cover the cost of the deceased's interest.
  • A succession plan can greatly help in establishing a timely settlement of the deceased's estate .

The Bottom Line

Proper business succession planning requires careful preparation. Business owners seeking a smooth and equitable transition of their interests should seek a competent, experienced advisor to assist them in this business decision.

American Bar Association. " Forms of Stock Purchase Agreements ," Page 1.

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Business Succession Planning: A Step-by-Step Guide

business succession planning

Business succession planning is a valuable tool for both small businesses and growing enterprises. In small businesses, succession planning means effectively managing changes in ownership or leadership. In larger organizations, it that can help to avoid potential talent gaps that have a detrimental effect on the company. The right strategy can help you plan ahead so that you can transfer knowledge and retain employees in key roles. And this is a top priority in these uncertain, post-pandemic times.

With that in mind, we have created a step-by-step guide to help you design and implement a plan that sets your business up for long-term success . We will take a look at the benefits of succession planning in HR and break down the succession planning process to help you understand everything that’s involved.

What Is a Succession Plan?

Why is business succession planning important, what is succession planning in hr, the business succession planning process in 5 steps, business succession planning best practices, succession planning template, succession planning tools.

  • Create a succession plan with performance management software 🚀

So, what is the definition of succession planning? How can you apply it to your business?

Business succession planning is a process that helps you prepare your company for the future. Essentially, it’s about creating a strategy and process for identifying potential future leaders and developing their skills so that they are ready to take on a new role when one of your key employees leaves the company.

Through careful planning, communication, training, and feedback, you can create a successful change management strategy that prepares you for potential transitions in your business. This helps you avoid key player talent gaps. It also helps you proactively develop your inclusive leaders of the future.

Despite its valuable role in business planning, according to a survey conducted by SHRM last year, only 44% of HR professionals claim that their organization has a succession plan in place. What’s more, only 21% of those that do have a plan in place have created a formal succession management plan.

Do you have a detailed succession plan in place? If not, then you’ve come to the right place.

According to the 2021 Global Leadership Forecast , companies around the world are facing a leadership crisis. In fact, only 11% of surveyed organizations reported that they have a “strong” or “very strong” leadership bench, the lowest rating in the past 10 years (it has been in decline since 2011’s reported 18%). This drop has been attributed to a decline in leadership development and transition training in organizations.

Understandable given the distractions the world has had over the past couple of years.

Nonetheless, this figure shows just how important it is for organizations to work on their succession management strategies. This is the most effective way to ensure that the leaders of the future have the right skills and experience to guide them to success . And this is what business succession planning is all about.

By preparing strong leaders for the future, you can help your organization reach its long-term goals, reduce employee turnover , and build a stronger and more resilient business that’s ready to thrive.

Benefits of Business Succession Planning

In case you’re still not convinced, let’s take a look at some of the specific benefits of business succession planning in a bit more detail.

  • Identifying and developing your existing employees for future leadership roles helps you to promote from within . Aside from reducing turnover and hiring expenses , this also helps you ensure your future leaders have the right organizational knowledge and internal relationships , something which external recruits will lack.
  • Promoting the development of your existing employees shows them that you are willing to invest in their future . This can be a great morale boost that motivates employees to stay at your company. This helps you stay competitive and attract top talent to your business.
  • A well-designed succession plan helps you formalize training for both present and future leaders. It keeps your business moving forward and helps you retain your top performers .
  • Business succession planning is also an effective tool for mitigating the risks of organizational change . This helps you avoid any potential talent gaps when someone leaves your company. It also helps you pass on valuable institutional knowledge to future leaders before it’s too late.

Succession planning in HR consists is a vital part of talent management. It’s all about your role as an HR professional in identifying key roles and positions that may need filling in the future and finding and developing internal candidates who may have the right skills and experience to fill them. The right strategy can help you retain staff, cut recruitment costs and better manage your internal recruitment processes .

HR succession planning is the process of identifying, selecting and developing employees who could potentially become key players with the right development. This helps you prepare for potential organizational changes so that you have skilled and engaged employees waiting to fill key leadership roles when the time comes.

As an HR professional, you play a significant role in preparing and facilitating your organization’s succession management strategy. However, for your succession planning in HR strategy to succeed, it’s equally important to get the support of senior management so that your plan is as effective as possible and aligned with your organizational goals .

Talent Management and Succession Planning: Employee Buy-in

Business succession planning is also about managing your existing talent so that you are able to retain as much institutional knowledge and experience as possible. This means that, aside from working with senior management, you also need to rely on the feedback of your employees.

What do we mean by this?

Essentially, it’s all good and well managing and developing your existing talent, but they need to be on board with your succession plan and have a genuine interest in remaining at your company and developing their skills. Otherwise, the time and money you invest in preparing them for future leadership positions will be wasted.

Make sure the potential succession candidates you select are:

  • Interested in learning new skills
  • Comfortable with change
  • Motivated and engaged
  • Able to adapt to uncertainty and new working environments
  • Willing to take on more responsibilities
  • Up for a challenge

performance software

Now that we’ve discussed what business succession planning is, let’s take a look at what you need to include in your succession planning process.

Make sure your succession planning framework includes the following 5 key stages.

Define & Align Your Goals

The first step is creating a succession leadership plan. This means you need to define your goals and align them with your business. You may need to meet with senior leaders for this phase to ensure your goals are aligned with your overall strategy.

You also need to have a clear idea of who you are as a business before creating your succession leadership plan. Once you understand “who” you are, you will be better equipped to identify your potential new leaders.

Finally, to complete your plan, you need to:

  • Define the roles, skills, and experience that each successor will require (your succession profiles). Make sure you gather as much feedback on this as possible from your team to help you get a full picture of what you need to include in your succession plan.
  • Create a forecast of your company’s needs . Where do you need to be as a company within the next 5 years? How will your organizational structure change over this time? Think about your turnover trends, compensation strategies, who may be due to retire, and training and development plans for the future.
  • Update your job descriptions to reflect the information you’ve gathered. Make sure you are clear about your expectations . This will help you define the right candidate profiles for your succession plan.

kpi template for succession planning

Create Your Succession Strategy

Defining your goals is one part of your plan, but you also need to create a comprehensive succession planning strategy to make sure you are on the right track – you need a business strategy game plan !

So, what does this mean, exactly?

Put simply, you need to define a series of actions and strategic moves that help you align your succession goals and objectives with your overall HR strategy .

Consider the following:

  • Where do you want to be as a business? What roles, positions, skills and experience will you need to succeed?
  • Which senior/leadership roles do you need to create a succession plan for?
  • Will you take business succession planning into account during performance appraisals in order to identify potential candidates throughout the year?
  • Does your business have any specific vulnerabilities that may affect your succession plan? (For example, a high percentage of employees that are due to retire soon)
  • Have you considered adjusting your hiring strategy to account for successor roles?

The key here is to be as proactive as possible with your strategy. Anticipate potential gaps in your workforce before they occur.

Identify Potential Candidates

The next step is to evaluate your current workforce in order to identify key positions that may need filling in the future, and key employees that may be suitable replacements. This is where you will implement the succession profiles and job descriptions that you created in the previous step. The more information you include in your profiles and descriptions, the easier it will be to identify the right match within your existing workforce.

Generally speaking, the best candidates will be supportive, proactive, engaged with learning and development, great problem-solvers, adaptable and able to take on more responsibility.

It’s important to be as objective as possible in this stage. You also need to consider that potential candidates may not currently be in leadership roles. It’s all about finding potential. The most effective way to do this is by using succession planning tools and metrics, rather than relying on personal opinions. More on this shortly.

Establish Professional Development Opportunities

As soon as you have your list of potential candidates and you know what skills they need to work on in order to eventually fill the role you have matched them to, it’s time to create a professional development plan to help them get where they need to be.

Which skills does each candidate need to develop? What learning opportunities would help them get the right experience and expand their current skillset? Are there any knowledge gaps that you need to address?

Create a list of the skills each candidate currently has vs. the skills they need to acquire, then work out the best way to offer them suitable opportunities for learning and development. Create individual development plans, offer formal training, consider creating a mentoring or coaching program to support them, and encourage continuous feedback and communication.

Implement Your Plan

The final stage is implementing your business succession plan. This will usually be a gradual transition with multiple short and long-term layers.

The first layer involves officially announcing your succession plan and notifying potential candidates. You then need to roll out your individual development plans and arrange training. Introduce candidates to their mentors, if you are using them, and encourage them to meet regularly. This will show your employees that you support their professional development, and you can see that they have potential.

Most importantly, make sure you collect regular feedback to see how your individual development plans are progressing, and if potential candidates are on track to reach their succession objectives.

Here are a few business succession planning best practices to help you create a plan that sets you up for success:

  • Formalize your plan . The sooner you create and formalize a detailed succession management plan, the better. Make sure your succession planning process focuses on all key stages. That means not just identifying the roles and skills you need for your future leaders, but also implementing individual development plans to get your workforce where they need to be.
  • Make sure your succession planning in HR plan is dynamic . Succession planning is all about change management. Be prepared to adapt to change by constantly updating your plan.
  • Collect regular 360-degree feedback . This will help you keep track of your employees’ interests, skills, performance, strengths, weaknesses, and opportunities.
  • Promote open communication . This will help you build trust and set clear expectations.
  • Consider your entire workforce . Don’t just focus on your managers. Your leaders of the future might be hiding in lower-level positions. Look for potential, not existing skills.

One of the most valuable tools you can use for this strategy is a succession planning template. The right template will help you define key roles within your company and identify suitable replacements. Make sure you include a template in your HR audit checklist (check out this HR audit checklist template if you don’t already have one!)

Here are a few examples of the information you can collect with a succession plan template:

  • Current key employees and potential replacements
  • Key skills and experience that each position requires
  • Candidate training and/or experience level
  • The time it would take to onboard a candidate for an existing position
  • An overview of upcoming vacancies (for example, key employees that are due to retire)

hr audit checklist

In order to create and manage an effective business succession planning strategy, you need to use the right succession planning tools. These are the tools that will help you identify which candidates could potentially be future leaders at your organization. They also help you identify potential succession gaps and map the right candidates to the right positions.

Ideally, you should be using a range of tools to help you get a full picture. Here are a few examples of succession planning assessment tools that will help you with this:

  • Personality assessment tools : to help you get a comprehensive picture of your existing culture (e.g. tools for tracking motivation levels)
  • Behavioral assessment tools : to help you identify and analyze employee leadership skills and assess how they behave at work (e.g. situational judgment tests)
  • Cognitive assessment tools : to evaluate critical thinking and reasoning skills related to performance (e.g. a cognitive aptitude test)
  • 360-degree feedback : to gather valuable input from employees and their peers in order to understand their readiness to take on future roles (included in most performance management software solutions)

Succession Planning Software

Finally, once you have designed and implemented your business succession plan, you need to regularly monitor progress. This will help you determine if your plan is working and if potential candidates are on track to reach their succession goals.

And this is where succession planning software can help.

Succession planning software isn’t as daunting as it sounds. In fact, most HRIS systems can provide you with the data you need.

The first thing you need is access to key metrics and KPIs . This includes turnover rates, retention rates, cost-per-hire, time-per-hire, and the rate of planned positions being filled. You also need to evaluate performance metrics to determine if business succession planning candidates that have taken on their new role were ready for it.

Did they achieve the training and experience they needed during the development phase in order to take on their new leadership role? If not, what could you have done better?

By analyzing the right data, you can determine what areas of your business succession planning strategy you need to work on in order to continuously improve the quality of your succession candidates. And by using the right HR software and performance management software you can easily identify talent gaps, make comparisons between employees, and simplify the succession management process.

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Succession Planning Process in Business

succession planning definition business studies

Succession planning in business is a strategic process aimed at ensuring the continued effective performance of an organization by making provisions for the development and replacement of key leaders over time. This process involves identifying and developing new leaders who can replace old leaders when they leave, retire, or pass away. 

Effective succession planning ensures that a business remains resilient despite leadership changes, minimizes disruptions, and maintains a steady pipeline of talented individuals ready to step into critical roles as needed. It is a strategic necessity for long-term success and stability within an organization.

Here are the key steps involved in the succession planning process:

1st Step: Identifying Key Positions 

Identifying key positions is a critical first step in the succession planning process, focusing on recognizing the roles crucial for the business’s continued success and smooth operation. This step is foundational because it determines which positions the organization must prioritize for succession planning. Here’s a more detailed look at this process:

Understanding Organizational Goals and Strategy

  • Align with Business Strategy : The process begins with thoroughly understanding the organization’s long-term goals and strategy. Identifying key positions requires an alignment with where the company is headed and what it aims to achieve. This ensures that succession planning supports the overall strategic direction of the business.
  • Assess Organizational Structure : Review the current organizational structure to understand the roles and their impact on the business’s operations. This helps identify which positions are critical to the core functions and services of the organization.

Identifying Critical Roles

  • Impact Analysis : Assess the impact of each role on the organization’s operations. Key positions are typically those whose absence would significantly disrupt the business processes, lead to a loss of critical knowledge or skills or directly impact the company’s financial performance.
  • Bottleneck Positions : Identify unique roles with specialized skills or knowledge not easily replicated or replaced. These could be positions central to the organization’s workflow, decision-making, or creative processes.
  • Leadership and Decision-Making : Roles pivotal in leadership, strategic decision-making, and guiding the organization’s culture and direction are often considered key positions. This includes top executives and mid-level managers who play a crucial role in operational leadership.

Future-Oriented Analysis

  • Future Needs and Growth Areas : Consider the organization’s future needs and areas of growth when identifying key positions. As the business evolves, new key roles emerge that are crucial for future success, requiring early identification and planning.
  • Technological and Market Changes : Stay aware of how changes in technology, industry standards, and market trends affect the importance of specific roles. Positions that are key today may change, and new vital roles may emerge as the business landscape evolves.

Involving Stakeholders

  • Consultation with Leaders : Engage with current leaders and organizational stakeholders to gain insights into which roles they perceive as critical. Their practical experience and understanding of the business can provide valuable perspectives on the essential roles for the organization’s success.
  • Feedback from Employees : Sometimes, insights from various levels help identify critical positions that might not be obvious from a top-down perspective. This can include roles that significantly impact morale, internal processes, or customer satisfaction.

Documentation and Review

  • Document Key Positions : Once identified, document the key positions, outlining their responsibilities, impact, and why they are considered critical. This documentation serves as a reference for the succession planning process.
  • Regular Review : The identification of key positions is not a one-time task. Regularly review and update the list of critical positions to reflect changes in the business environment, organizational strategy, and internal organizational changes.

2nd Step: Defining Competencies and Requirements

Defining competencies and requirements for key positions is the second crucial step in the succession planning process. This step outlines the specific skills, knowledge, behaviors, and attributes necessary for success in these critical roles. It sets the foundation for identifying, assessing, and developing potential successors. Here’s a more detailed breakdown of this process:

Understanding Role Specifications

  • Job Analysis : Conduct a thorough analysis of each key position to understand the duties, responsibilities, and outcomes expected from the role. This analysis helps identify the essential functions and tasks associated with the position.
  • Role Requirements : Determine the minimum qualifications needed for the role, such as education, certifications, and experience. These are the baseline requirements that any potential successor must meet.

Competency Framework Development

  • Core Competencies : Identify the core competencies required for success in each key position. Competencies are the knowledge, skills, abilities, and personal attributes that enhance employee performance and ultimately result in organizational success. Core competencies include strategic thinking, leadership, communication, problem-solving, and adaptability.
  • Technical Skills : Outline the specific technical skills or expertise necessary for the role. This might include specialized knowledge unique to the position, industry-specific skills, or proficiency with specific technologies or systems.
  • Behavioral Competencies : Define the behavioral attributes that are important for the role. These include teamwork, integrity, initiative, and handling stress or change.

Aligning with Organizational Values and Culture

  • Cultural Fit : Ensure the competencies and requirements align with the organization’s values and culture. Success in a role is not only about technical skills and knowledge but also about fitting in with the organizational ethos and contributing positively to the work environment.

Future-Oriented Planning

  • Anticipating Future Needs : Consider how changes in the business environment, technology, or market demands might alter the requirements for critical positions in the future. Defining competencies should address current needs and anticipate skills that will be valuable as the organization evolves.

Involvement and Validation

  • Stakeholder Input : Involve stakeholders, including current job holders, their managers, and HR professionals, in defining competencies and requirements. This collaborative approach ensures a more comprehensive and accurate representation of what is needed for success in the role.
  • Benchmarking : Look at industry standards and benchmarks for similar positions to ensure the defined competencies and requirements are realistic and competitive. This can involve researching job descriptions, industry reports, and professional standards within the field.

Documentation and Communication

  • Clear Documentation : Document the defined competencies and requirements clearly and structured. This documentation is a reference for developing training programs, performance evaluations, and development plans for potential successors.
  • Regular Updates : The defined competencies and requirements should be reviewed regularly to ensure they remain relevant and aligned with the organization’s strategic direction and the external environment.

3rd Step: Identifying Potential Successors

Identifying potential successors is a pivotal step in the succession planning process, focusing on pinpointing individuals within the organization who can fill key positions in the future. This step is critical for ensuring a seamless transition and maintaining continuity in leadership and other critical roles. Here’s a detailed exploration of this phase:

Talent Pool Assessment

  • Performance Reviews : Utilize existing performance appraisal systems to identify high-performing individuals who consistently exceed expectations. Performance reviews can provide valuable insights into an employee’s contributions and potential for future growth.
  • Potential Assessment : Apart from past performance, assess the potential of employees to take on more complex roles. This involves evaluating their ability to grow and handle responsibilities that are broader in scope and complexity than their current role.

Development and Readiness

  • Developmental Assignments : Look for employees who have successfully taken on developmental assignments, projects, or roles that stretch their capabilities. Their performance in these situations can indicate readiness and potential for advancement.
  • Learning Agility : Identify individuals who demonstrate learning agility—the ability to learn new skills and adapt to new situations rapidly. This trait is crucial for success in leadership and other key roles, especially in dynamic and changing environments.

Leadership Qualities

  • Leadership Potential : Focus on employees who exhibit leadership qualities, such as the ability to inspire and motivate others, strategic thinking, decision-making skills, and the ability to navigate organizational politics effectively.
  • Succession of Values : Consider individuals who embody the organization’s core values and have the potential to sustain and enhance the organizational culture through their leadership.

Career Aspirations and Engagement

  • Career Planning Discussions : Engage in career planning discussions with employees to gauge their aspirations, career goals, and willingness to take on new challenges. This helps identify those who are capable and interested in advancing within the organization.
  • Employee Engagement : Assess the level of engagement and commitment of potential successors. Highly engaged employees are more likely to be invested in the organization’s success and be more willing to take on leadership roles.

Diversity and Inclusion

  • Diverse Talent Pool : Ensure the identification process encompasses diverse candidates. This includes considering individuals from various backgrounds, experiences, and perspectives, which can enhance creativity, innovation, and resilience in leadership positions.

Tools and Techniques

  • Assessment Centers and Tools : Utilize assessment centers and psychometric tools to evaluate potential successors’ competencies, leadership potential, and readiness. These tools can provide objective data to support decision-making.
  • 360-Degree Feedback : Implement 360-degree feedback mechanisms to gather insights from various stakeholders, including peers, subordinates, and supervisors, regarding an individual’s performance and potential.

Succession Planning Committee

  • Establish a Committee : Form a succession planning committee, often comprising senior leaders and HR professionals, to oversee the identification process. This committee can ensure a systematic approach, maintain objectivity, and align the process with organizational goals.
  • Maintain Confidentiality : Handle the identification and communication process with sensitivity and confidentiality. Being transparent about the succession planning process is important, but specific discussions about potential successors should be conducted with discretion to avoid creating unrealistic expectations or workplace tensions.

4th Step: Development Plans

Development plans are personalized roadmaps for potential successors identified in the succession planning process. These plans are designed to prepare individuals for future roles, especially key positions within the organization, by bridging gaps between their current capabilities and the competencies required for the targeted roles. Here’s a detailed exploration of creating and implementing effective development plans:

Gap Analysis

  • Competency Assessment : Start with a thorough assessment of the individual’s current competencies, skills, knowledge, and experience about the requirements of the future role. This assessment should be based on the competencies and requirements defined earlier in the succession planning process.
  • Identifying Development Needs : Conduct a gap analysis to identify areas where the individual needs development or improvement. This analysis should cover technical skills, leadership abilities, strategic thinking, and other competencies critical to the target position.

Setting Development Objectives

  • Specific Goals : Based on the gap analysis, set specific, measurable, achievable, relevant, and time-bound (SMART) development goals. These goals clearly articulate what the individual needs to learn or improve to be ready for the future role.
  • Alignment with Career Aspirations : Ensure that the development objectives align with the individual’s career aspirations and motivations. This alignment increases the individual’s engagement and commitment to their personal development plan.

Designing the Development Plan

  • Targeted Learning Opportunities : Incorporate a variety of learning opportunities tailored to the individual’s development needs. This can include formal education and training, online courses, workshops, and conferences relevant to the skills and knowledge they need to acquire.
  • Experiential Learning : Emphasize experiential learning through assignments that offer real-world experience. This can include job rotations, project leadership roles, task force participation, or shadowing experiences where the individual can learn by doing.
  • Mentoring and Coaching : Pair the individual with a mentor or coach who can provide guidance, feedback, and support. Ideally, the mentor or coach should be someone with experience in the target role or a related area who can share insights and lessons learned.
  • Feedback Mechanisms : Incorporate regular feedback mechanisms into the development plan. This can include periodic reviews with the mentor, coach, or supervisor to discuss progress, challenges, and adjustments to the development plan as needed.

Supporting Personal Development

  • Personal Development Initiatives : Encourage and support personal development initiatives that align with the individual’s goals and the organization’s needs. This could include encouraging self-directed learning, participation in professional associations, or personal research projects.

Monitoring and Evaluation

  • Tracking Progress : Establish a system for tracking the individual’s progress against the development plan. This can include milestones, check-in meetings, and progress reports to ensure the plan is on track and achieving its objectives.
  • Adjustments and Flexibility : Be prepared to adjust the development plan as needed based on feedback, changing organizational needs, or new growth opportunities. Flexibility is critical to ensuring the plan remains relevant and effective.
  • Success Metrics : Define clear metrics or indicators of success for the development plan. These should be tied to the achievement of specific development goals and the readiness of the individual to assume the future role.

Organizational Support

  • Resource Allocation : Ensure adequate resources (time, budget, access to learning opportunities) are allocated to support the individual’s development. Organizational support is crucial for the success of development plans.
  • Culture of Development : Foster a culture that values continuous learning and development. This culture encourages all employees to engage in their development and supports the growth of potential successors.

5th Step: Monitoring and Evaluation

Monitoring and evaluation in the context of succession planning involve systematically tracking the progress of potential successors against their development plans and assessing the overall effectiveness of the succession planning process. This phase ensures that the initiative remains aligned with organizational goals, adapts to changing circumstances, and delivers on its objectives of preparing individuals for key roles. Here’s a more detailed look at how to implement effective monitoring and evaluation:

Setting Up Monitoring Systems

  • Progress Tracking : Establish clear systems and tools for tracking the progress of individuals against their development plans. This could involve regular check-ins, progress reports, and milestone reviews to assess learning and skill acquisition advancements.
  • Performance Metrics : Utilize performance metrics aligned with the development plan’s goals. These metrics can include qualitative assessments (such as feedback from mentors, peers, and supervisors) and quantitative measures (such as completion of training modules, achievement of project goals, or improvements in leadership assessments).

Regular Reviews and Feedback

  • Scheduled Reviews : Conduct scheduled reviews of development plans involving the individual, their mentor or coach, and their supervisor. These reviews are opportunities to discuss progress, challenges, and any adjustments needed to the development plan.
  • 360-Degree Feedback : Implement 360-degree feedback mechanisms to gather comprehensive insights into the individual’s performance and development from various stakeholders, including peers, subordinates, and senior leaders.

Evaluating Development Activities

  • Effectiveness of Learning Opportunities : Assess the effectiveness of the learning and development opportunities provided to the individual. This involves evaluating whether these opportunities contribute to acquiring the necessary skills and knowledge for the future role.
  • Adaptation to Needs : Evaluate how well the development activities are adapted to the changing needs of the individual and the organization. This includes considering whether new skills or competencies have become relevant due to changes in the business environment or organizational strategy.

Succession Planning Process Evaluation

  • Overall Process Review : Periodically review the entire succession planning process to assess its effectiveness in identifying, developing, and preparing successors for key roles. This review should consider the alignment of the succession planning process with organizational goals, the adequacy of resources allocated, and the engagement of stakeholders.
  • Identification of Improvement Areas : Identify areas for improvement in the succession planning process, including the methods used for identifying potential successors, the development opportunities provided, and the effectiveness of monitoring and evaluation practices.

Adjustments and Continuous Improvement

  • Making Adjustments : Based on the outcomes of monitoring and evaluation, make necessary adjustments to individual development plans, the approach to identifying potential successors, and the succession planning process as a whole.
  • Continuous Improvement : Adopt a continuous improvement mindset, using feedback and evaluation results to refine and enhance the succession planning process. This involves staying responsive to new challenges, learning from experiences, and incorporating best practices.

Communication and Engagement

  • Transparent Communication : Maintain transparent communication with all stakeholders involved in the succession planning process, including potential successors, about the outcomes of monitoring and evaluation efforts and any subsequent adjustments to plans or processes.
  • Stakeholder Engagement : Engage stakeholders in the evaluation process to gather diverse perspectives and foster a collective commitment to the success of the succession planning initiative.

6th Step: Transition Management

Transition management within the context of succession planning refers to the strategic and deliberate process of transferring responsibilities and leadership from one individual to another, ensuring a smooth and effective handover of key positions. This phase is crucial for minimizing disruptions and maintaining organizational continuity. Here’s a more detailed exploration of how to manage transitions effectively:

Preparing for Transition

  • Communication Plan : Develop a comprehensive communication plan to inform relevant stakeholders (including employees, clients, and partners) about the upcoming transition. The plan should outline what will be communicated, to whom, how, and when to maintain transparency and manage expectations.
  • Timeline Development : Establish a clear timeline for the transition, including key milestones and dates for the handover of responsibilities. This timeline should provide enough time for the incoming individual to acclimate to their new role while still having access to the outgoing individual for guidance.

Knowledge Transfer

  • Structured Handover Process : Implement a structured handover process that includes detailed documentation of key responsibilities, ongoing projects, critical contacts, and any other essential information necessary for the role. This process ensures that the successor has all the information needed to succeed.
  • Mentoring and Shadowing : Arrange for the successor to shadow the current role holder before the transition, if possible. This hands-on experience allows the successor to gain valuable insights into the day-to-day responsibilities and challenges of the role.

Support Systems

  • Support for the Incoming Individual : Provide robust support for the incoming individual, including ongoing coaching, mentoring, or access to external professional development resources. This support helps the successor navigate the initial challenges of the new role and accelerates their adjustment period.
  • Assistance for the Outgoing Individual : Offer support to the outgoing individual, especially if they are retiring or transitioning to a new role outside the organization. This can include retirement planning services, career transition support, or recognition for their contributions to the organization.

Managing the Emotional and Cultural Impact

  • Emotional Intelligence : Recognize and manage the emotional aspects of the transition for both the successor and the rest of the team. Changes in leadership can lead to uncertainty and anxiety, so it’s important to address these emotions constructively.
  • Cultural Continuity and Change : Ensure that the transition respects the organization’s culture while also allowing for the natural evolution that new leadership brings. The successor should be someone who embodies the organizational values but can also drive positive change.

Post-Transition Support

  • Evaluation and Feedback : After the transition, conduct evaluations to gather feedback on the process from the successor, the predecessor (if available), and key stakeholders. This feedback can identify areas for improvement and best practices for future transitions.
  • Adjustment Period : Allow for an adjustment period where the new role holder can settle into their position, refine their approach, and make necessary changes. During this period, regular check-ins and support can be beneficial.

Continual Learning and Development

  • Ongoing Development : Recognize that the transition doesn’t end when the new leader assumes their role. Continued learning and development opportunities should be provided to help the successor grow into their role and address any emerging challenges.

Step 7: Feedback and Continuous Improvement

Feedback and continuous improvement are:

  • Essential concluding elements of the succession planning process.
  • Focusing on collecting.
  • Integrating feedback to refine and enhance the process over time.

This iterative approach ensures that the succession planning strategy remains adequate, relevant, and aligned with organizational goals. Here’s a detailed look at how to incorporate feedback and continuous improvement into succession planning:

Collecting Feedback

  • Broad Stakeholder Input : Gather feedback from various stakeholders involved in the succession planning process, including potential successors, their mentors or coaches, HR professionals, senior leaders, and other employees. This diverse input can provide a comprehensive view of the process’s strengths and areas for improvement.
  • Surveys and Interviews : Utilize various methods such as surveys, interviews, and focus groups to collect feedback. These tools can help understand the effectiveness of different components of the succession planning process, from identifying key positions to developing and transitioning successors.
  • After-Action Reviews : Conduct after-action reviews following significant succession events, such as the transition of a critical role. These reviews can provide insights into what worked well and what could be improved in future transitions.

Analyzing Feedback

  • Identify Themes and Trends : Analyze the feedback to identify common themes, trends, and areas of concern. This analysis can help pinpoint aspects of the succession planning process that are consistently effective or consistently problematic.
  • Performance Metrics : Use performance metrics and key performance indicators (KPIs) to quantify the success of the succession planning process. Metrics include the time to fill key positions, the performance of successors in their new roles, and the satisfaction levels of stakeholders with the process.

Implementing Improvements

  • Prioritize Areas for Improvement : Based on the feedback analysis, prioritize areas for improvement. Focus on changes that are likely to have the most significant impact on the effectiveness of the succession planning process.
  • Action Plans : Develop detailed action plans for implementing improvements. These plans should outline the specific steps, responsible individuals, timelines, and resources required.
  • Pilot and Phase Implementations : Consider piloting improvements in one part of the organization or for specific roles before a broader rollout. This approach allows for testing and refining changes before they are widely implemented.

Fostering a Culture of Continuous Improvement

  • Encourage Open Communication : Foster a culture where feedback is valued and encouraged. Open communication can help identify issues early and engage stakeholders in the continuous improvement process.
  • Learning Organization : Promote the concept of the organization as a learning entity where processes are regularly reviewed and updated based on new insights and changing conditions. This mindset can help in embedding continuous improvement into the organizational culture.

Monitoring Changes

  • Track the Impact of Improvements : Monitor the impact of implemented improvements on the succession planning process. This involves revisiting performance metrics and gathering follow-up feedback to assess whether the changes have addressed the identified issues.
  • Iterative Process : Recognize that continuous improvement is an iterative process. The cycle of collecting feedback, analyzing it, implementing improvements, and monitoring the results should be ongoing to ensure the succession planning process remains dynamic and responsive to the organization’s needs.

Incorporating feedback and continuous improvement into succession planning is about creating a responsive, adaptable process that evolves with the organization’s needs. By systematically collecting and analyzing feedback, implementing targeted improvements, and fostering a culture that values learning and adaptation, organizations can enhance the effectiveness of their succession planning efforts and ensure long-term leadership continuity and organizational resilience.

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4 reasons why you can't afford to skip out on succession planning


Despite your best retention efforts, people in critical roles will inevitably leave. Therefore, succession planning is vital to minimize gaps in leadership positions. But succession planning is more than simply bridging the gap between open roles and leadership positions. In many ways, succession planning is about leadership development to make sure your workforce can reach its fullest potential . And while we know people aren’t born leaders, it’s important to take into account which leaders you’re grooming for executive-level roles. 

Take Apple. In 2011, Steve Jobs stepped down as CEO . Before that, he spent years mentoring and grooming his successor Tim Cook to take over. Cook took on a wide range of operational roles and worked with Jobs directly to gain knowledge specific to the CEO position. Cook also got some hands-on experience, stepping up to lead day-to-day operations at Apple twice when Jobs was on sick leave.

No matter the size of your organization, you can make leadership transitions simple and effective. By using a succession plan to prepare, you’re future-proofing your organizational success. 

Employee development and succession planning go hand-in-hand. At its core, it’s about investing in people that’ll help to lead your business to its full potential. Let’s break down what succession planning is and how it works. We’ll also talk about the benefits of succession planning — and how you can prepare for the future. 

What is succession planning?

First, let’s understand what we mean by succession planning.

A key function of human resource management , succession planning is the process of preparing employees to assume new roles in your organization when they become available. The goal of succession planning is to ensure a smooth transition after key employees go on sabbatical , resign, retire, or pass away.

Think of succession planning like managing a sports team. One of your star players could get injured, traded, or retire at any time. And while you can acquire new talent, it can be time-consuming and expensive. 

A smart alternative is to develop someone on the bench to step up and take on a more significant role in the future. In addition, the player on the bench will likely be a lot more motivated, knowing they're working towards a starting position.

In the workplace, companies operate similarly to their C-suite roles. We work in a multi-generational workforce with many leaders on the cusp of retirement . Organizations use succession planning to help prepare for the future of their organization. A concept that leans on leadership development, succession planning makes sure your people are taken care of. 

When is succession planning necessary?

All organizations should have a succession plan in place. However, there are a few situations where succession planning is especially critical.

  • You have a family-owned business. Avoid relying on informal or verbal succession agreements and have a formal succession plan in place.
  • You have roles with specialized skills . For example, a technician with decades of experience with special software can be a difficult loss. If your leadership role requires technical skills, make sure you’re building in that cushion to help develop the right person. 
  • Senior leaders are a few years away from retirement . It's best to start succession planning as early as possible. But as retirement nears, succession planning becomes urgent. Finding and training someone suitable for the role can take a couple of years.


4 benefits of effective succession planning

Human resources leaders know that succession planning is critical to keeping your organization flourishing for years to come. While it requires a significant time investment upfront, the payoff is huge. When an employee does leave, your organization is not left scrambling to recruit and hire a replacement.

Succession planning is a critical component of a strong talent management strategy. Filling your talent pipeline with trained employees has the following benefits:

Increased employee retention and morale

A promotion policy that prioritizes advancing employees from within can help you maintain top talent. And a transparent succession plan with an emphasis on generational differences can help keep them happy and productive as they know they have a path to growth at your organization.

When done right, succession plans help you walk the talk. Most companies market themselves as great places to work. But succession plans can help you back this up. Internal hiring, leadership development , and transparent succession planning show that companies value employees.

A more diverse portfolio of leaders

We know there’s still a huge gap in the diversity of leaders across businesses in the U.S. For example, in the Fortune 500, only six CEOs are Black , 5% are women , and less than 1% publicly identify as LGBTQ+ . 

It’s important to include diverse perspectives when building teams and organizations. People who embrace inclusive practices tend to be more effective leaders , and their companies experience greater levels of success . 

In order for succession planning to result in a more diverse workforce, leaders must be intentional about how they're sourcing candidates, training and breaking down biases in the workplace, and developing inclusive leadership skills. 

Yet succession planning — when leaders are intent on bringing a culture of belonging to the workplace — can lend itself to increased diversity. How is your leadership team approaching developing diverse leaders? Are you conducting diversity training for all of your leadership team? 

A stronger company culture

When done right, succession planning can help strengthen your company culture. We know that leaders have an incredible influence over employee mindset, behaviors, and actions. When great leaders leave or retire, it’s critical that those filling their shoes are modeling the same set of values. With thoughtful succession planning, organizational leaders can continue that embodiment of your company’s core values . 

A future-proofed workforce

Especially now, change is more prevalent than ever. If we’ve learned anything over these last few years, it’s that change is here to stay. At BetterUp, we talk a lot about the idea of future-mindedness . It’s a concept that we’ve studied and innovated around. To be a future-minded leader means you’re approaching the future with optimism and pragmatism. In order to successfully prepare for the future, your leaders need to consider what’s looming ahead. And while many companies may need to weather rough patches and constant change, future-mindedness can help soften the impact. 

Thanks to succession planning, your company will be better prepared to thrive in changing conditions. As a result, you'll enjoy greater resilience and organizational stability, which fosters market confidence and drives shareholder value.


4 succession planning best practices

Here are a few key things to remember as you build a succession plan for your organization.

Plan in advance

Succession planning is a proactive approach, not a reaction to rumors of a vital team leader leaving. Remember that strong succession plans can involve up to three years of strategic planning and training.

Identify key positions now. Consider who in your current workforce is especially valuable and whose loss would have the most immediate and wide-reaching effects. Then, start developing succession plans for those roles extending beyond the next position in the organizational structure .

Be transparent with employees

Talk to those in your talent pool about their goals and show trust in their potential without promising particular roles. Then, incorporate their training progress into existing performance management by making it part of weekly one-to-one meetings with their manager.

Foster diversity in training

This includes demographic diversity through intentional DEIB initiatives and various skills, talents, and perspectives.

Be open and creative about who you consider for training in your succession plan, as a fresh viewpoint can sometimes be as valuable as an experienced one. Actively engage your leaders in unconscious bias training and work to build inclusive leadership skills. 

Seek expert guidance

When in doubt, lean on your support network. For example, are your leaders working with career coaches to help guide their professional development? Do you have executive coaching options for those on track for the C-suite roles? What sort of professional development offerings do you have in place for your leaders? How are you making sure your managers are building the skills they need to succeed? 

"When making succession planning decisions (and when implementing them), we include multiple team members including our CPA, succession planning and estate planning attorneys, strategic advisors, executives, and coaches," shares Larry Brinker, Jr., Chief Executive Officer at Brinker Group. "It's very important to get the best advisors around you when making these decisions and creating succession plans."


6 common pain points when succession planning

There are plenty of benefits to succession planning. But depending on the scope of the project and the organization's culture and readiness, there might also be challenges. The following obstacles to a formal succession planning program may exist. Consider them when planning (and marketing) the program.

Succession planning takes time 

By nature, succession planning has a long time to value. But many of today's leaders are rewarded chiefly based on short-term accomplishments. For far too many organizations, the board only discusses CEO succession when a transition is looming.

How to overcome it: Start succession planning as soon as possible. You never know when key roles will shift within your organization, so it's best to be prepared for when they do. This means checking in with your leaders regularly on their career plans . It might also mean identifying future leaders by seeing their potential. 

Succession planning can be unsettling

The nature of succession planning can be perceived as a threat to some leaders. For some, succession planning may be seen as a lack of confidence in your current leadership team. And executives may hesitate to raise the issue of succession planning for fear of being perceived as having intentions of resigning. This destabilizing dynamic can have a negative effect on your organization.

How to overcome it: Begin talking about succession planning with your key executives during the onboarding process. Reassure them that you want them to stay long-term, but you have a plan in place if things don't turn out that way.

Any strong and good leader will recognize the importance of succession planning. Work with your coach as your guide, too. 

It's not clear who owns succession planning

In many organizations, no one has been tasked with the responsibility of succession planning. Therefore, no one takes accountability for it. Certain stakeholders might shy away from the idea of owning succession planning as its own program. 

How to overcome it: Sit down with your leadership team and hash out who will be responsible for succession planning within your organization. It could be human resources, people operations , the board of directors, a special committee on the board, or functional leaders.

Resistance to change

Change is hard. And as human beings, we like being comfortable for a reason. So, when change happens, it’s a disruption. There will be people who oppose any new initiative simply because it's new.

How to overcome it: Succession planning can happen incrementally. First, look at your existing hiring and performance management initiatives to sell the value and importance of building an internal bench of talent. Then, slowly introduce the ideas of waning skill sets in the labor market and the existence of internal talent that can easily be developed to fill anticipated gaps.

Management opposition

It can be tough for some managers to think about letting go of their best performers. As a result, they may resist the idea of succession planning.

How to overcome it:

  • Be transparent about your goal of keeping talent within the organization
  • Set an expectation for managers to develop their team and hold them accountable for recognizing the employees who excel
  • Educate managers on all the benefits of succession planning, including how they'll have their choice of internal candidates to choose from when vacancies open up
  • Invest in your team, helping them cultivate key management skills , along with the ability to make difficult leadership decisions
  • Create opportunities for your leaders to feel supported, engaged, and great at work 


Lack of time

Everyone is short on time. Succession planning is just one more thing to add to the to-do list. And because it's not urgent, it may keep being moved to the back burner.

  • Calculate the time your organization spends recruiting, selecting, training, and managing new talent
  • Consider how long it takes to assimilate and obtain all the relevant context to perform well
  • Compare that with the time it will take to develop your current employees' skill sets

5 steps to creating a succession plan

"The lack of a succession plan can lead key employees and customers to leave, which can hamper the business's ability to grow post-transition," says Sam Brownell , Founder at Stratus Wealth Advisors.

Take the five steps below to get started on your succession planning strategy.

1. Conduct a business review

In this step, consider your organization's business strategy and what it means in terms of the leaders you will need. For example, are you a startup? Do you need to turn the business around, realign to a new business model or sustain or increase your success?

Brownell believes every succession plan should start with an independent valuation by an objective third party that is knowledgeable about your industry.

"Without knowing how much your business is worth, it's hard to put together a successful succession plan. Just as it would be difficult to complete a hike without knowing where the trailhead is, guessing how much your business is worth is not a great way to set up your succession plan for success."  Sam Brownell, Founder at Stratus Wealth Advisors

2. Create a talent needs forecast

Next, outline your organization's objectives so that you can best determine what jobs to train and begin gathering materials and resources. Dig into your talent management system to help forecast. 

Decide how many people you'll require in critical roles, what experience and competencies they must have, and how you will choose them.

3. Take a talent inventory

Uncover essential leadership roles and identify high-potential candidates who could fill them. Avoid focusing solely on C-suite and senior management roles. It's worth looking at lower-level positions as well. Compile data on when vacancies could occur (e.g., retirement, promotions).

4. Conduct a talent review

Next, evaluate your current employees. HR leaders can make educated decisions about filling positions and implementing learning and development programs by assessing employees' skills and knowledge. This will give employees the training they need and nurture a growth-oriented culture.

5. Plan progress reviews

Succession planning isn't a one-and-done exercise. It should be an ongoing process that changes as your organization's needs change. Review your succession plan periodically and keep it current.

"Our company builds succession planning into our business continuity strategy. We weave it into our strategic plan, a rolling 5-year plan that we review yearly," shares Brinker.

Ask yourself, are talent development plans being implemented? How are you monitoring them? And are they delivering results? If not, make modifications as necessary.

You can't afford not to have a succession plan

Research reveals that only 35% of businesses have a formalized succession planning process .

"Most business owners get bogged down with their day-to-day operations and ignore their succession plan, and it only comes to light when it is too late," says Robert Clements , Partner, Wealth Management at LPL Financial. 

Yet, according to the Harvard Business Review, the market value wiped out by poorly managed CEO and C-suite transitions in the S&P 1500 alone is close to $1 trillion a year.

"The most important aspect of succession planning is that an imperfect plan that can ultimately be altered is better than no plan at all," explains Clements.

He recommends communicating with family or key executives early and often about your intentions for the company to gauge their interest and feedback. From there, you can work with professionals to build the succession plan that will allow you to achieve your goals.

No matter where you are in your succession planning journey, BetterUp can help. By providing personalized support to your leaders, you can ensure that you’re tapping into your people’s fullest potential.

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Madeline Miles

Madeline is a writer, communicator, and storyteller who is passionate about using words to help drive positive change. She holds a bachelor's in English Creative Writing and Communication Studies and lives in Denver, Colorado. In her spare time, she's usually somewhere outside (preferably in the mountains) — and enjoys poetry and fiction.

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How to create a succession plan for business continuity and growth

April 2, 2024

succession planning definition business studies

What is succession planning, and why is it so important?

Succession planning is vital to organisational development and extends beyond the C-suite and upper management roles. It's essential for all levels of an organisation, ensuring a seamless transition of talent and skills.  

Following are the topics we will cover in this article:

  • Succession planning definition
  • Key elements of an effective succession plan  
  • Risk mitigation and adaptation strategies
  • Implementing succession plans for mission-critical roles

How to create a succession plan

Succession planning case studies: implementing in various business contexts.

  • Common succession planning challenges and how to overcome them
  • Key takeaways
  • Invest in your business' future with Airswift

Let's start with a clear succession planning definition

Succession planning is the process of identifying and preparing promising executives for greater future responsibilities and is significant in modern business environments because it ensures leadership continuity and success. 

According to Neil Manfred, Group IT Director at Airswift, "Succession planning is about making sure the whole organisation continues to run smoothly by identifying reliable individuals."  

The two main components of succession planning encompass staff retention and talent development. 

Staff retention 

Staff retention is critical for maintaining business continuity and growth. It involves strategies and practices to retain talented employees and reduce turnover rates.

Says Charles Pfauwadel, Senior Vice President of ASPAC at Airswift, succession planning is "by far the best way to retain people because the longer someone is with the organisation, the more they contribute because they have fostered strong relationships with clients and within the business."

  • Boosts morale and motivation: Recognition of potential through succession planning increases employee commitment and drive. 
  • Demonstrates investment: Training, mentorship, and leadership development programs show the company values employee growth. 
  • Reduces turnover costs: Investing in existing employees reduces recruitment and training costs associated with high turnover. 

Career path clarity: Defined career paths within succession planning keep employees engaged and motivated.

Career progression is very much linked to succession planning. We want to make sure leaders elevate and promote team members, which often leads to replacing managers and opening up new roles. – Charles Pfauwadel  

Talent development 

Talent development in succession planning is integral to a robust and adaptable workforce. "Empowering individuals based on their strengths and interests can contribute significantly to the organisation. In technical fields such as IT, tailoring projects based on what individuals enjoy doing can lead to remarkable achievements, such as leading ISO certification efforts," says Manfred.

Here are several benefits to developing talent:

  • Identifies and nurtures potential: Programs assess skills and potential to develop future leaders from within.  
  • Enhances skills and competencies: Training focuses on leadership, communication, and decision-making to prepare employees for future challenges. 
  • Adapts to changing needs: Programs evolve alongside the business landscape to ensure employees have the latest skills needed for success. 
  • Improves succession readiness: Investing in development creates a pipeline of prepared leaders to mitigate risks from staff departures. Pfauwadel emphasises that succession planning helps businesses anticipate sudden changes. "It ensures tasks and knowledge are not lost overnight and allows for preparation and training in advance." he says.
  • Fosters continuous learning: A culture of ongoing growth is encouraged through employee development opportunities.

Two people having a discussion with a document and laptop placed before them

Key elements of effective succession planning 

Succession planning is a theoretical exercise and builds organisational resilience. A robust succession plan comprises several components that ensure its success in identifying, nurturing, and transitioning talent. 

Proactive training and skills documentation

Effective succession plans begin with identifying and documenting critical skills and competencies for various roles. Training programs are then implemented to develop these skills among employees, ensuring they are well-prepared to step into leadership positions.  

Leadership pipeline creation 

Establishing a leadership pipeline involves identifying high-potential employees and providing them with opportunities for advancement and development. This includes rotational assignments, stretch assignments , and targeted development programs designed to groom future leaders from within the organisation. 

Mentorship and coaching programs 

These play a crucial role in succession planning by providing guidance and support to emerging leaders . Experienced executives can mentor younger employees, sharing their knowledge, insights, and experiences to help them develop leadership skills. According to Pfauwadel, "it's all about identifying high-potential people as early as possible and supporting their development and growth.”

Succession readiness assessments 

Regular assessments are conducted to evaluate the readiness of potential successors to step into key roles. This may include performance reviews, competency assessments, and leadership potential evaluations to identify gaps and development areas. 

Contingency planning 

"Being ready for unexpected situations is crucial. If someone resigns, and you don't have succession planning in place, especially if this person is a salesperson, for example, you may lose the business because you don't have a backup plan."     - Charles Pfauwadel

Effective succession planning includes contingency planning for unexpected events such as sudden departures, retirements, or incapacitation of key personnel. Contingency plans outline alternative strategies for filling critical roles on short notice, minimising disruption to business operations. 

The role of open communication and collaborative goal-setting 

I'm a massive believer in one-to-ones with my direct reports, speaking at least once a week. I want everybody to feel like they can come to me and say, ‘Hey, I'm struggling with this area’, without worrying about retribution or retaliation. -Neil Manfred

Open communication and collaborative goal-setting are essential to a transparent and aligned organisation. Employees who feel empowered to share ideas bring diverse perspectives to inform decisions and spark innovation.

Collaborative goal setting ensures everyone understands the company's vision and their role in achieving it, fostering a sense of ownership, boosting motivation and productivity. This combination creates a high-performing workforce. 

Two women facing a laptop

Risk mitigation and adaptation strategies 

Succession planning involves identifying and mitigating risks associated with leadership transitions. The steps highlighted below ensure business continuity in the face of unforeseen challenges. 

Diversifying the leadership pipeline 

Succession planning involves diversifying the leadership pipeline. This includes identifying and developing a pool of talented individuals across different departments and levels of the organisation who have the potential to step into leadership roles. By broadening the talent pool, organisations can reduce dependency on specific individuals and increase resilience to unexpected departures or changes in leadership. 

Cross-training employees 

Cross-training employees is an effective strategy for building versatility and flexibility within the workforce. Organisations can ensure that multiple individuals can perform critical tasks and responsibilities by providing opportunities for employees to gain experience and skills outside their primary roles.  

Succession planning is about finding individuals who have the inclination to move into another area. It's about giving them a well-rounded ability across each department.   – Neil Manfred

Implementing succession plans for mission-critical roles 

Specific roles within an organisation are essential for maintaining business operations and continuity. Succession planning involves identifying these mission-critical roles and developing specific succession plans to ensure qualified individuals are ready to step in when needed.  

With good succession planning, you can smoothly transition someone new into a vacant role. It's all about ensuring the company can plan and think long-term. - Charles Pfauwadel

Scenario planning and contingency plans 

Organisations engage in scenario planning to anticipate and prepare for various potential outcomes and challenges associated with leadership transitions. This involves identifying potential scenarios, assessing their likelihood and impact, and developing contingency plans to address them.  

Regular review and updates 

Risk mitigation and adaptation strategies should be regularly reviewed and updated to reflect changes in the organisational landscape and evolving business priorities. Succession plans should be dynamic and responsive to emerging risks and opportunities, with regular assessments to ensure effectiveness.  

A group of people having a discussion

Effective succession planning involves deliberate strategies to identify, nurture, and prepare talent to seamlessly transition into key roles. This ensures organisational resilience and long-term success.

Here are eight ways to ensure effective succession planning strategies:

Start early : Begin succession planning well in advance. Preparing multiple candidates for key positions to address sudden changes and aligning this process with your company's growth objectives for a steady stream of leadership talent is vital.

Be open-minded : Cultivate high-potential employees at all levels. Overlooking seniority, focus on the skills and attitudes needed for leadership roles. Promote a culture where growth and learning are supported through training and mentorship.

Document skills : Keep detailed records of employees' skills, roles, and job requirements. Update these regularly to mirror any shifts in responsibilities, laying the groundwork for promotions and identifying areas for improvement.

Identify skill gaps : Regularly assess employees to spot skill shortages, using this analysis to guide development plans. This keeps your succession plan informed and targeted.

Engage and align : Foster transparent discussions about employees' career goals, aligning their aspirations with the company's needs. This collaboration ensures mutual benefits and satisfaction.

Plan together : Collaborate with managers to tailor succession strategies, offering tools and advice to harness their insight into team dynamics and potential leaders.

Practice and assess : Use temporary leadership roles, like covering for vacations, as trial periods to evaluate candidates' readiness, providing feedback and additional training where necessary.

Hire strategically : Align your hiring strategy with your succession plan, leveraging internal talent evaluations to guide external recruitment, thereby maintaining a consistent approach to talent development and leadership continuity.

Infographic: Leveraging succession planning for business growth and innovation

Succession planning is dynamic and should be tailored to various businesses' unique characteristics.

This requires a nuanced understanding of organisational structures, resources, and cultures in small, medium, or large enterprises.

Small enterprise: Huntswood

Unique considerations for small businesses

Succession planning for Huntswood is focused on its 226 employees and 4,000 contractors. This highlights the company's commitment to internal development and talent management.

Huntswood's succession planning strategy extends beyond its employees to include contractors, emphasising the importance of building a solid leadership pipeline. The company's approach involves strategic hiring and developing internal successors to ensure continuity in key roles. 

Huntswood's proactive approach to succession planning showcases the company's dedication to regulatory compliance, quality, and customer outcomes. By focusing on internal development and talent management, Huntswood positions itself to navigate challenges and sustain leadership continuity effectively.  

Medium enterprise: GoPro  

Adapting leadership to a rapidly changing market for wearable technology, GoPro faced intense competition and needed leaders who could navigate this dynamic environment. 

Unique considerations for medium businesses

GoPro's approach has been more reactive at times. Nick Woodman, the founder and long-time CEO, stepped down in 2020. The company brought outsiders with experience in areas like enterprise software (CEO Lisa Su from AMD) to address their evolving needs.

Flexibility is needed for medium-sized companies in fast-paced industries. They may need to look outside for specific expertise while nurturing internal talent. 

Large enterprise: Samsung  

For Samsung , its main challenge was maintaining stability and growth for a complex multinational corporation with a family-oriented leadership structure. 

Unique considerations for large businesses

The multinational conglomerate utilises a multi-pronged approach. They strongly focus on internal development through programs like the Samsung Leadership Institute, which grooms future leaders from within the company. Additionally, they leverage their global presence by considering qualified candidates from various regions for leadership roles. 

Samsung has seen relatively smooth leadership transitions despite its complex structure. This can be attributed to their focus on internal development and a global talent pool. 

Common succession planning challenges and how to overcome them 

Organisations can maximise succession planning efforts and ensure long-term success by proactively addressing and overcoming common challenges.

Resistance to change 

Prioritise clear communication and transparency throughout the succession planning process to overcome resistance to change.

Engage employees in open dialogue about the rationale behind succession planning and its benefits to individuals and the organisation. Provide support and resources to help employees adapt to new roles, emphasising the opportunities for growth and development. 

Lack of resources 

Prioritise resource allocation for succession planning, recognising it as a strategic investment in long-term sustainability.

This involves investing in training, technology for talent management, and allocating time and personnel for succession planning. Additionally, organisations can explore partnerships with external consultants or educational institutions to supplement internal resources. 

Inadequate leadership buy-in 

Emphasise the strategic importance of succession planning and its alignment with broader organisational goals to cultivate leadership buy-in.

Provide education and training for senior leaders on the benefits of succession planning and their role in its success. Encourage leaders to actively engage in talent development efforts and lead by example in promoting a culture of succession readiness and continuous learning. 

Insufficient talent development  

Prioritise talent development as a core component of succession planning.

Implement structured training programs, mentorship initiatives, and leadership development courses to nurture the skills and capabilities of high-potential employees.

Encourage continuous learning and skill-building at all levels of the organisation, empowering employees to take ownership of their career growth and advancement. 

Lack of talent pool diversity

Prioritise diversity and inclusion in their succession planning efforts, actively seeking and developing talent from diverse backgrounds.

Implement strategies to remove biases from talent identification and selection processes, such as blind screening techniques or structured interview protocols. Foster an inclusive culture where all employees feel valued and empowered to contribute their unique perspectives and talents. 

Succession plan rigidity 

Design flexible succession plans, allowing for adjustments based on changing circumstances and emerging talent trends.

Incorporate regular reviews and updates into the succession planning process to ensure alignment with evolving business strategies and talent priorities. Encourage a culture of agility and adaptability, where employees are encouraged to explore new roles and opportunities for growth within the organisation. 

Key takeaways 

  • Succession planning is proactive, not reactive . Don't wait for a crisis to hit. Begin cultivating your future leaders today. 
  • It's a continuous process, not a one-time event. Regularly re-evaluate and adapt your plan to align with evolving needs and opportunities. 
  • Benefits extend far beyond filling key roles. A well-implemented plan fosters  employee engagement, knowledge transfer, innovation, and organisational resilience.  
  • Communication and collaboration are key.  Transparent discussions, collaborative goal-setting, and open career development pathways build trust and motivation. 
  • It's an investment in your future .  You secure your organisation's long-term sustainability and success by nurturing talent and preparing for transitions .  
  • Succession planning is not just for giant corporations or impending CEO retirements; it's a strategic approach applicable to any organisation . 

Man and woman in business attire high five each other

Invest in your business' future with Airswift 

Organisations can weather changes and thrive in an ever-evolving landscape by prioritising succession planning as a strategic investment.  

At Airswift, we understand the importance of talent management and succession planning in driving business continuity and growth. Whether you seek strategic workforce solutions or expert guidance in mobilising international talent we can support your journey towards a resilient and sustainable future.  

Reach out to us today to learn how we can partner with you to secure your organisation's long-term success.

This post was written by: Diyaa Mani, Content Marketing Coordinator

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Your Business Needs a Succession Plan: Here Are the Basics

Succession planning may be the single-most neglected aspect of business ownership. Don’t make the same mistake that so many others do. Instead, get started with your plans today.

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In Part 1 and Part 2 of this series on selling your business, we’ve examined the questions facing owners who entered 2020 ready to make their move, breaking down how the COVID-19 pandemic changes the situation and how to increase a business’s value if you decide to delay bringing it to market. There’s another way forward, though — standing pat and not selling.

Tax Wrinkles for Work-at-Home Employees During COVID-19

If you were a business owner who was considering putting your company on the market but decided not to sell (or at least not anytime soon), what steps should be you taking now? The goals are to ensure preservation of the current business, as well as provide for an orderly and stable future transition when the proper time to sell arrives. Accordingly, the first and most critical step is setting a goal to implement both a business continuity plan and a business succession plan. The sooner, the better.

We have all learned a valuable lesson from the COVID-19 pandemic: A significant business disruption can happen with very little advance notice, and not being prepared can be disastrous.

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Developing a Business Continuity Plan

Armed now with the knowledge of how the pandemic impacted your own business operations, you can now plan. Did the travel restrictions impair your sales efforts? Did the substantial increase in employees working remotely overburden your IT infrastructure? Did your vendors and suppliers make requests that you couldn’t respond to effectively?

The goal of a business continuity plan is to identify that which is essential and that which is not and to place the business in a position where it can continue to operate during a disruption. Ideally, the business continuity plan would include:

  • A comprehensive strategy for keeping the business operating day-to-day.
  • An assessment of essential and non-essential operations and processes.
  • An analysis of key employees/positions and how each would be impacted by a disruption and, specifically, the potential loss or unavailability of key employees.
  • A review of facilities and analysis of how the business operates if one or more location becomes unavailable.
  • A plan to protect, secure, back up and replicate, if necessary, critical data systems, infrastructure and applications.

These are only a few of the many issues for consideration when developing a business continuity plan. Many of the details are industry-specific, and you need to work with your key employees and advisers to address the challenges likely to face your particular industry. Consider meeting and discussing with your vendors, customers and suppliers the challenges that were presented by the COVID-19 restrictions. Get their views on how things could have been handled more effectively. Information is key to developing a plan that will actually work.

There’s Never Been a Better Time for Business Owners to Make a Move

Once you develop a plan, revisit it regularly and adjust and update it so that it is always ready to go when you need it. If, for example, your CFO retires, you will need to consider how the loss of that person and their particular knowledge will affect the plan. Will their successor have the wealth of historical knowledge necessary to obtain and transfer information in a timely manner? If not, consider how you address the gap. Every organization seems to have those “go-to” people who have been there forever and without whom things run much less smoothly. Consider how the plan is impacted if those individuals are unavailable. The key takeaway is that the plan needs to grow and change with the business in order to work effectively when the disruption happens.

Developing a Business Succession Plan

No matter what your plans are for the future of the business, eventually, you will transition it to someone. Perhaps that someone is a purchaser, or perhaps you will transition to your family, key employees or some combination of the two groups. The point is that transition will eventually be unavoidable. Ideally, you get to control and be part of the process. That, however, is not always the case. Unexpected death of an owner, key executive or employee can cripple a business if no successor has been identified and there is no plan for transitioning management.

Every business succession plan looks different. Not every business owner wants to transition their business in the same way or at the same time. Some owners want to exit completely at a certain date. Others want to stay involved to a lesser degree over time but never exit entirely. These issues, as well as many others, must be considered. The plan should be designed to:

  • Address anticipated timing.
  • Identify one or more successor.
  • Address the value of the business.
  • Provide for implementation of the plan.
  • Discuss communication with employees, customers and family.
  • Include tax planning.
  • Provide for contingencies.

In my long career as a business lawyer, I have observed that succession planning is the single-most neglected aspect of business ownership. Maybe it’s human nature to think that we’ll always have time to deal with it later. The truth is, if you don’t get around to it and the unexpected occurs, the impact on your family and employees could be devastating. Also, we see many executive job candidates asking about a company’s transition planning before they are ready to commit to working there. Lack of a transition plan can therefore have a negative impact on attracting and retaining talented employees and executives.

The best way to approach the process, in my experience, is by dedicating a year to the effort. Spend three or four months discussing the process with your family, executive employees, your bank and other key stakeholders. Get your lawyer and accountant or other tax adviser involved from the outset. Develop and refine the plan over the next few months, and implement it over the last three or four months. One year is what you need. Negotiate the fees with your professional advisers in advance and get a budget for each phase. When it’s done, you’ll thank yourself, and your business will be better off for having gone through the process.

Final thoughts

As touched on in this article and the other parts of this series, the COVID-19 pandemic was and remains a major disruption that couldn’t have been foreseen by most business owners at the start of 2020. The confusion of the early days, however, is beginning to clear. For owners who were planning for a transition, there is path forward — be it bringing the business to a changed market, delaying the decision or staying put for a time.

No matter the decision, proper preparation and organization will make it easier.

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Patricia Farrell is a corporate law attorney in Pittsburgh. With a primary practice in business services, she regularly represents privately held businesses in mergers, acquisitions, divestitures and other major transactions, both in the United States and in Europe, Asia and Australia. She also has a broad corporate practice where she assists with corporate governance as well as succession planning for business owners and a variety of other day-to-day business issues.

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What Is Succession Planning? Key Definition and Strategies

Sam Cook

Content Director and Employee Engagement Researcher

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On this page

  • Assess Your Risk!
  • What Is Succession Planning?
  • What Are the Common Reasons for Not Having a Succession Plan?
  • Lack of time and resources
  • The organization is too small
  • The company is family-owned
  • What Are the Benefits of Succession Planning?
  • Minimal disruption to the business
  • Internal mobility
  • Mentoring and support of the next generation of leaders
  • Boosting employee morale
  • What are the Steps of the Succession Planning Process?
  • 1. Identify key positions and skills
  • 2. Identify potential successors amongst internal talent
  • 3. Create training and development plans
  • 4. Prepare for the transition
  • 5. Review, review, review
  • What Should You Consider When Selecting Candidates for Succession?
  • Learning agility
  • Self-reflection
  • Risk management
  • What are the next steps for your company?

The National Council of Acoustical Consultants (NCAC) recently asked me to speak at their annual conference on the topic of succession planning. While I was excited to do it, the timing (unfortunately) didn’t work out on my part. But the ask got me thinking about my own experiences with succession planning, in general, and more broadly about how much it’s overlooked and misunderstood in two key ways:

  • Succession planning is not just about finding someone with the requisite skills to assume an empty role. Instead, it should be viewed as a people-specific need within an organization’s business continuity plan .
  • Succession planning is a must for any role that maintains ownership over business-critical tasks and where the loss of such an employee would create significant disruption to one or more business operations. Yes, this can include non-management positions!

One report from Gartner  ranks leader and manager development as one of the top priorities for HR leaders in 2024. The same report also states that  26% of CEOs  rank talent shortage as the top damaging factor to business outlook. That data, however, doesn’t include the often-overlooked difficulty that comes with filling empty roles for subject matter experts (SMEs), whose presence is often essential but who don’t lead or manage teams.

The need for succession planning extends leadership positions. 95% of Americans  have plans to switch jobs in 2024 . Despite a rocky economy and crazy-high inflation, the job market is still pretty strong, especially for high performers. This means that the next leader of your company might be walking right out of the door and into a new role that suits them better

Don’t let your future leaders slip away from you. With succession planning best practices and the right mentoring programs to nurture existing talent, you can show your employees the paths open to them when they choose to invest their time with you.

 Download our free Succession Risk Assessment tool to determine which employees or roles need a succession plan

What will happen when those in critical positions leave your organization? Senior leaders might retire, a key member of staff might need extended maternity or paternity leave, or a gap might be left when someone needs to suddenly sign off on sick leave.

With effective succession planning in place, you should — as the name suggests — have a plan for who will succeed your leaders and key contributors, no matter the reason why they might leave. You might have an idea of exactly who you want as the replacement, or you might just have an idea about the type of candidate you would like to see considered for the role. Remember, succession plans should form part of the company’s business continuity processes as they are created to minimize disruption as much as possible.

Succession planning is a critical business operation, and yet few companies actually choose to engage in it. A  2021 survey of HR professionals  found that only  21% of respondents  came from an organization with a formal succession plan in place, with over  a third  (36%) saying  they didn’t have a plan at all.

Bringing up the succession planning process should not feel like someone preparing to dig their own grave or creating a launchpad for their successor. It should feel like the natural progression of the company’s strategic goals. It is only realistic to assume that an employee and a company will part ways at some point, and replacement planning could form a key part of the  employee life cycle .

Mentoring software can help you properly align succession planning goals with a measurable, people-focused development plan. Book a demo to learn more about how MentorcliQ helps companies overcome talent disruptions with mentoring.

Over a third of businesses (36% ) don’t have any succession plan, formal or otherwise. As with everything in life, there is always an excuse. We’ve pulled out three of the common reasons why a business might not have a succession plan, but we’ve also added a little refutation to each one.

We get it — this is one more operation and process that needs to be planned out and captured. No one enjoys having to update company procedures, but putting in the succession planning work can bring benefits further down the line.

The average executive cost-per-hire can be, on average, a whopping  $28,329 . Companies cannot afford to waste time cycling through candidates searching for that diamond in the rough. Succession planning highlights the skills that top talent needs to demonstrate. By identifying what these skills are, effort can be put into either nurturing existing employees and aiding them with their talent gaps, or honing in on what the perfect external candidate can offer.

Small organizations benefit from succession planning just as much as big multi-office operations. According to  data from the US Census , the  majority of US businesses have fewer than 5 employees . In small businesses, we often see those in key positions wearing multiple hats and managing tasks that might typically be out of their usual job description. For example, someone might have been hired for their marketing background, but their tasks also cover areas that might traditionally be held by sales or customer service.

There could even be one person who is not in a senior role, but who holds a great deal of institutional knowledge, like an office administrator who’s been there since the beginning. If either of these employees leaves, there is suddenly a massive talent and knowledge gap that needs to be filled. It might be trickier to find a replacement than you might think!

A succession plan helps address these crucial positions and how they might change going forward. Do you commit to finding that one candidate who could fill critical roles as they have been left, or do you split the role and source enough cover for all emerging gaps? Both could be valid options, and one path isn’t necessarily more viable than the other!

Look, I watched the HBO hit Succession , and I hope you did too. Family-owned businesses are not exempt from succession planning needs, and if anything, their succession planning difficulties may be even more challenging and distinctly political in nature.

Father and son sit at a table discussing succession for their family owned business.

OK, there is a bit of a difference between the average American family business and  Waystar Royco . Still, that doesn’t mean that there shouldn’t be any succession planning efforts.

When a business is family-owned and operated, the assumption is that the founder’s children, grandchildren, and even nieces or nephews may play a role in operations. If so, the founder may choose to actively mentor their family members to ensure that their legacy remains intact and the business is in safe hands when they choose to move on.

However, there is no guarantee that this will be the case. In this scenario, succession planning can be used to find external replacements. Again, there may be an element of legacy protection so that the core values of the business can remain intact under new management.

Such a succession plan may also address the level of involvement the family has within the company. They may not want to sit on the board of directors and make critical business decisions any longer, but they could still remain majority shareholders with a say in how the company is directed.

Though this can seem like another troublesome company process to manage, it can bring a lot of rewards beyond simply finding the right person to step in another’s shoes. Some of the benefits of succession planning can include:

Whether someone has to leave suddenly or their departure can be seen months in advance, effective succession planning can help minimize disruption to critical business operations.

Team leaders will need to prepare employees to deal with the departure of the person anyway. Whether it is someone in management or just that one employee who seems to know all the ins and outs of how things actually work, the space they leave in a team roster can cause disruption if not properly handled.

Succession planning ensures that there is someone ready to step into that gap. Setting up leadership continuity prepares not just the departing employee but the whole team. All relevant information can be passed on, the replacement can shadow the leaver for a little while, and everything involved with knowledge transfer and structure can easily be passed along.

If you have put a lot of effort into finding key talent to fill positions further down your corporate ladders, why would you not want to hold onto them? If you don’t offer  professional development to employees , they will search for it elsewhere. Research has shown that  a third of employees  are willing to resign if they lack learning opportunities and clearly defined career mapping . Career growth and advancement are high priorities for many workers; they want to keep moving forward.

Succession programs often don’t kick into gear when someone is thinking about leaving. Things tend to start much earlier than this, and can often involve active development of a company’s talent pipeline. Choosing to create leadership development programs can help to grease the wheels of internal mobility.  Onboarding mentors  or a  buddy system  can help these new employees easily find their feet and think about what they want their talent development to look like within the company.

Offering routes for internal mobility isn’t enough. Succession planning observes that there is a space for someone new to step into and tries to define who that person might be. If no one is willing to take the step forward, critical roles could be left unfilled.

Improve succession planning with a mentoring strategy  that is designed to offer that extra level of support and help people considering leadership roles.

Employees who feel valued and supported will always feel more engaged and connected with the company. They will consider their future roles and hopefully see a space for them in the business’s plans. Job satisfaction will rise as they feel like the effort and hard work that they put into the business is reciprocated through opportunities presented to them.

Place  talent development  programs in the hands of employees and let them dictate how they advance their careers. From those who actively participate, a potential successor of tomorrow might emerge. For the others, it might be worth looking into mentoring or some other scheme that could best help them to engage with the business once more.

Mentoring helps boost employee morale through direct, person-to-person engagement and development! A quick demo will help you learn how MentorcliQ puts the human element front and center in succession planning strategies.

Identifying employees and offering them development is just one part of a much wider and slightly more complex process. A full succession planning framework might include some of the following steps.

You can’t replace something you don’t know about! Before even considering candidates as potential successors, you need to consider the critical positions and leadership roles that would bring major disruption to the company if lost.

Everyone always starts at the C-suite, but we cannot stress this enough: look beyond that.

Yes, a business is going to run into trouble pretty quickly if the CEO retires without naming a successor. That kind of thing usually makes investors nervous and tanks stock values. But what would happen if your payroll officer went on sabbatical? How would the CEO manage their calendar if their executive assistant retired? Could the business as a whole cope if someone from IT support took parental leave? These are oft-overlooked business-impacting talent losses that can hurt revenue generation company culture, and broader employee retention.

None of the roles we mentioned above are necessarily managerial, but they all carry a level of responsibility for a critical area of the business. Succession plans should be created for roles such as these, so business continuity is not compromised if one key employee has to leave suddenly.

Now that a company has an idea of the skills and jobs that might be impacted by a departure, sudden or otherwise, leadership can look for  high-potential employees  who may be the right fit for the role. Often, the top talent you are searching for can be found already in your teams.

Nowadays, many employees will view their current job as just one stop in a long and fruitful career. They think that if they want to see continued success and career advancement, they will have to move to a different company. If this is what they truly want to do, don’t stand in their way. There is still plenty of support to offer these employees, but for succession planning, you want the focus to be centered on those considered for internal positions.

Employee in an office at a table typing up a training and development plan for succession planning.

With a willing succession pool created, now is the time to implement  leadership development  strategies to help prepare these internal candidates for future leadership roles. Each journey will look a little different; some candidates might benefit from exposure to the role and shadowing the person they could replace, while others might need to develop their soft skills a little further.

The overall goal of succession planning should not be to elevate one employee over many but to offer opportunities to anyone interested in what future roles might be.

Though succession planning is not usually created with one employee in mind, there should come a point where the company is confident that it wishes to support one particular candidate.

At this stage, there should be a period of transition. Ideally, succession planning should link up neatly with the handover period. This gives everyone time to adjust—the departing employee, their replacement, and the team they will be joining or possibly even leading.

Handovers should never drag on too long. Outlining expectations and milestones in a succession plan can help keep things moving forward smoothly and at a good pace.

Mentoring programs can form a key part of the handover and transition process. Mentees should be given the opportunity to  shadow  the outgoing employee. This better facilitates the transfer of internal knowledge and skills, and can provide key insights into the experiences and scenarios the new employee is likely to face in this role.

What would any planning process be without a review stage? Yes, succession planning is going to come with some degree of review. Every stage of the planning process should be adequately documented to ensure that the succession plan is viable and delivers the results expected.

Reviewing the process can also reveal what  didn’t  work. Can you adapt any gaps that might still exist? Were there any parts of the handover that proved to be more complex than previously thought? All of this can help inform how the succession planning process is handled in the future.

Succession planning is less about identifying employees specifically, and more about thinking about the critical roles at the company and the qualities needed for good performance in them. Regardless, there are some key qualities that every candidate should embody. Though key skills and industry knowledge might differ across each of these critical roles, consider the following when evaluating internal candidates.

Not the bias of the candidates (though this is always something worth bearing in mind), but the bias of those selecting the succession pool. We have a tendency to pick like for like, often unconsciously choosing to match the race and gender of the appointee with that of the one departing. Edward Chang studied this concept as he looked at the appointment of over 2000 federal judges and 5000 corporate board members.

His research team uncovered that, when selecting replacements for departing women or racial minorities on a board of directors, the boards chose men  65%  of the time and white people  75%  of the time. We as a society are taking great steps towards  diversity and inclusion , but we need to make sure that the progress we make is being felt at executive levels as clearly as it is at others.

Two men in an office discussion learning agility in succession planning.

How quickly can the succession candidates pick up new skills? Advancing in a career means that anyone will have to adapt quickly to new situations and scenarios. If someone is moving into leadership for the first time, or moving laterally across the company to a different department, they may find that they encounter people and problems that they have not previously in their working life.

They need to be able to pivot and adjust seamlessly. When engaging in the succession planning process, it is vital that candidates can handle anything thrown at them with grace and composure, as there is always likely to be little resistance during the transition period.

Good succession planning candidates should frequently reflect on their progress. They should have a clear idea of their strengths and weaknesses and what they can do to improve on both. This, in turn, should feed into their own employee development plans, as they should be keen to increase their skills.

This is a good sign that they don’t over- or under-estimate their abilities. They are adaptable enough to fit into any team and can approach any task with a leveled and calm mind.

We all need a degree of understanding of risk management in our roles. Though it is true that those in the leadership team might have to handle risk more frequently, or may have to handle higher levels of risk, employees at every level need to know how to handle a project if it does go awry.

An employee who keeps a level head and successfully mitigates the risks that arise will be better than those who panic and don’t know how to calm the situation. When considering the perfect candidate to fit succession plans, decent risk management should definitely be a desired trait.

Key skills and experiences should be identified as necessary for success in the role as part of the succession planning process. Therefore, when creating a succession funnel for candidates, the demonstrative experiences candidates will need to show should be considered.

Of course, lacking one particular experience should never hold back the right candidate. Still, a candidate’s collective professional and personal experiences should show that the candidate is prepared to take on any potential challenges that might come their way.

A company culture that recognizes the strengths and needs of its workforce will always bolster effective succession planning.

Succession planning, in a nutshell, involves:

  • Identifying the weak points where absence from a particular employee results in a widespread negative impact on business objectives.
  • Defining the character, institutional knowledge, and skills required for replacing the departed employee, and comparing this character profile to internal talent.
  • Nurturing candidates through mentoring and professional development to help them successfully transition into their new roles.

A succession plan won’t work without adequate support to help candidates through the tunnel towards their new positions and responsibilities. MentorcliQ’s award-winning software helps match mentees with the right mentors without bias and removes the unnecessary admin HR professionals would have to complete if using other matching schemes. Get your stars of tomorrow talking to the people who can help them the most.

Don’t just take our word for it! MentorcliQ’s mentoring software has been recognized as being amongst the  best tools for succession planning  (and we were rated the best for pairing mentors and employees for professional development!).

Book a demo with MentorcliQ today , and find out how we can help transform your internal mobility, retain the shining stars you help to develop, and protect your key positions. Take the next step in your succession journey with our help!


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Succession Planning: Definition, Objectives, Steps

Succession Planning: Definition, Objectives, Steps

Companies need to develop their talent to compete in a global market. Top management is mainly responsible for the growth and survival of the organization .

To discharge such responsibilities, each organization needs to plan management succession.

Meaning of Succession Planning

Succession planning is done in different time frames to ensure the availability of the right managerial personnel at the right time in the right position for continuing organizational strength.

Most organizations plan for immediate requirements matching their budgets and business plans.

This shortsightedness leads them to an alarming situation when they find a shortage of managerial workforce to staff different positions in the organization, resulting in organizational collapse.

To avoid this, good organizations try to make succession planning in three different time frames, i.e., immediate, intermediate, and long-range.

Succession planning enables organizations to identify talented employees and provides education to develop them for future higher and broader responsibilities.

Unfortunately, many companies still struggle to create a formal process to identify, develop, and retain high-potential people within the organization.

Definition of Succession Planning

Succession planning is when an organization ensures that employees are recruited and developed to fill each key position within the company.

Through succession planning, organizations recruit superior employees, develop their knowledge, skills, and abilities, and prepare them for advancement or promotion into ever more challenging roles.

Succession planning is a process for identifying and developing potential future leaders or senior managers and individuals to fill other business-critical positions in the short or the long term.

In addition to training and development activities , succession planning programs typically include practical, tailored work experience that will be relevant for future senior or key roles.

Objectives of Succession Planning

Clear objectives are critical to establishing effective succession planning. These objectives tend to be core to many or most companies that have well-established practices:

  • Identify those with the potential to assume greater responsibility in the organization.
  • Provide critical development experiences to those that can move into key roles.
  • Engage the leadership in supporting the development of high-potential leaders .
  • Build a database that can be used to make better staffing decisions for key jobs.
  • Improve employee commitment and retention .
  • Meet the career development expectations of existing employees.
  • Counter the increasing difficulty and costs of recruiting employees externally.

Elements of Succession Planning

Succession planning is not about replacing an existing employee. The purpose is to prepare the organization and develop its “bench strength” for future organizational requirements.

There are a few elements to managing a succession plan, such as;

  • identifying key positions for which a succession plan is necessary,
  • identifying the successor or successors,
  • identifying job requirements,
  • building competencies and
  • assessing progress.

Process / Steps of Succession Planning

  • The first step is to prepare and develop a management staffing plan for all anticipated needs in different time frames.
  • The second step is staffing and development. Staffing is concerned with recruitment , selection, and placement. The development of managerial personnel is done through training, job rotation, projects and board assignments, performance appraisal, counseling, and guidance.
  • The third step is to ensure a friendly organizational environment to retain the desired managerial personnel.
  • The fourth step is developing  a good performance appraisal system to get feedback on managerial performance and review their progress and shortfalls.
  • Preparation of the management resource inventory is the final step in succession planning. The such inventory contains details of personal data, performance records, skills, potential career goals, and career paths of managerial personnel .

Fundamentals of Succession Planning

The fundamentals of succession planning include:

  • Support from the CEO;
  • Build a development mindset in the organization;
  • Align the succession plan with the overall strategy of the company;
  • Ensure data-driven decision-making;
  • Assess performance culture regularly.

Ensure that succession planning is integrated with other processes of talent management, including performance management, training and development , compensation , and assessment;

  • Link succession planning for competency management.
  • Integrate with career development tools;
  • Automate the succession planning process for greater efficiency and less operational risk.

Succession Planning Challenges

It is not an easy task to make effective succession planning. John B indicated that succession planning faces some challenges. These challenges fall under two categories: challenges with the process and challenges with the technology.

Integrating succession planning with other processes is the main challenge that companies are facing. Challenges to making the process work include the inability to locate or create a pool of active and passive candidates and a lack of interest from senior executives.

A study indicates that it is difficult to make effective succession planning due to a lack of assessment tools, succession planning tools, and career development tools .

These concerns in succession planning represent a broader challenge in human capital management , i.e., getting the talent needed and addressing the talent requirements for the future.

Another challenge with succession planning includes a lack of support from top management . Succession planning needs to be aligned with the business objectives of the company.

CEO and other senior management involvement are critical steps.

Succession planning will not become a companywide initiative if the management is not involved and actively ensures a more cohesive succession.

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