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Succession Planning: What the Research Says

• Eben Harrell

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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The Complete Succession Planning Guide for HR Professionals

Table of Contents

What is succession planning, why is succession planning important, how to create a succession plan, the key features of succession planning software, simplify your succession planning process with quantum workplace.

In today's competitive business landscape, organizations recognize the critical importance of succession planning as a strategic initiative for talent retention and development. As the demand for skilled professionals continues to rise, succession planning enables companies to proactively identify, nurture, and retain high-potential employees. 

By cultivating a robust pipeline of internal talent, organizations not only ensure a seamless transition of leadership but also foster a culture of growth, engagement, and professional development. 

Fortunately, succession planning makes it easy to plan for the unexpected and replace top talent seamlessly.

In this article, we’ll cover what succession planning is, why it’s important, how to build your succession plan, and how to utilize technology to implement your succession plan at scale within your organization.

Succession planning is the process of identifying the critical positions within your organization and developing action plans for high-performing individuals to be ready to fill those positions. It ensures you have the right people, in the right jobs, at the right time—today and tomorrow. 

Done well, succession planning helps organizations be ready when talent needs arise. It guides talent development over time and identifies talent risk.

But succession planning is so much more than simply picking replacements—leaders need to understand how open positions and bad hiring decisions can potentially impact the company. 

An effective succession plan equips identified successors with the skills and competencies needed in their future role. 

By using a customized development plan, you can promote employee growth and ensure your successors make the right impact. Not to mention, the right succession planning tool enables you to utilize objective metrics—like performance reviews and engagement scores—to help you fill open positions when top leaders leave.

Succession planning should never be an afterthought. That’s because succession planning plays a critical role in the long-term success and sustainability of your organization. 

Your plan provides you with a strategic initiative to proactively address talent gaps, minimize business disruptions, and foster a culture of career growth and development. Your succession plan is key for long-term business success. 

Here are 8 top reasons why succession planning is critical to your business:

1. Provides a guideline for training and development

The right succession plan will guide your training and development plans and prepare high-potential employees for their future role. Your succession plan will highlight areas for growth so they can develop critical skill sets, empowering them to thrive now and in the future.

Development and training for succession planning isn’t the only benefit to be found. In fact, our research shows that 79% of employees who had access to a formal development program were engaged (compared to only 58% of employees whose organization didn’t have a formal program).

Of employees who participate in learning and development opportunities : 

• 71% feel motivated
• 55% feel empowered
• 64% feel more equipped to do their job

While succession planning is one reason to invest in development and training, it’s certainly not the only high-potential benefit.

2. Reduces costs to recruit and hire talent

The costs associated with recruiting and hiring top talent will soar if you don’t have a plan in place. If top roles go unfilled for too long, you might be forced to make rushed and costly hiring decisions, only to regret them later. 

Hiring top talent typically requires bonus offerings and relocation costs. And when you aren’t confident in your replacement, your business may continue to lose money. By shaping a talent pipeline, you’ll safeguard the return on your hiring investment with sound successors. 

In the case that your successors come from within the company, you won’t need to recruit externally, which reduces costs further. You’ll be able to invest the money you save elsewhere—like in training and development.

3. Identifies key leaders

With the right approach to succession planning, you can identify, develop, and retain key employees who might perform well in top roles. This way, you can measure all of your options and make the best decisions when it comes to successors. Plus, you can ensure your succession pool aligns with your diversity and inclusion goals. 

Utilizing reporting and metrics to connect performance, development, and engagement is one of the most critical elements of a high impact succession plan .

4. Promotes long-term planning

Businesses that aim for long-term success need long-term plans. In the face of rapid change, you need strategic plans to guide your actions. With a thorough succession plan, you’ll create a path to retirement for top leaders and ensure their expertise is transferred to their successor. As you outline clear plans, you’ll be better equipped to grow and evolve as a successful organization. 

5. Mitigates risk

Succession planning helps you protect your company. Let’s face it, your top leaders may be swayed to leave for higher pay or be affected by a serious illness, for example. Critical roles aren’t always top ones when it comes to business risk and continuity. Think: the head of cybersecurity or your lead software engineer who knows the code like the back of her hand. 

Whatever the case, when critical roles within your organization go unfilled for too long, your business success may be put in jeopardy. 

But with succession planning, you’ll have a plan when change happens so that your business isn’t vulnerable.

6. Establishes your legacy

When leaders are aware of their successors, they’re able to provide mentorship and share knowledge. This way, when top leaders exit, their contributions and impact won’t leave with them. All the hard work put in throughout the years will be translated into future efforts of their successor, so your leaders can leave a lasting mark on the organization.

7. Shapes an exit strategy

Succession plans ensure leadership exits are smooth, seamless, and non-detrimental to profitability. An effective plan outlines replacements for key people so that your business can run properly when they leave. If you're blindsided by top talent loss and have no back-up plan, your business is likely to face negative impact.

8. Promotes progression

Succession planning helps you shape the mindset that’s key for continuity. While replacement identification is important, succession planning promotes big-picture growth. When leaders continually think about how certain events can affect the business as a whole, they’ll be more agile and resilient in the face of unexpected events. Now that you understand some of the key benefits of succession planning, it’s time to build your strategy!

If you’re in charge of crafting the succession plan for your business - fear not! While every organization is different, the recipe for a successful succession plan is similar no matter how complex your organization is. 

Here are the steps to create a succession plan:

1. Identify critical roles to plan for

The first step in a succession plan is to identify the key positions within the organization that are critical for its continued success. Sometimes these positions are leadership roles. Sometimes, they’re mid-level. No matter what the title is, you should identify roles where the operation, strategy, and decision-making of your organization would be dramatically affected if they were to be suddenly empty.

Here are some guidelines on how to identify critical roles for succession planning:

• It has a high impact on business operations: You’ll want to consider roles that have a significant impact on the organization's core operations, strategic initiatives, and overall performance.
• It involves a high level of leadership and decision-making: Be sure to identify roles that involve critical decision-making authority and require strong leadership skills to effectively guide teams and drive results.
• It requires specialized expertise, training, or experience: As you know, the talent pool for certain areas of expertise is getting smaller and smaller. You’ll want to consider those roles that require specialized knowledge, unique skill sets, or industry-specific expertise. Which brings us to….
• There is a high talent scarcity or risk: Evaluate roles where there may be a scarcity of talent in the external market or a higher risk of succession gaps, such as positions with specific technical requirements or leadership demands.
• It’s required for future organizational success: It can be hard to anticipate the future needs of your business, but it’s critical to do so when succession planning. Identify those roles that will be pivotal for achieving long-term goals and addressing emerging challenges or opportunities.

2. Define your succession criteria

Once you have your critical roles identified, it’s time to establish your succession criteria. But what does that mean? 

Succession criteria are the skillsets, competencies, experiences, and training required for your potential successors. These criteria act as your benchmark for evaluating the readiness of candidates to fill your roles. 

It’s possible that the criteria may be different based on the role you’re looking to plan for. Here are some examples of criteria you may want to consider:

• Core competencies required for the role including both technical and leadership capabilities.
• The employee’s experience level and track record within the organization as a whole.
• The employee’s professional goals drive success and contribute to the long-term success and vision of the organization. 

3. Complete a talent assessment

Now that you have your roles and criteria defined, it’s time to complete a talent assessment. Your succession plan will require you to assess your talent pool within the organization to identify potential successors. This assessment includes evaluating employees' performance, potential, and readiness to take on higher-level responsibilities. This is where your criteria comes into play. 

4. Implement talent development and training

Now that you have your talent pool based on your assessment, you can refocus your efforts on development and training . This usually involves creating a personalized development plan for your candidates to enhance their skills, knowledge, and competencies required for future leadership roles.

There is an overwhelming need for businesses to invest in career growth and development. Our research shows the top three opportunities employees want include leadership development programs, cross training, and skills-based training for an advanced role.

5. Scale your mentoring, coaching, and one-on-ones

Remember, talent development is never a one-and-done investment. Be sure to provide mentoring, coaching, and regular one-on-one opportunities to your potential successors. Ongoing development is an integral part of your succession plan. Seasoned leaders within the organization can guide and support successors in their professional growth, sharing their knowledge and experiences to help them prepare for future leadership positions.

6. Review and monitor your succession plan

Regularly reviewing and monitoring the progress of the succession plan is crucial. This usually involves tracking the development and performance of potential successors, evaluating their readiness for advancement, and making adjustments to the plan as needed. Succession planning technology can make this process much easier by providing tools for you to set criteria, identify candidates, and implement development strategies before there is a desperate need to fill an empty role.

7. Develop your knowledge transfer process

Once your successor is identified and ready to assume a critical role, your succession plan should include a clear, standardized transition process. This process will look different for every role. But it’s likely to include a comprehensive handover of responsibilities and knowledge transfer, which will ensure a smooth transfer of leadership and decision-making authority.

8. Continuously update your plan over time

Just like any successful HR initiative, a successful succession plan requires continuous evaluation and refinement. Use your succession planning technology to collect continuous feedback from stakeholders, analyze the plan's effectiveness, and implement adjustments based on changing organizational needs. 

Remember - a great succession plan isn’t made on the fly. And succession planning offers an incredible opportunity to boost talent growth and development from within your existing employee base.

If you’ve been managing your succession plan with disparate software systems, spreadsheets, and email threads, it may be time for an upgrade. Succession planning software makes your succession plan easy to build, launch, and scale over time.

By leveraging the capabilities of succession planning software , you’re one step closer to a seamless and efficient succession plan.

Modern technology can take the pain out of the process and streamline your succession strategy. With the right tools, you can propel employee growth, guide change, and drive business success. These are the top benefits of a comprehensive succession planning tool:

1. Evaluates talent readiness

Succession planning has traditionally been an HR responsibility. But managers most directly influence the development of identified successors. You need a succession planning process that empowers managers to take an active role in successor development—and that holds them accountable for movement.

To make the best hiring decisions, leaders need to be able to visualize their talent all in one place and understand the full scope of each individual’s skill set. With the right tools, you can identify your highest potential talent and include them in your succession plans. 

Most traditional succession planning tools evaluate talent readiness in multi-year increments:

• Ready in 1-2 years
• Ready in 3-5 years
• Ready in 5-7 years

But it’s too difficult to drive action and make adjustments with this model. To do that, your process must focus on development in smaller increments. A better practice is to evaluate talent readiness in 12-month increments, such as:

• Ready in 12 months
• Ready in 24 months
• Ready in 36 months
• On the radar

These 12-month increments help managers take a more active and tangible role in successor development. By focusing on a smaller span of time, it’s easier to build a development plan and to measure the success of that plan. Smaller increments of time also help hold managers accountable for intentional development that drives employees toward readiness. 

For example, let’s say Susan needs to focus on two specific areas to be ready for a VP of Sales role in 12 months. Susan’s manager should be working with her on a development plan that drives her toward “Ready Now.” If, after 12 months, her readiness hasn’t changed, her manager should be held accountable for that lack of movement.

2. Regularly checks in on talent development

To help guide successors on their journey to a future role, you need to understand where they are today and their overall trajectory. And you need to check in along the way. Two ways to do this are to sync your success planning conversations with talent review data and documented development goals.

Syncing succession planning and talent reviews

Think about your talent reviews as a regular check-in on succession plans. Quarterly talent reviews help you evaluate and measure successor growth and development along the way. By understanding successor impact, growth trajectory, and retention risk, you can be more agile and adjust your succession plans as needed. 

A robust succession planning platform will work seamlessly with your talent reviews and employee goals. When you’re able to measure and align performance with your succession plans, you can identify the right talent and ensure they’re growing. This way, you can create continuity in critical roles and drive business success for years to come. 

Syncing succession planning and development goals

A key result of your succession planning process should be developmental goals for potential successors. Goals and stretch projects can be another measurement of candidate readiness. With goal tracking, leaders can see how a potential successor approaches new opportunities and can help plan for future transitions.

The right platform will bring employee skills gaps to the surface when they are identified as successors. This way, you can promote growth and development in the areas that matter. When employees are prepared to fill critical roles, you’ll be able to conduct business as usual in the face of leadership loss. 

3. Monitors your talent risk

The work is not done once your succession plan is created. You need to actively evaluate areas of risk within your plan. Be sure your succession planning tool integrates with your HRIS data—and that it’s set up to send alerts around key insights and events like:

• A critical role is empty
• A role has no identified successor
• A successor is being considered for multiple roles

If you have multiple successors being considered for one role, be proactive about the development plans of the ones who don’t end up getting the role. You want to prevent attrition of those high potential team members—and keep them engaged and motivated to potentially fill future roles.

The same applies to successors who are “Ready Now” for a role that isn’t open. You’ll want to keep them challenged with stretch projects, interim positions, committees, etc.

Remember: Succession planning is not a one-and-done initiative. It’s essential to recognize that succession planning requires continuous evaluation, adjustment, and monitoring to align with organizational changes, evolving talent needs, and emerging leadership trends. Succession planning software enables you to regularly review and refine your talent pool over time.

4. Provides reporting on your DEI aspirations

Checking your succession plan against your DEI goals helps you work smarter, not harder. It’s important to consider the implications of your future plans on your diversity and inclusion initiatives and metrics. But keeping track of diversity metrics and plans can be tiresome and inconclusive without the right technology. A robust succession platform enables you to keep a pulse on your metrics and ensure that your top positions are filled with inclusivity in mind. 

You may want to:

• See younger generations developed for leadership
• Ensure accurate distribution of roles across locations
• See higher gender or ethnic diversity on your leadership team

Promoting diversity and inclusion in succession planning can be a challenge for organizations striving for equitable representation in leadership positions. It is crucial to proactively identify and address biases, provide equal opportunities for underrepresented groups, and leverage tools and technologies that support diversity analytics to ensure fair and inclusive succession planning processes.

Regardless of what you’re trying to achieve, a strong succession plan should align with your diversity, equity, and inclusion goals.

5. Tracks the success of your plan

A succession plan is most successful when leaders and managers regularly review and optimize the plan. You should track completed successions as they happen. And the status and progress of the plan should always be up-to-date and easy for leaders across the organization to view and understand.

6. Provides visibility & makes it easy to collaborate.

Collaboration is critical. And that’s why you should look for a tool that not only provides insightful reporting, but the ability for HR and key stakeholders to communicate centrally. Collaboration tools can help you streamline the nomination process and reduce administrative burden.

A savvy solution will allow multiple users to nominate candidates for a single role simultaneously. This facilitates collective input and diverse perspectives in the succession planning process.

But what about visibility concerns?

Make sure you select a tool that provides controlled access and restricts sensitive information to authorized individuals. This will enable you to maintain confidentiality at the top of the organization while fostering transparency and  collaboration within your designated user groups.

7. Enables solid decision making when talent leaves

When your top leaders unexpectedly, it’s important to have a plan in place so you’re not scrambling to fill their role. Effective technology identifies the best fit for each role to make sound, measured hiring decisions and reduce negative business impact when key players leave.  

One of the biggest reasons that succession plans fail is that the organization has a limited pool of qualified individuals ready to step into critical roles. 

But it’s possible to proactively address this. Use your technology to identify and then implement talent development programs that focus on nurturing your high-potential employees, providing them with opportunities for growth, and aligning their development plans with the organization's succession needs. This helps expand the pool of potential successors over time. Not to mention, your software can help you identify gaps in training so you can make the best decisions when your talent leaves. 

8. Provides on-demand reporting for your investors

Succession planning is a must, especially when your company is publicly traded. A streamlined tool will keep your succession plan up to date, ready, and at your investors’ fingertips to illustrate your business’s longevity. 

Cultivating a robust pipeline of internal talent to nurture, develop, and retain is more critical than ever. In fact, some industries— like credit unions —are now requiring organizations to establish succession plans. But you’re not alone if you feel like your organization hasn’t found a process you’re confident in.

Many leaders have yet to figure out the best way to navigate succession planning, spending too many hours in spreadsheets that go nowhere. What’s troubling is that the most important part of a succession plan—the actual plan!—is often overlooked.

The right tools can help you navigate succession planning like a well-oiled machine. Quantum Workplace’s succession planning tool helps ensure you have the right people in the right jobs at the right time, today and in the future. It syncs seamlessly with Quantum Workplace Talent Reviews & Goals to identify and develop your best talent and create continuity in your most critical roles.

Learn more about how Quantum Workplace can help you:

• Capture talent, interest, and readiness to find the best successors for critical roles
• Help successors grow and develop so they’re ready when called upon
• Ensure your successor pool aligns with your diversity and inclusion aspirations
• Make sound decisions when critical talent leaves
• Provide a board-ready succession plan at your fingertips when you need it

Simple and intuitive succession planning tools help you elevate top performers, identify talent risk and pinpoint successors. Book a demo to see how our succession planning platform will work for you and your business. 

Published July 11, 2023 | Written By Kristin Ryba

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Home » Human Resources » Business succession planning: The complete guide

Business succession planning: The complete guide

Business succession planning (BSP) is the best way for HR to ensure they retain the institutional knowledge and experience they have worked hard to accumulate in a business. 

It also helps ensure your enterprise’s survival in an age where HR focusing on employee retention   and quality talent is vital to business resilience .

BSP involves handing authority to lower levels of staff to avoid role gaps and ensure a successful transition for staff to leadership roles when companies lose employees through passing away, departing the company, or experiencing termination. 

40% of businesses fail within the first three years which can be due to a lack of succession planning or the fact that 42% of leaders rely on HR to carry out BSP rather than spreading the responsibility between all enterprise leaders.

However, effective business succession planning can benefit the culture, operations and finances of any enterprise. 

In this guide, we’ll explore:

What is business succession planning?

Why is business succession planning important, the 7 types of business succession planning, benefits of succession planning, barriers to business succession planning, how leaders and hr can achieve succession planning.

Succession planning in business involves strategically transferring leadership roles from one employee or a team to another and is often a care aspect of businesses owned by multiple owners.

This business strategy aims to maintain the seamless operation of a business, ensuring continuity even when key individuals transition to new opportunities, retire, or pass away. 

Additionally, it can facilitate a liquidity event, allowing the smooth transfer of ownership to emerging staff without impacting employee productivity while preserving the business’s ongoing viability.

Business succession planning is crucial for continuity and yet 43% of businesses do not have a BSP plan . These businesses are missing out on an approach which can ensure a smooth transition of leadership, preserve wealth, maintain employee morale, and safeguard the company’s legacy. 

Let’s go into more detail about why business succession is important to help you understand why it may benefit your organization.

Business resilience strengthening

Ensuring business resilience is paramount for sustained success, whether maintaining the current structure or navigating transitions like sales or restructuring, safeguarding assets for continual growth and prosperity.

Ensuring harmony between owners

In business partnerships, fostering harmony is essential. Balancing owner or CEO relationships within the business dynamic ensures effective operations and long-term success, nurturing a supportive and cohesive work environment.

Minimizing taxes

Minimizing estate and income taxes is a strategic goal in business succession planning. By implementing tax-efficient strategies, businesses can preserve wealth, allowing for seamless transitions and securing financial legacies.

Streamlining the retirement process

Streamlining the retirement process for the current leadership generation is a key aspect of business succession planning. Efficiencies in transitioning leadership responsibilities enable a smooth and effective handover, promoting continuity.

Control over decisions

Retaining control over decision-making processes is critical in business succession planning. By avoiding the delegation of crucial choices, businesses can ensure a strategic direction that aligns with their vision, values, and goals.

Benefits even in failure

Business succession planning remains valuable even in failure. It supports a successful transition to a new owner, offering opportunities for recovery and revitalization, ensuring that the business legacy endures despite setbacks.

Consider why BSP is important if you need to implement it in your enterprise as you consider all the reasons above.

It’s challenging to understand a concept like BSP without examples, so here are some ways you might use succession planning strategies in practice.

1. Performance management

Performance management involves setting performance objectives and assessing employee performance against them. 

Its primary goal is to ensure high-quality work, optimal performance, and efficient work processes. 

Identifying high achievers and areas for improvement is a key outcome of performance management.

2. Career planning

Collaborative efforts between management and employees define career objectives and align them with prospects as you strategically move employees into key positions. 

This process identifies employee strengths and interests, matching them with business needs. Career planning contributes to employee retention and enhances job satisfaction.

3. Mentorship and coaching

Active coaching and mentoring by managers and senior staff for employees with leadership potential assist them in gaining the necessary skills for promotion. 

These programs aid personal and professional development, unlocking individuals’ full potential and preparing them for leadership roles.

4. Internal competition

Fostering internal competition among potential leaders through assigning comparable responsibilities at the same executive level.

This approach, for instance, is seen in hedge funds, where potential fund managers control portfolios of similar sizes, aiding in identifying suitable candidates for senior positions.

5. Recruitment

The success of succession plans relies on recruiting individuals capable of filling essential roles. 

Developing broad sector relationships allows recruiters to swiftly fill crucial positions with external applicants, ensuring the continuous smooth operation of the organization.

6. Evaluation of metrics

Organizations assess succession planning programs through metrics such as bench strength, talent retention, leadership development, knowledge management, and competency management. 

This step involves evaluating leaders’ training readiness based on competency assessments, providing insights into the reliability of succession plans.

7. Knowledge management

The capture, identification, transfer, and utilization of organizational knowledge are integral to succession planning. 

Knowledge audits ensure the recording of sufficient information in specific divisions and functions, enabling future leaders to assume responsibilities in these areas seamlessly.

Having a formalized succession plan offers numerous advantages for both employers and employees.

Employee advantages

Employees know the potential for advancement and even ownership, fostering empowerment and increasing job satisfaction.

A plan for future opportunities reinforces employees’ commitment to career development because every staff member is a key employee in their role in the larger scale of the company.

Management and tracking advantages

Management’s dedication to succession planning results in supervisors mentoring employees to transfer knowledge and expertise.

Improved tracking of employee value enables leaders or HR to fill internal positions promptly when opportunities arise.

Improved communication

Enhanced communication between leadership and employees facilitates each business partner’s shared understanding of company values and vision.

A new generation of leaders is essential during mass workforce retirements.

Proper succession planning is particularly beneficial for public company shareholders. 

Having the next CEO actively involved in business operations and well-respected long before the current CEO’s retirement ensures stability. 

A well-communicated succession plan prevents investors from selling the company’s stock when the CEO retires.

Additionally, succession planning can cultivate a new generation of leaders, serving as an exit strategy for business owners looking to sell their stakes.

Recent academic sources suggest there are three major barriers to business succession planning: Tax, finances and legal issues. 

Tax poses a significant barrier to business succession planning due to complex regulations and financial implications. 

Transfer of ownership can trigger substantial tax liabilities, discouraging smooth transitions and hindering the effective implementation of succession plans.

Financial challenges hinder business succession planning, creating hurdles in funding the transition process. 

Lack of resources may hinder adequate preparation, limiting the ability to address critical aspects and ensure a seamless transfer of ownership.

Legal 

Legal issues pose a barrier to business succession planning by introducing complexities and uncertainties. 

Ambiguous regulations, contractual disputes between owners, and compliance challenges can impede the smooth ownership transition, creating obstacles in executing succession plans.

Consider these barriers and try to integrate them within your business succession plans by liaising with finance and legal teams and explaining the barriers and urge them to consider the best way to overcome them. 

More than 74% of leaders report they are unprepared and lack the training for the challenges they face in their roles . Knowing how to work with HR to achieve a business succession plan before attempting it ensures leaders’ approach is systematic and successful. 

Here are seven tips to initiate the succession planning process within your company.

1. Proactively develop a plan

Leaders must work with HR to anticipate potential departures via a workforce management plan to fill gaps during planned retirements or unexpected resignations. 

Leaders must assess the impact of critical roles on daily operations and consider the possible consequences of personnel changes. HR can then consider how to negate the impact of these changes in future. 

To develop your plan, follow these three steps:

•  Outline roles

Outline the roles, skills, and experience essential for successors (succession profiles). Seek extensive team feedback to comprehensively understand the requirements for your succession plan. 

• Anticipate future needs

Anticipate your company’s future needs through a 5-year forecast. Assess organizational structure changes, turnover patterns, compensation strategies, potential retirements, and future training plans. 

• Regularly revise job descriptions

Revise job descriptions based on gathered insights. Clearly communicate expectations to define suitable candidate profiles for the succession plan.

2. Identify succession candidates

HR can recognize team members capable of stepping into crucial roles. They must look beyond immediate organizational chart hierarchies and consider employees with skills conducive to higher positions.

Discovering suitable successors is pivotal in crafting an effective business succession plan. Methodically assess current talent, evaluating their skills, experience, and potential. 

Consider leadership qualities, adaptability, and alignment with organizational goals. Engage in open communication with potential candidates to gauge interest and aspirations. 

A meticulous identification process ensures a smooth transition, maintaining continuity and fostering the long-term success of your business.

3. Communicate the plan

Effectively communicating a business succession plan is essential for a seamless transition. Start by informing key stakeholders, such as employees, clients, and investors, about the plan’s purpose and benefits. 

Use clear and transparent messaging to address concerns and ensure understanding. Implement a phased communication approach, providing updates at appropriate intervals. 

Foster open dialogue to address questions and concerns, promoting a sense of stability and confidence in the transition process.

In private HR discussions, inform selected individuals that they are under consideration for roles of increasing significance. 

Emphasize the absence of guarantees and acknowledge that circumstances may alter the plan.

4. Enhance professional development

Elevating professional development within your business succession plan is crucial for future leadership. 

Intensify investment in the career development of chosen successors as part of workforce engagement management efforts. 

Implement job rotations to broaden their knowledge and connect them with mentors to enhance soft skills like communication, empathy, and diplomacy.

Identify key skills and competencies required for successors. Implement tailored training programs, mentorship initiatives, and continuous learning opportunities. 

Encourage collaboration and cross-functional experiences to broaden expertise. Regularly assess and adjust development plans to align with evolving business needs. 

Prioritizing professional growth ensures a robust pipeline of capable leaders for a seamless succession.

5. Trial the plan

Test potential successors by having them assume some of the responsibilities of a manager during a vacation. 

Pilot your business succession plan through a phased trial. Select a small-scale scenario, monitor its execution, gather feedback, and make adjustments accordingly. This trial ensures a smooth full-scale implementation.

Doing so provides valuable experience for the staff and allows you to identify areas requiring additional employee training .

6. Integrate with the hiring strategy

Align your hiring strategy with the business succession plan by identifying potential successors during recruitment. 

Foster a culture of mentorship and skill development, ensuring a seamless leadership transition.

Identify talent gaps left by potential successors and use this information to shape future recruiting efforts.

7. Consider your succession

When crafting a succession plan, consider your eventual replacement. Identify an employee who could step into your role and initiate measures to aid their preparation for the transition.

Your workforce is dynamic, and change is the only constant when it comes to employee behaviors. 

While predicting departures may be challenging, effective succession planning ensures business continuity, securing a stable future for your company using an agile approach to financial sustainability.

Implement business succession planning to ensure your survival

Implementing business succession planning is crucial for ensuring the survival and continuity of your enterprise as you keep ownership and avoid a buy-sell agreement scenario.

By identifying and nurturing future leaders, clarifying legal obligations, and addressing financial and tax considerations, senior leaders fortify their enterprise against unforeseen challenges. 

This strategic approach secures your company’s legacy and fosters resilience and adaptability for sustained success for any enterprise.

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Tristan Ovington

Tristan Ovington is a professional senior writer and journalist, specializing in providing expert insights on various topics such as digital adoption, digital transformation, change management, and Cloud apps. He delivers his knowledge through accessible online content that is data-driven and presented in a friendly tone, making it easy for readers to understand and implement.

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

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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.

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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Business Succession Planning: A Step-by-Step Guide

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

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.

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)

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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What Is Succession Planning?

• How It Works

Special Considerations

Succession planning and diversity.

• Succession Planning FAQs
• Business Essentials

Succession Planning Basics: How It Works, Why It's Important

Yarilet Perez is an experienced multimedia journalist and fact-checker with a Master of Science in Journalism. She has worked in multiple cities covering breaking news, politics, education, and more. Her expertise is in personal finance and investing, and real estate.

Investopedia / Julie Bang

The term succession planning refers to a business strategy companies use to pass leadership roles down to another employee or group of employees. Succession planning ensures that businesses continue to run smoothly and without interruption, after important people move on to new opportunities, retire, or pass away. It can also provide a liquidity event , which enables the transfer of ownership in a going concern to rising employees. Succession planning is a good way for companies to ensure that businesses are fully prepared to promote and advance all employees—not just those who are at the management or executive levels.

Key Takeaways

• Succession planning is a business strategy for passing leadership roles on to one or more other employees.
• The strategy is used to ensure that businesses run smoothly after employees retire and leave the company.
• Succession planning involves cross-training employees to help them develop skills, knowledge, and an understanding of the business.
• Plans can be long-term, which are meant to account for future changes, or for emergencies whenever anything unexpected arises.
• There are many benefits to succession planning, including inclusivity if companies have a strong plan to diversify their workforce.

Understanding Succession Planning

Succession planning is a contingency plan. It is not a one-time event. Rather, it should be reevaluated and updated each year or as changes dictate within the company. As such, it evaluates each leader’s skills, identifying potential replacements within and outside the company and, in the case of internal replacements, training those employees so they’re prepared to assume control.

In large companies, the board of directors typically oversees succession planning in addition to the chief executive officer (CEO), and it affects owners, employees, as well as shareholders. A larger business may train mid-level employees to one day take over higher-level positions. For small businesses and family-owned companies, succession planning often means training the next generation to take over the business.

The process takes a lot of time and effort. As such, it requires:

• Recruitment or Proper Hiring: The goal is to choose candidates who are capable of rising through the ranks in the future. For example, an experienced person from another company might be courted and groomed for a higher position.
• Training: This includes the development of skills, company knowledge, and certifications. The training might include having employees cross-train and shadow various positions or jobs in all the major departments. This process can help the person become well-rounded and understand the business on a granular level. Also, the cross-training process can help identify the employees that are not up to the task of developing multiple skill sets needed to run the company.  

Businesses may want to create more than one type of succession plan. An emergency succession plan is put in place when a key leader needs to be replaced unexpectedly. A long-term succession plan, on the other hand, helps the company account for anticipated changes in leadership.

According to human resources (HR) experts, succession planning involves preparation rather than pre-selection. This means that those responsible must identify the skills, practices, and knowledge. Although it may seem like a complex process, it doesn't have to be, especially if businesses and leaders are able to organize and plan ahead of time. The whole process can take anywhere between 12 to 36 months.

In small companies, the owner alone may be responsible for succession planning.

One way to succession plan in a business partnership is for each partner to purchase a life insurance policy that names the other partner as the beneficiary. This type of succession plan is called a cross-purchase agreement and allows the surviving partner to continue operating the business.

Here's how it works. If one partner dies at a time when the surviving partner would not otherwise have enough cash to buy the deceased partner’s ownership share, the life insurance proceeds make that purchase possible.

Succession planning is also commonly known as replacement planning and often involves passing on ownership of a company to someone else.

Benefits of Succession Planning

There are several advantages for both employers and employees to having a formalized succession plan in place:

• Employees know that there is a chance for advancement and possibly ownership, which can lead to more empowerment and higher job satisfaction.
• Knowing there is a plan for future opportunities reinforces employees' career development.
• Management's commitment to succession planning means that supervisors will mentor employees to transfer knowledge and expertise.
• Management keeps better track of the value of employees so positions can be filled internally when opportunities arise.
• Leadership and employees are better able to share company values and vision.
• A new generation of leaders is needed when there's a mass exodus of people from the workforce into retirement.
• Proper succession planning benefits shareholders of public companies, especially when the next candidate for CEO is involved in business operations and is well respected years before the current CEO retires. Also, if investors observe a well-communicated succession plan, they won't sell the company's stock when the CEO retires.

Succession planning can also cultivate a new generation of leaders, thereby providing an exit strategy for business owners who want to sell their stake.

One of the key drivers to success for any company (whether it's a small business or a large corporation) is how inclusive it is. Companies are now recognizing the need to diversify their work environments in order to remain competitive and successful. Not only does it boost employee morale, but it also aims to broaden the pool of talent and make attempts to fight bias.

But how do companies do this? This involves a well-structured succession plan that includes hiring individuals from different backgrounds, those who have different leadership abilities, and people who bring different experiences to the table. The plan should also include removing any barriers that may exist internally for employees of all levels and ensuring a comfortable work environment for all employees.

This only works if succession plans are put into place wholeheartedly rather than to boost corporate images.

How Does Succession Planning Work?

Succession planning is used by businesses to streamline the process involving a change of leadership or ownership. It involves recognizing internal employees who merit career advancement and training them to assume new roles within the company. These plans only work if companies take the steps necessary to prepare. Plans are often long-term to prepare for inevitable changes in the future. Emergency plans can be set in place to account for unexpected changes.

What Is Succession Planning in Business?

Succession planning is an important part of any business to help it run smoothly and without interruption whenever there needs to be a change in leadership. Changes can be the result of people leaving the workforce (changing companies, switching careers, or retiring) or if there are unexpected circumstances, such as the death or displacement of a team member.

What Are Some of the Common Mistakes Companies Make During Succession Planning?

Succession planning requires careful organization and (as the name suggests) planning. Companies may miss opportunities or make missteps if they can't communicate their vision with employees, don't adopt a formal agreement or plan (including a shortlist of candidates and conducting regular reviews of positions and employees), assume their talent has the skills and knowledge to advance and succeed, fail to use succession plans for all employees, and ignore the need to diversify their talent pool.

SHRM. " Engaging in Succession Planning ."

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What Is Succession Planning—and Why Is It Important?

So, your organization is growing. That’s great! But does your organization have a growth plan? Or what about a succession plan? If you said “yes” to a growth plan, but “no” to a succession plan, that could be a problem.

While a growth plan prepares your organization for the road ahead, it doesn’t help your employees grow with the organization. In other words, having a growth plan without a succession plan is like building a skyscraper and forgetting to add the elevator.

But what is a succession plan? And why is it so important to have one? Read on to uncover the answers to these all-important questions.

What Is Succession Planning?

By definition, succession planning is a strategy companies use to pass leadership roles down to other employees. An effective succession plan should equip the identified successors with the skills and knowledge they need to fulfill their future roles.

What’s the Difference Between a Succession Plan and a Growth Plan?

A growth plan outlines how an organization expects to grow, then identifies upcoming needs to support that growth. A typical growth plan might include:

• An overall business goal
• A list of components needed to reach the goal
• A timeline with checkpoints or stages of development
• An initial budget
• An outline of the marketing strategy
• Infrastructure, hiring, and other essential needs.

On the other hand, a succession plan focuses on what you need to provide employees for them to advance within your organization. And while many organizations have growth plans, 65% do not have a formal succession pla n in place.

In other words, while they’ve planned out their upcoming organizational needs, often including new management roles, they have no consistent strategy to identify strong internal candidates and help those employees fill the roles in that growth plan.

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The 9 Most Important Benefits of Succession Planning

Considering the scarcity of succession plans, you may think it’s better to hire from outside; but in fact, research suggests that internal hires notably outperform external hires during their first few years on the job .

Knowing this, many organizations prefer to promote from within, and some even make it part of their company culture. These organizations and their employees benefit greatly from succession planning.

6 Benefits of Succession Planning for Organizations

Succession planning is a great idea for any organization, regardless of its hiring philosophy. Here are some of the key benefits of having an effective succession plan in place:

• Save money: A succession plan sources candidates from inside your organization. This means you’ll spend less money on recruiting, not to mention onboarding and training.
• Stronger internal hires: According to Gallup research, 82% of managers are chosen for their performance, not their managerial skills. Because a good succession plan allows you to gauge aptitude and enthusiasm for internal recruitment , it acts as a prefilter for employees you’ve marked for advancement.
• No lengthy vacancies: It’s impossible to predict when a great candidate will arrive to fill an opening, and a long delay can throw a huge wrench into your organization’s expansion strategy. However, by preparing employees in advance to step into new roles as soon as they open, you can eliminate that big question mark in your growth plan.
• Creating a foundation for career development: Learning and development is a big priority for young candidates. So, having a succession plan in place is a clear indicator that you are willing to invest in your workforce and guide them forward.
• Increased employee engagement: A succession plan shows you value your employees, provides recognition and rewards for high performers, and gives them a clear goal to work towards beyond business objectives. In short, it’s an engagement goldmine.
• Minimal downtime, maximum performance potential: A succession plan that includes cross-disciplinary training and skill development can expand your workforce’s existing capabilities. This makes your organization more versatile, more productive, and less vulnerable to absences and bandwidth bottlenecks.

3 Benefits of Succession Planning for Employees

What’s good for an organization isn’t always good for its people, but succession plans are great for both employers and employees alike. Employee development is an essential component of any effective succession plan. In fact, without a strong development aspect to prepare employees for career advancement, a succession plan doesn’t work. With a succession plan in place, it can be a win-win for both parties.

Here’s how your employees can benefit from a well-designed succession plan:

• They’ll feel valued: The fact that someone is willing to invest time, effort, and money into their development makes employees feel like they’re valued for their potential, not just their current performance.
• They’ll gain a sense of purpose: Some organizations serve a noble cause, while others create a sense of ownership with profit sharing or stock options. For those who can’t do either, a succession plan provides a clear path to advancement and fights the feeling of aimlessness that creates disengagement and turnover.
• They’ll feel more prepared: Whether it’s to lead a big project or take on a management role, stepping into the spotlight can be scary. A succession plan helps put employees at ease by creating space and time to ask questions and make mistakes before things get real.

What Is the Role of Recruiting in Succession Planning?

An effective succession strategy should be closely linked to your recruitment strategy. A succession plan will help you develop a more long-term perspective when hiring and recruiting. Rather than simply looking for a good candidate to fill a job for a current opening j, you will invest in hires that can fill present needs and support the future growth of your organization.

Through proper planning, you can forecast openings and then recruit superior employees with the intent to develop their skills, knowledge, and abilities to prepare them for advancement. Candidates are looking for opportunities for career growth with a clear path for upward mobility. The fact that your organization has a culture of promoting from within and a succession plan to make it happen can therefore make you more appealing to top talent.

How to Design and Implement a Succession Plan

A succession plan is essentially a growth plan for employees. It includes similar elements to a growth plan but it should be more focused on employee development . A complete succession plan should have:

1. Define Overall Employee Development Goals

You might be looking for employees to develop into managers, to become competent in cross-disciplinary roles, or to expand their own skills and become experts in an area the organization has plans to enter. Or you might have a plan that can achieve different goals depending on the need.

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2. Align Around a List of Requirements

This could be anything from minor tasks and books to read to course completions and successful leadership of projects. In essence, this is everything an employee needs to do in order for the organization to consider them ready for their new role.

3. Create a Timeline for Succession

In order to match an employee’s development plan to your organization’s growth plan, you need to know when to begin. A timeline tells you how much time development will take and offers a way to grade the employee’s progress as well.

4. Get Approval for Budget

From buying books and software to estimating the hours your succession plan will take from an employee’s workweek, it’s essential that your budget falls within what your organization can handle as it works towards its overall business goals.

5. Craft a Strategy for Implementing Your Succession Plan

The “how” of your succession plan should outline the methods you intend to use to introduce, conduct, and measure the process. That could mean any or all of the following:

• A reading list of books or online courses
• A mentoring or shadowing program
• Accepted classes or institutions
• Internal training materials
• A defined trial period or series of evaluation tasks

Your strategy should also outline how you intend to measure and track how employees are performing at each stage. This could involve a simple checklist, a test or graded project, some sort of peer/manager review, or a combination of all three.

Next Steps: Invest in the Future With Succession Planning

We’re taught from a very young age that it’s a good idea to plan for the important things in life, and doing so often comes down to money. When it comes to business, many organizations are so wary of their finances that they become hyper-focused on planning how to spend wisely as they grow.

To that end, it’s much easier to calculate how many desks you’ll need next year than it is to quantify the return on investing in the people sitting behind them. But more than any product, it’s the people who bring value to an organization—and that makes employees the wisest possible investment.

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What is succession planning? A key talent strategy for business

Succession planning helps businesses cultivate a pool of talented workers who are poised to take over leadership roles as the business grows, changes and develops..

What is succession planning?

Succession planning is a talent management process that builds a pool of trained workers who are ready to fill key roles when leaders and other key employees step down. Organizations with succession planning programs in place foster a talent-oriented culture by recruiting skilled workers and top talent. Once recruited, businesses focus on developing these workers’ skills, expertise and knowledge so they are prepared to take on leadership roles in the event of organizational growth, talent loss or management turnover.

A change in leadership can be sparked by more than a resignation — an employee might retire, get fired, get sick, take leave or quit without notice. Succession planning ensures there’s a strategy in place for someone to step in, get promoted and take over that person’s duties without a loss in productivity and morale.

However, the goal of succession planning isn’t to prepare one person to take over a specific role. That’s called replacement planning, which is different. Succession planning relies on a large pool of talented workers ranging from entry-level to senior leadership who are being prepared for key roles. These employees have the right skills, energy and leadership qualities that will benefit the company across a spectrum of roles, departments and seniority levels. Replacement planning is linear — you are preparing a worker to take over or replace specific senior management positions; succession planning is about cultivating a flexible, large selection of talent.

Succession planning process

The process of succession planning is unique to each company, but there are general guidelines that you can follow to help your business create a successful succession strategy.

• Identify the most important roles in the organization that would need to be filled quickly if that employee exits the organization.
• Define the main responsibilities, competencies and requirements for each job, including what personality traits best suit the role.
• Use the established criteria to assess candidates and to determine who has the potential to grow into a leadership position.
• Establish a talent pool of workers who are qualified to eventually fill key roles in the organization.
• Develop these employees through training and valuable work experience so they’re ready to take over leadership positions when the time comes.

Succession planning template

It’s important to create a template that outlines what succession planning will look like in your company. The goal is to create as seamless of a transition as possible and to avoid hurting morale and productivity. The template should reflect the specifics of your succession planning — whether you’re a business owner preparing for the day you pass the company onto someone else or an executive planning your future exit strategy. Some companies even publish their own templates online, which can help offer guidance if you’re struggling to create a template for your business.

Your template should at least include the following:

• All relevant company information including the date the succession plan was developed.
• A table of contents that can point readers to different sections of the succession plan.
• An overview of the succession plan, what the organization wants to achieve with the strategy and any details
• Any leadership or non-leadership roles that are vital to business operations or have a large impact on the company.
• A list of roles that you can predict will be open within the next few years due to retirement. If you’re in an industry or area with high competition, consider potential losses from poaching.
• A list of all potential candidates that are fit for future leadership or high-potential positions.
• Training programs and career development efforts to train high-performing workers.
• Any legal documents that need to be considered, including contracts, partnerships and other agreements.

Succession planning best practices

Succession planning is a great way to build your next generation of IT leaders . Your succession plan should take into consideration current and future business challenges, critical skills, future skills, all core and technical competencies and a strong plan for career development. Succession planning involves multiple steps but there are four core objectives that you’ll need to build a strong succession planning strategy .

• Identify qualified candidates within the organization who will be able to take on more responsibility in the future.
• Once you identify your top candidates, focus on developing their skills and expertise through training
• Get leadership engaged in developing future talent and supporting those with high potential in the organization.
• Create a database of workers so staffing decisions can be made quickly when key positions open.

For more on succession planning best practices, see “ How to build the next generation of IT leaders ” and “ CIO succession planning in the digital age .”

Who benefits from succession planning?

Succession planning is as important in small organizations as it is in large organizations. For smaller companies, with less resources, smaller budgets and fewer employees, succession planning helps avoid disruptions in workflow. This is especially true for owner-operated businesses once the owner steps down or sells the company. In large organizations, succession planning is important because there’s a lot at stake and an unexpected loss can leave the business in chaos. With a complex organizational structure, there needs to be enough talent to go around so leadership and management changes can be addressed quickly.

Succession planning examples

At Apple, Steve Jobs founded Apple University to support succession planning by educating Apple employees and leaders to understand how he built the business and how to think like Steve Jobs. It’s highly secretive, but it’s designed to help keep consistency in the organization. Apple also demonstrated a commitment to succession planning when Tim Cook seamlessly took over as CEO after Jobs stepped down. Cook has since indicated that succession planning is still an important strategy for the organization, with a “deep bench” of successors poised to take over in the future.  

IBM demonstrated its succession planning strategy in 2011, when Samuel J. Palmisano stepped down. The company’s first female CEO, Virginia Rometty, was ready to take over in his place. Rometty worked for IBM for over 30 years, so she already had a deep knowledge of the company culture and business operations. It allowed for an effortless transition, so the company could continue working to its full potential despite the organizational changes.

The future of succession planning

A key component of succession planning is talent development. For key players that are identified as potential candidates for succession planning, it will be important to figure out how to keep them engaged and motivated. Currently, it’s millennials who are coming up in the workforce and are largely the target of succession planning.

Millennials comprise 38 percent of the workforce, according to Gallup, and they’re poised to take over leadership roles as baby boomers start to retire. The report points out that if organizations fail to meet millennial’s needs, they’re more likely to “function as free agents, always looking for fresh opportunities.” The survey found that 60 percent of millennials in the U.S. workforce say they’re “currently looking for a new job opportunity.”

According to a report from Gallup, employees used to care about salary, satisfaction, having a good boss, annual reviews, their weaknesses and their job. But today, employees are focused more on having a purpose, developing their skills and working with mentors. Employees are also less focused on annual reviews, and more concerned with maintaining ongoing discussions about performance throughout the year. These workers are also interested in cultivating their strengths and finding a healthy work-life balance.

The good news is that millennials are eager to learn and grow under “high-quality management.” They want to feel interested in their work, with a sense of purpose, and they want to know they have opportunities to advance. Understanding your employees will make it easier to develop their talent in the modern workplace, so they’re prepared as future leaders.

Succession planning tools and software

Succession planning is a skill that requires business acumen, communication skills, leadership skills and other hard and soft skills. But there are tools and software designed to help make the process of succession planning easier on an organization. Talent management is critical to succession planning, so tools that help manage employee training and progress will give you more insight into how talent develops in the organization. Here are some popular succession planning tools and software:

• Talent Guard
• MentorcliQ Employee Mentoring
• Workday Succession
• HRToolBench
• Bullseye Engagement Performance Management System
• EmployeeConnect

Succession planning training and certification

Succession planning requires collaboration, buy-in and effort from leadership in the organization. It also requires working across departments to understand and fill talent gaps, and then communicating those to HR and recruiters. If you want to get a better understanding of succession planning and how it will fit into your business, here are some training and certification programs you can choose from:

• EDUCBA — Succession planning video course
• ASPE Training — Succession planning boot camp
• Human Capital Institute — Leadership Development & Succession Strategist (LDSS) certification
• Institute of Organization Development — Leadership Development Certification program (LDCP)
• MRA — Succession planning training course
• The American College — Business succession planning certificate

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Succession Planning: What It Is & Why It’s Important

April 24, 2023

The unexpected loss of key leaders can throw a real wrench into the works for organizations, especially in the current climate of steep competition for talent. Starting a hiring search from scratch can be frustrating, time-consuming and expensive. That’s why it’s imperative for organizations to prepare to replace crucial positions before there’s a frantic need. A proper succession planning process is the answer.

What is Succession Planning?

Succession planning is a process in which an organization prepares to fill positions and retain skills and knowledge when senior leaders leave. Research shows employees at companies that hire and promote more internal candidates stay 41 percent longer than workers at companies with lower internal hiring rates, according to LinkedIn’s 2020 Global Talent Trends report.

Why is Succession Planning Important?

Effective planning makes succession a managed event rather than an unexpected crisis. It ensures leadership continuity, which contributes to overall smoother sailing for the company—including better business results, higher employee retention and better organizational morale. Succession planning is important when it comes to safeguarding institutional knowledge, making sure it doesn’t leave the company when senior leaders do.

Benefits of Succession Planning

  Succession planning brings several benefits, including:

• Ensuring business continuity with smooth transitions of leadership and transfer of institutional knowledge
• Reducing disruptions and risks
• Identifying future leaders and taking the time to develop them well in advance 
•   Boosting employee morale and retention by investing in employees’ development and future prospects with the organization

Key Elements of Effective Succession Planning

  Effective succession planning requires a thorough analysis of an organization’s leadership structure and needs. The goal is to determine what actions need to be taken immediately, as well as over the medium and long term, in order to keep leadership strong on an ongoing basis.

One of the foundational steps in this process is cataloging and defining roles and responsibilities throughout the organization and understanding how those roles relate to each other. Next, you can identify potential successors and assess what they need to effectively move into leadership roles. Company-sponsored training and development programs are often a key element of this preparation.

With this information, you can create a succession plan and timeline that details the steps that candidates should take to prepare for leadership. This plan should be communicated to stakeholders so that everyone is on the same page. 

Obstacles to Succession Planning

  In designing your process, you should prepare for common obstacles that can come up.

Internal Resistance to Change

  Although succession planning provides a number of organizational benefits, not everyone will be immediately on board. Not everyone likes to think about things ending. Some leaders in the organization may be resistant to sharing knowledge; managers may see succession programs as a burden on their time or they may want to hold on to their best performers. Program planners should anticipate these arguments and clearly lay out the business case for its importance and need. Starting small, perhaps with one major function, can create a success story that can help allay concerns.

Organizational Silos

  Business unit silos can make it difficult to identify promising candidates and share knowledge. Proper succession planning can start by working with functions that are partially shared among different units. Planners can connect people across units for temporary assignments, projects or conversations to develop more cross-unit collaboration.

Equitable Opportunities

  In many organizations, succession opportunities have often been decided in an ad-hoc way by a few leaders who may not have a holistic view of the organization, meaning that many potential succession candidates have been overlooked. This has been particularly true for underrepresented populations such as BIPOC and women. A formal succession plan should include processes that root out bias and allow the organization to better discover potential talent in an equitable way.

Lack of Buy-in from Key Stakeholders

  Without buy-in from key stakeholders, you may not get very far in executing an effective succession planning program. It’s key to communicate early and often with stakeholders so that they clearly understand your plan. You also need to understand any concerns or roadblocks on their side and find solutions that will work for everyone involved. 

Limited Resources and Time

  Time is of the essence—and most of us don’t feel that we have enough of it. The resources needed to effectively carry out a succession plan—including money, expertise, and human resources—may appear scarce as well. The key here is to establish the importance of effective succession planning for the future of the organization and make sure it gets the priority it deserves.

Uncertainty About the Future

In any given organization in today’s business climate, it can sometimes feel that change is overwhelming and that business evolution outruns any attempt to plan ahead. It’s certainly true that a succession plan should be flexible enough to adjust as needed. But having some kind of plan in place will give the organization a big advantage over no plan at all, even if it needs to change along the way. 

Utilize Mentoring as a Succession Planning Template

Mentoring programs are very effective at identifying employees with high potential and pairing them with experienced partners who can help them grow and thrive. Mentoring focuses on building personal relationships that help make the organization stronger, one person at a time, in order to achieve long-term goals. 

Pairing high-potential employees with leaders in the organization can set up knowledge transfer and build greater institutional understanding for newer generations of employees. Using a mentoring template within succession planning can give your efforts a head start.

Succession planning best practices

  Following established best practices can help your organization achieve optimal results.

1. Evaluate current data

It’s important to understand your organization’s current succession needs and issues in order to plan what needs to be done. Identifying data points such as how much of your workforce is currently eligible to retire and which positions take the longest to hire for will help you create an objective baseline for your planning program.

2. Do your homework

Identifying potential candidates is key to succession planning. It’s crucial to make sure that you know what you’re looking for in a candidate, and that you conduct a thorough search. This means objectively establishing the qualities and experience that define the ideal candidate. You should look beyond obvious next-in-line employees to make sure you are including the best possible candidates, regardless of their current position.

3. Establish expectations

Your succession planning process should be transparent both for candidates and the leaders who are working with them. Make sure that candidates are ready and willing to move forward, and that leaders and successors understand their respective roles and obligations.

4. Involve employees and stakeholders in the process

Succession is a multifaceted issue, and it’s helpful to have multiple perspectives to add to the planning mix. Soliciting feedback and ideas from both employees and stakeholders ensures that you’re getting a 360-degree view. It also goes a long way toward crucial buy-in from both groups.

5. Align the plan with the company’s strategic goals

While a good succession plan will delve into the details of how succession should proceed on a granular level, that’s not where it begins. The overarching guide to any succession plan should be the high-level mission and strategy of the organization. Starting from there and working your way down to the day-to-day logistics ensures that the plan supports the larger goals of the organization.

6. Develop a diverse pool of potential successors

It’s important to ensure that succession programs include groups of employees that have been historically underrepresented. Make sure the talent pipeline is drawing from diverse and inclusive backgrounds and functions, beyond internal recommendations or those closest to the existing role. The goal of succession planning is to prepare employees for future potential roles—not pre-selecting successors. This approach keeps opportunities open and encourages a wide-ranging search for candidates.

7. Evaluate and adjust the plan regularly

No succession plan should be written in stone. Business objectives and environments can and will change, along with the goals and circumstances of potential succession candidates. It’s important to regularly take a look at the plan’s effectiveness and adjust as needed.

8. Seek outside expertise and support

If your organization is new to succession planning, you don’t have to struggle on your own. Outside resources and experts can be invaluable in helping you create a succession plan that can serve your organization now and into the future.

Overhaul Your Succession Planning Process with Mentoring

Businesses of all sizes can realize big benefits through succession planning in terms of business continuity, maintaining institutional knowledge, employee retention and more. Mentoring is a key tool in succession planning, offering a personalized way to help an organization discover and develop potential leaders . Mentoring programs can help companies create a succession process that keeps an organization operating optimally, regardless of leadership changes.

Find out how Chronus mentoring software can help you optimize your succession planning.

Jennifer Sokolowsky

Jennifer Sokolowsky is a freelance writer and editor based in Seattle. Her work focuses on the potential of technology to transform the business world and human lives.

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What is Succession Planning—and Why Does it Matter?

Mar 9, 2021 | Blog , Succession Planning

What it is, How to Start & How to Succeed

As a consultant and succession planning keynote speaker, I often take it for granted that business owners know what it is, and why it is important. However, several recent virtual conversations with groups of business owners made me realize that this is not the case—so I thought this might be a good time to revisit some succession planning fundamentals.

Simply stated, succession planning is a process for planning the orderly transition of business leadership from one generation to the next. This includes identifying and developing new talent to replace incumbent leaders when they leave the organization, retire or pass away. There are countless studies supporting the importance of proactive succession planning, including some alarming statistics:

• 86% of corporate leaders believe succession planning is important
• Only 35% of organizations have a formalized succession planning process
• 14% believe their company does an acceptable job of
• 40% of companies report not having one internal candidate to replace their CEO
• 60% of new executives fail within their first 18 months after promotion or hire
• The direct cost of replacing a failed executive is approximately 10x their salary

The last figure really drives it home, doesn’t it? Even a conservative estimate puts that figure in the millions. Few organizations, especially family-owned businesses, will survive that kind of expenditure—and only the rarest of cool-headed leaders could possibly succeed under that kind of emotional and financial pressure. So, why is succession planning so hard to start?

Why So Many Companies Avoid Succession Planning

The short answer is this: it’s actually NOT difficult to begin taking steps to prepare your family-owned business for a leadership transition, just as it’s not technically difficult to prepare one’s last will and testament. What it is, though is uncomfortable —and this emotional discomfort is often a significant barrier to the succession planning process. Here are three other common reasons people might put things off:

They fear conflict. Many privately owned companies avoid succession planning altogether, fearing it will be a painful process with hard conversations that result in hurt feelings among leaders—some of whom might be family members. They may not be wrong about the difficult conversations; this is a necessary part of the process! But it’s important to remember that a bit of strategic disagreement now is likely to help you avoid bigger conflicts (and consequences) later on.

They think they’re already done . Other organizations consider a succession plan completed when they’ve identified their next CEO, or the person who could potentially assume the position several years down the line. In reality, choosing a successor is just the first step.

They know it’s the end. For some privately held and family owned businesses, succession planning may lead to a decision to sell—and understandably, this can feel like a death in the family! Whether a company fails to identify a candidate to take the business forward or they receive an offer they can’t refuse, it may become clear that exit is the best course of action.

While this can be very hard information to hear, a timely farewell can also have a happy ending! By selling our family car dealership business in 2008, I was not only able to harvest the value we had accumulated through generations of hard work for the benefit of the family shareholders — I was also able to divert my focus to our commercial real estate business, which I was more interested in and is now thriving.

Why Companies (Finally!) Start the Succession Planning Process

The problem with succession planning isn’t that business owners don’t recognize its importance—by and large, they do. Most companies simply fail to recognize its urgency, and continue to put it off until it’s too late. In the case of our family-owned business, it took my father going into hospital for life-threatening surgery to even start the conversation!

Beyond sudden illness and other catastrophes, common late-breaking catalysts might include advice from one’s board or other trusted advisors, recommendations from HR leaders and oversight (or outright pressure) from industry regulators to mitigate long-term risk. While all of these are excellent reasons to get started on your company’s succession plan, my advice is to not wait for any outside forces to light the fires of change.

Making a Strong Start: A Simple 8-Step Succession Plan

Every organization has a unique culture and situation, which requires a customized succession plan. Here are a few basic things to consider when starting on yours:

• Start with the end in mind. Having a good idea of what you want to happen to your business is a good starting point. What is your ideal outcome in the next 5–10 years? Do you want to pass the business on to your children, or another family member? Do you want to sell to your management team—or do you want to sell to an industry player or strategic buyer, for the best price possible?
• Plan your resources. I inherited a business with an aging management team and failing finances, so I knew there was work to be done before I could even think about selling the business! Our resource planning included not only the human resources of new managers, but also the time required to work with our existing car franchises to grow revenue, and further leverage profit by acquiring new franchises.
• Assess and mitigate risk. Some things—catastrophic fires and global pandemics, to name two in recent memory—are impossible to see coming. But it’s critical to take steps to reduce risks for your business by securing products such as “key person” insurance coverage.
• Attain alignment. Are your company’s leaders, stakeholders and board all in agreement on the direction of the business? Top-down alignment is essential for a smooth transition to the next generation. Without a clear succession plan, the transition will be rife with conflict and destructive disorganization—which will put your succeeding leader in an untenable position. This is precisely what happened to me, when I was suddenly forced to fill my father’s CEO shoes at the age of 28!
• Secure commitment. As our main business partners were car manufacturers with franchise agreements, it was important that they be committed to our course of action. Like most automobile companies, their criteria for success included attractive dealership locations with good facility condition; strong management; financial strength; proven customer satisfaction and robust track record of sales performance.
• Always be flexible. On the succession planning keynote speaker circuit, I advise my clients to allow at least 3–5 years for their succession plan to unfold and evolve. This allows the chosen successor to gain experience and knowledge, as the outgoing leader gradually reduces their responsibilities. I would have loved a gradual handover, with mentorship and knowledge transfer from my father! It would have been far less stressful than the sink-or-swim situation I found myself in.
• Seek advice. A little money spent now on a team of trusted advisors will save you a lot of time and money in the future. You may need help from a CPA, lawyer or financial advisor—or all three, depending on the size and complexity of your business. It’s also wise to secure a succession planning consultant to help guide you through this process, and make sure you have a plan that can be successfully implemented.
• Finally—JUST START! Remember: the best succession plans are not necessarily the most complex. Take that critical first step by putting your plan in writing, taking all the previous steps to heart and knowing that you have several years to revise and refine. When it comes to succession planning, the best time to start is always NOW. 

In summary: do the basics, and you will be ahead of the pack! Even if retirement seems like a distant dream and there are more pressing things that demand your attention, it’s time to start. Secure your life’s work and legacy by passing on your business in a controlled way, rather than rushing to put a plan together in a crisis. Take it from someone who knows.

Related Topics: Business Contingency Planning: What, Why + How Stepping Out, Not Down: Why Your Aging CEO Won’t Retire The Role of the Board During Family Business Succession

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Why succession planning should be a priority for every business

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Insights and ideas for people leaders

Stay informed with the biggest trends in workforce education.

For many organizations, succession planning falls toward the bottom of the priority list. Research shows that only 35% of organizations have a formal planning process in place. Most boards and CEOs consider this exercise important but rarely consider it urgent — unless, of course, they’re facing the departure of a key executive or linchpin employee. Then succession becomes a priority or, worse, a full-blown crisis — though at that point, it’s often too late for a seamless transition. 

The issue of organizational succession planning affects every size company and every industry, from start-ups to enterprises. It’s not if, but when a CEO or other key player leaves the company, whether by retirement, a better opportunity, termination or other circumstances. 

If you lack succession planning prior to a leader’s departure, the transition could be both challenging — and costly — for your organization. The average time to fill positions across all job levels is 36 days , with months more typically required for executive positions. Add to that the average number of days her replacement will need to get up to speed, an exceptional 26 weeks for executives to get up to speed.  

But it doesn’t have to be that way. 

According to a study, proactive succession planning can increase company valuations and investor returns by 20% to 25% . Yet few companies have viable plans in place for successful transitions across key positions.

To remain competitive and cultivate potential leaders, now’s the time to prioritize succession planning and develop a modern approach to preparing employees for each step forward within the organization. 

What is succession planning?

Succession planning is the act of preparing for the inevitable departure of key members of an organization to ensure the quickest, most seamless transition possible, regardless of the circumstances.

Put simply, the process involves HR and people leaders reviewing key roles across the organization, noting those where an employee’s departure could affect or disrupt the company. From there, they identify potential leaders in the ranks and develop a succession pipeline that will proactively prepare these candidates to step into a more advanced role when a vacancy arises.

Building a pipeline of quality candidates is a long-haul, ever-evolving objective. A deliberate and proactive process like this supports the smooth transition of personnel as well as continuous employee development that’s directly aligned with the needs of the business. Departures without several suitable candidates in the pipeline force a reactive decision (and usually a poor one), based on urgency instead of strategic, thoughtful placement.

Taking a long-term approach to succession allows you to proactively build an internal talent pipeline and fill vacant roles more easily. However, that also necessitates having a robust L&D strategy in place for upskilling and developing these employees over time.

What roles and employees is succession planning for?

Succession planning isn’t just for those in executive positions. While it’s traditionally thought of in this way, the current skills shortage requires HR leaders to think beyond executives and extend it to other levels of leadership. 

An effective succession planning strategy addresses the need for leadership roles at all levels, including departmental leaders, as well as team and project leads. Other critical or specialized roles of non-leadership positions may also have a succession plan in place - especially if they demand a niche skill set that is hard to find.  

You may also want to address temporary vacancies in your succession plans. Peers and direct reports to vital roles should have the basic competency to step in if a leader is taking a vacation, parental leave or extended medical leave.

Why is succession planning important?

Succession planning takes time, but it's worth the investment. Here’s why:

Addresses generational challenges

The number of leaders on the edge of retirement outweighs the number of individuals entering the workforce, forcing the issue of succession and creating holes that will need to be filled by a new wave of talent. Strong L&D programs prepare younger employees in a multigenerational workforce to step in and take the reins when retirees depart.

Supports diversity, equity and inclusion

It’s necessary to craft a succession planning strategy through the lens of diversity, equity and inclusion (DEI) . This may require going a level deeper to see if the L&D opportunities that your organization offers are effective at specifically uplifting diverse talent.

Diversity in leadership is still a massive challenge for many organizations as well. Women make up only 20% of senior leadership teams and for racially diverse employees, that figure drops to 13% . The numbers between gender and race and education levels do not correlate, and research shows this disparity negatively affects company success and progress. 

An advantage of succession planning is you can take action to identify high-potential, diverse individuals early on and craft a path to leadership — benefiting the employee and your business. 

Avoid employee turnover costs

Particularly at the upper level, the time between an executive’s departure and the replacement’s arrival can bring crucial work to a halt. The cost of a lack of succession planning for public companies rings in at $112 billion for hard costs like executive searches, severance packages, revenue losses from tabled initiatives and growth strategies. Although the turnover costs may be less for junior and mid-level employees, they are still significant and avoidable. 

Whether a company looks outside with a costly executive search or promotes someone from within, the uncertainty of the situation, lack of confidence in the potential replacement or poor performance from the new leader can destabilize an entire organization. This can even create a cascading effect of departures across the board, multiplying the cost of turnover exponentially.

Identify and address skills gaps early on

When identifying potential successors, you’re looking at the hard and soft skills they possess and evaluating their ability to take on a specific role. Through this process, you may be able to notice patterns among colleagues or even entire teams that are indicative of larger skills gaps that may pose a problem down the line. Plus, succession planning means not only identifying and training who will be stepping into an advanced role, but also preparing for the steps they will need to take to get there. Planning for succession requires that you take a critical eye to evaluate the L&D programs you have in place and ensure that they are robust enough to upskill and/or reskill workers across the organization effectively. 

What goes into effective succession planning?

At a high level, your succession plan should include:

• An outline of the critical roles that require succession planning and how those roles (or new roles) might evolve in the future
• An understanding of the day-to-day responsibilities of those positions
• An understanding of the technical and soft skills needed to be successful in these roles
• Multiple methods for identifying high-potential talent , including recommendations, professional assessments and conversations with employees
• L&D tailored for a succession pipeline that nurtures the development of interested high-potential candidates
• A transition strategy for role takeover, including a succession plan for the role vacated by the incoming replacement 

These steps are just a starting point. The specifics of a succession plan will be unique to the role in question, as well as the current skills, competencies and work experience of the candidate. There will also be differences depending on whether the plan addresses permanent replacement or temporary filling.

Internal vs. external succession planning

Internal and external hires each come with a unique set of challenges and benefits .

Internal promotion is significantly cheaper than external hiring, requires far less ramp-up time, promotes higher retention and allows you to provide hyper-specific training to your candidates. Most importantly, employees promoted from within tend to outperform external hires.  

Even so, external hiring has its place, allowing you to fill highly specialized roles and supporting the inflow of new perspectives and cultural additions. You will likely want to pursue a hybrid approach and take deliberate steps to recruit high-potential candidates to join the company prior to the vacancy. Here’s how to approach succession planning for both internal and external hires.

Internal succession planning: Prioritize learning and development

The first step in succession planning is to identify your high-potential employees (HiPo). These individuals are innovative, agile learners with the greatest capacity for success in a leadership position. As managers, they cultivate rising stars within their team. As individual contributors, they take initiative and invest in their own growth.

However, identifying the right talent is just the beginning. The next phase in the succession planning process is to ensure that you have the right workforce education , training and mentorship programs in place to develop your high-potential employees effectively. Every individual brings a unique set of skills to the table and each position has its specific requirements.

External succession planning: Finding the right people

When looking externally, it’s necessary to define the exact qualities you’re looking for in a candidate early on. These may relate to cultural values and identities, specific experience, technical skills or niche expertise. These qualities should reflect gaps in your current workforce or critical requirements of the role that’s being filled — sometimes even both.

After an individual has been hired, you can continue to cultivate your external hire using the same approach you would for an internal candidate. Providing access to ongoing training, mentorship and education opportunities will enable your new hire to ramp up quickly and underscore a culture of learning within your organization. 

Interim leadership

Interim leaders are individuals with the right competencies and experience to temporarily fill a role in the event of a long-term absence or to assist with the transition of an internal or external successor. 

Interims can also be critical in discovering and understanding what changes might need to be made to a vacant position. Their perspective may be instrumental in creating parameters for responsibility and behavior for the incoming leader, whether internal or external. 

Succession planning best practices

As you begin to create or revise your succession plans, consider these best practices:

• Look inside. Your strongest candidates most likely work for you already.
• Start preparing years ahead. Look lower on the ladder than you might think. Potential leaders need time to grow. 
• Don’t think of this as planning for a single person. Give yourself a succession pool with multiple candidates to consider, with an eye on future needs of the company, not just current needs
• Push your people. For curious, high-potential employees, give them challenges outside of their training and experience — maybe a 6-month assignment to solve a difficult problem or a transfer to a wholly unrelated department. With support from more experienced leaders, a dive into the deep end builds agility and courage. When it’s time to step up to the next level, they’ll have the skills and foresight to do so.
• Provide learning opportunities. Beyond experiential learning, offer workforce education as a continuous resource throughout an employee’s career. This nurtures a culture of learning that will propel your best candidates forward and help fill your succession pool with workers that are ready to hit the ground running. 
• Update your succession plan regularly. This is a rolling project, not a static one. Look forward to help define what sorts of roles, people and skills the future may require. Review and adjust as needed and schedule action items throughout the year to keep your plan at the ready.

Future-proof your organization with strategic succession planning

However you go about it, workforce succession planning can support your organization in keeping critical roles filled so that everything continues to run smoothly when a vacancy arises. By assessing skills needs proactively and developing robust L&D programs that encourage development, you’re building a succession strategy that future-proofs your business, while simultaneously helping your people advance their careers.

Having the right upskilling and reskilling initiatives in place allows for easier succession planning: Download this skill-building guide for step-by-step instructions on what you need to take your L&D to the next level. 

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Succession Planning 101: What is It and Why Is It Important?

Succession Planning

There comes a time that every business leader must ask themselves a question: "Before leaving my business, how do I go about planning for a successor?" With factors such as generational wealth, future goals, and executive strategies all tied up in your leadership role, you need to know how to prepare for succession. But what is succession planning? And why is it important to know how to prepare for succession? Let's go over the basics.

Understanding Succession Planning

Importance of succession planning, how does succession planning work.

• Determine the most crucial roles in the company. Consider the positions playing a vital part in the business's future success. Who holds the most responsibility in the day-to-day? In a world where folks may be wearing multiple hats, it can be helpful to consider the role and not specific individuals to start. 
• Develop a description of these roles and create a list of expectations for the position. What does the job fully entail? What is everything required of the person in the role?
• Identify the candidates who could best succeed in the role (or roles) based on the description and expectations you determined. Who could seamlessly transition into the position? Who might need a helping hand to get where they need to be to succeed?
• Create a plan to help those candidates get the training and development they need to remain strong candidates. Can a mentor or two take them under their wing? Are there additional responsibilities they can take on to prove their worth?
• Re-examine this succession plan annually and repeat steps 1–4 as necessary. What has changed since the last time the plan was examined? What remains accurate?

The Bottom Line: Succession Planning

Related Posts

When You Should Develop a Succession Plan for Your Business

How to Build an Effective Exit Strategy for Your Business

While you might not equate your business exit strategy with a family vacation, it actually helps to think of it like one (metaphorically speaking, of course). You probably wouldn't wait until a.

The Information You Need For Every Type of Business to develop a successful Succession Plan

As a business owner, you may have spent years growing, cultivating and shaping your company to match your strategic vision. It’s your baby, your lifeblood. While moving on or selling it might not be.

Plancorp started with a unique philosophy: Always put your clients’ interests ahead of your own, and you’ll build a successful business. That was in 1983, but the sentiment still drives every decision we make. After 40 years of helping individuals, families and business owners plan for financial independence, our commitment to serving as financial life advocates is stronger than ever. More »

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Why Succession Planning is Important to Your Business

As the owner of a small or medium-sized business, you have almost certainly given some thought to retirement. Be the ant, not the grasshopper. Before the day arrives, make sure that you leave behind a company that's prepped and ready for new ownership. Why is succession planning so important?

Increase Your Firm's Value

It’s understandable if you focus most of your energies on how much your business is worth now, not what it might be worth on some far away day when you've decided to move on. Unfortunately, this kind of thinking can result in short-sighted management decision making that reduces long-term value. This makes it more difficult to find a buyer.

For instance, in a survey of rural owners who had recently purchased an existing business, 26% cited “problems with the building or property" as an impediment to finding a suitable company to purchase. Often the previous owners, approaching retirement, had failed to maintain their buildings properly in order to reduce property taxes, when they should have kept them in good condition to preserve resale or inheritance value. [1]

A well-constructed succession plan can help grow your enterprise and increase its profitability, even years before a planned exit. This is because the process includes evaluating its current and projected resale value, identifying specific strengths and weaknesses, and developing a business plan that boosts stability and profitability.

Stay Ahead of the Market Curve

Due to the gradual aging of the U.S. population — two-thirds were born before 1967 — a “silver tsunami" of retirements among small business owners will increase rapidly over the next several years. [2-3] For instance, 12,000 to 16,000 professional financial advisors are expected to retire each year over the next decade, [4] while 50% of homecare business owners would like to sellout within five years. [5]

At the same time, numerous studies indicate that most small-to-medium sized companies in the United States have never formally adopted a succession plan. Among home improvement  (hardware) retailers, only 28% have one; less than half of those have it in writing. Only 8.3% of business owners in the homecare sector have a written plan on file. [6]

Overall, smaller companies are less likely to have a plan on file. Among business adviser  firms, 13% of those managing less than $50 million in assets have one, compared to 60% of those with over $500 million on the books. [7] Among family firms, the practice may even be declining, with only 23% reporting a “robust, documented" plan, compared with 27% two years ago. [8]

Companies that have a solid succession plan may be better positioned for sale than those that do not, offering buyers or heirs a more competitive business. If you have a strong succession plan, you may be several steps ahead of other companies entering the market to sell their business. You will have created a competitive advantage when the time comes.

Where to go from here?

Business succession planning is a financially and personally rewarding process, but it can also be emotional and complex. Let's start with the basics:

How Should I Transition My Business?

• Do the math to see which option makes the most sense for you. Understand the difference between cash and cash flow.
• Take a realistic look at maximizing your retirement income.

When Should I Transition My Business?

• Assess your business's competitive dynamics.
• Identify your exit objectives.
• Discern market conditions.
• Evaluate your company's attractiveness and readiness to go to market.

What is My Business Worth?

• Avoid valuation traps that can give you an inaccurate picture of your company's worth.
• Understand the difference between estate valuations, financial valuations and strategic valuations.

Who Should Benefit from the Wealth I Have Built in My Business?

• Customize your succession plan based on your personal objectives.
• Learn the importance of developing a plan early.
• Create a trust or “protective wrapper" to shield from future litigation.

Key Drivers to Successful Business Succession Planning

Base your succession plan on four critical pillars — competitive positioning, capital market conditions, shareholder dynamics & objectives, and changes in tax laws.

Ready to Help

PNC’s corporate and wealth team has the experience and financial modeling tools to help you “fast forward" down the road of life as you decide when to transition your business. Take the guesswork out of the equation and make sure your team understands your objectives.

We can outline your options so you can gain control of perhaps the most important financial decision you will make during your lifetime. Contact your PNC relationship manager to further explore business succession planning.

Start the discovery process here.

Now’s the time to plan

your business transition.

Important Legal Disclosures and Information

1. Rural Business Ownership Transitions Study: Findings From Surveys And Interviews With New Business Owners. University of Minnesota Extension. https://conservancy.umn.edu/bitstream/handle/11299/197992/new-owner-survey.pdf Contently 3

2. Rural Business Ownership Transitions Study: Findings From Surveys And Interviews With New Business Owners. University of Minnesota Extension. https://conservancy.umn.edu/bitstream/handle/11299/197992/new-owner-survey.pdf

3. 2012 Survey of Small Business Owners. US Census Bureau. https://factfinder.census.gov/faces/tableservices/jsf/pages/productview.xhtml pid=SBO_2012_00CSCBO08&prodType=table

4. An Advisor's Guide to Succession Planning. National Association of Insurance and Financial Advisors. https://www.naifa.org/NAIFA/media/Communications/pub/SuccessionPlanningReportSingle.pdf

5. Kazds, Katrina. Moving to an Employee Ownership Model. HomeCare magazine. 2018. https://www.homecaremag.com/april-2018/redefining-family-transfer

6. Kazds, Katrina. Moving to an Employee Ownership Model. HomeCare magazine. 2018. https://www.homecaremag.com/april-2018/redefining-family-transfer

7. The Succession Challenge 2018: Why Financial Advisers Are Failing to Plan for the Inevitable. Financial Planning Association.  https://www.onefpa.org/business-success/Documents/FPA-Succession-Planning-Report-0418FINAL.pdf

8. The missing middle: Bridging the strategy gap in US family firms. PwC 2017 U.S. Family Business Survey. https://www.familyoffice.com/system/files/industry_publications/2017%20U.S.%20Family%20Business%20Survey.pdf 

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What Is Succession Planning and Why is It Important for business?

As a talent manager, you understand the importance of finding and developing great talent to help your organization succeed. But what happens when key members of your team leave unexpectedly? How do you ensure that your organization can continue to operate at the highest level? That’s where succession planning comes in. In this article, we’ll take a data-driven approach to examine the importance of succession planning, share real-life examples of companies that have successfully implemented succession plans, and provide actionable steps for you to create your own plan.

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What is Succession Planning?

Effective succession planning is an ongoing process that allows family-owned companies and organizations to develop skills and identify potential candidates for key leadership positions within senior management. However, most companies fail to recognize the importance of effective succession planning, despite it being critical to their success.

Only a small percentage of organizations have a complete picture of their talent pool and potential successors, with many relying on search firms to fill senior positions in the event of unforeseen events. Soft skills, such as effective leadership and communication, are important assets that need to be developed within the organization to create a pool of great leaders for future opportunities. By identifying and developing certain employees for growth opportunities, HR leaders can ensure that their organizations are future-proofed and ready for the challenges ahead.

Why is Succession Planning Important?

Ensuring business continuity.

When a key member of your team leaves unexpectedly, it can disrupt your business operations and lead to a loss of productivity. Succession planning ensures that there are trained and ready employees available to fill critical positions in the event of a planned or unplanned vacancy. This reduces the risk of business disruption and ensures that your organization can continue to operate at the highest level.

Mitigating Risk

Without a succession plan in place, your organization is at risk of losing key employees without having a plan for how to replace them. This can lead to increased costs associated with recruiting and training new employees, as well as decreased organizational performance. Succession planning reduces these risks by ensuring that there are trained and ready employees available to fill critical positions.

Retaining Institutional Knowledge

When key employees leave, they take with them valuable institutional knowledge that is difficult to replace. Succession planning ensures that institutional knowledge is retained within the organization by developing employees who have the potential to fill critical positions.

Developing Future Leaders

Succession planning is an excellent way to develop future leaders within your organization. By identifying employees who have the potential to fill critical positions, you can provide them with the training and development they need to succeed in those roles. This not only prepares them for future leadership positions but also helps to improve organizational performance by ensuring that there is a pipeline of talented employees ready to take on new challenges.

Enhancing Organizational Performance

Succession planning has been shown to have a positive impact on organizational performance. According to a 2019 study by the Harvard Business Review, organizations with a strong succession plan in place have higher revenue growth, increased profitability, and higher market value compared to organizations without a plan.

What are the benefits of succession planning?

Succession planning is more than just identifying potential successors for critical roles. It is a critical business strategy that can help organizations ensure the continuity of operations , maintain stability during leadership transitions, and provide a foundation for future growth.

One of the most significant benefits of succession planning is leadership development . By identifying and grooming succession candidates for senior management roles, businesses can ensure that they have a pipeline of talent that is ready to take on increasing levels of responsibility. This not only helps to ensure continuity of leadership but also ensures that businesses can continue to innovate and evolve as new challenges arise.

Another benefit of succession planning is the ability to maintain business stability during times of leadership transition. When a key executive or leader leaves a company unexpectedly, it can create chaos and uncertainty throughout the organization. Having a succession plan in place can help minimize the impact of these transitions by ensuring that there is a clear plan in place for how the organization will move forward.

Succession planning can also help to increase employee engagement and retention . When employees see that there is a clear path for career development and growth within the organization, they are more likely to stay with the company long-term. This can help to reduce turnover and ensure that businesses can retain top talent.

In addition to these benefits, succession planning can also help to ensure that businesses are better positioned to respond to future challenges and opportunities . By identifying and developing a strong pipeline of leadership talent, businesses can be more agile and responsive to changes in the market and industry.

Overall, succession planning is a critical business strategy that can help businesses ensure continuity of operations, maintain stability during leadership transitions, and provide a foundation for future growth. By investing in leadership development and identifying and grooming succession candidates for critical roles, businesses can position themselves for long-term success.

Steps to Creating a Succession Planning

Now that you understand the importance of succession planning and have seen real-life examples of successful plans in action, let’s take a look at the steps you can take to create your own plan.

Identify Key Positions and Critical Skills : The first step in creating a succession plan is to identify the key positions within your organization and the critical skills required to fill them. This will help you to understand which positions are the most critical to your organization and which skills are necessary for success in those roles.

Assess Current Leadership Talent and Potential Successors: Once you have identified the key positions and critical skills, you can begin to assess the current leadership talent within your organization and identify potential successors. This will help you to understand which employees have the potential to fill critical roles and which employees may need additional training and development.

Develop a Training and Development Program for Potential Successors: Once you have identified potential successors, you can begin to develop a training and development program for them. This may include mentoring, coaching, and other development activities designed to prepare them for future leadership roles.

Create an Emergency Succession Plan: In addition to your long-term succession plan, it’s important to create an emergency succession plan in the event of an unplanned vacancy. This plan should identify who will fill critical positions in the event of a sudden departure or unexpected absence.

Establish a Timeline for Implementation: Once you have created your succession plan, it’s important to establish a timeline for implementation. This will help to ensure that you stay on track and that your plan is implemented effectively.

Communicate the Plan to Stakeholders: It’s important to communicate your succession plan to stakeholders within your organization. This will help to ensure that everyone is aware of the plan and understands their role in its implementation.

Are you looking for an easy-to-use and effective solution to help you manage your company’s succession planning process? Look no further than GoHire .

Common Mistakes During Succession Planning Strategy

While succession planning is critical for any organization’s long-term success, there are common mistakes that companies can make that can hinder their ability to effectively plan for leadership transitions. Below are some of the most common mistakes:

Lack of Clarity: Companies that fail to clearly define their succession planning objectives and goals will struggle to create a plan that effectively addresses their needs. This lack of clarity can lead to confusion and ambiguity, ultimately hindering the effectiveness of the plan.

Limited Scope: Companies that only focus on developing successors for executive positions or key leadership roles may overlook other critical positions within the organization. This can create talent gaps and leave the organization vulnerable in unexpected areas.

Failure to Involve Stakeholders: Succession planning should involve key stakeholders, including the board of directors, senior leadership team, and HR department. Companies that fail to involve these groups may overlook critical perspectives and leave key players out of the planning process.

Inadequate Resources: Succession planning requires significant time, effort, and resources to execute effectively. Companies that fail to allocate sufficient resources to their succession planning efforts may struggle to achieve their objectives.

Failure to Follow Through: Companies that create a succession plan but fail to implement it effectively will not reap the benefits of their planning efforts. Follow-through is critical to ensure that the plan is executed effectively and produces the desired outcomes.

By avoiding these common mistakes, companies can improve the effectiveness of their succession planning efforts and ensure a smooth transition of leadership when the time comes.

Real-Life Examples of Successful Succession Planning process

Starbucks made a CEO succession announcement in 2017, revealing that the founder and current CEO, Howard Schultz, would be stepping down from his position. The company had spent several years preparing for this transition, with Schultz having already delegated many of his daily duties to Kevin Johnson, his successor. Johnson was able to take over as CEO without any major disruptions, and under his leadership, Starbucks continued to prosper.

Procter & Gamble

Procter & Gamble is known for its rigorous and effective succession plans. The company has a robust talent development program in place, which includes identifying and developing potential leaders from within the organization. In 2015, P&G announced that CEO A.G. Lafley would be stepping down and that his successor would be David Taylor, who had been identified and developed through the company’s succession planning process. Taylor had worked in various roles within the company for over 35 years, and his smooth transition into the CEO role helped to ensure that the company continued to operate at the highest level.

Effective succession planning is a critical aspect of talent management that can benefit all types of organizations, including family-owned companies, by ensuring that there are skilled employees prepared to assume leadership positions. Developing internal talent is key to building a sustainable pipeline of potential candidates for key roles, including CEO succession and other senior management positions.

Succession planning is an ongoing process that involves identifying and developing internal employees with the necessary skills and experience, as well as providing opportunities for growth and development. This ensures that the organization has a complete picture of its talent pool and can cultivate effective leadership for the future. HR leaders should work closely with senior leaders to ensure that the process is integrated within the organization and that the potential candidates possess both the technical and soft skills required for future roles. By providing growth opportunities, companies can retain their most important assets and minimize the impact of unforeseen events.

Most companies should consider utilizing search firms to identify external candidates as part of their succession planning efforts. By following best practices and utilizing effective succession planning tools like GoHire, organizations can future-proof their success and ensure that they have a strong bench of potential leaders ready for any challenges that may arise.

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What is Succession Planning? Definition, Importance + 5 Benefits

Author by : chrmp.

• Employee Development

For any business, be it a small organisation or a multinational corporation, succession planning is an essential aspect of the success of an organisation.

It’s all about identifying and developing potential leaders from among the current employees, thus ensuring that the right people are in place to take over when key individuals depart, whether that’s due to retirement, resignation, or unforeseen circumstances.

While succession planning may seem daunting, it’s also an opportunity to identify and develop new leaders, build a stronger team, and set your organisation up for long-term success.

This blog will look at the definition, importance, benefits, process, and best practices for succession planning.

Let’s dive right in!

What is Succession Planning?

Succession planning is the process of identifying and developing new potential leaders within an organisation to fill critical roles when current leaders leave, whether that’s due to retirement, resignation, or unexpected circumstances. 

Succession planning aims to ensure that the organisation can continue to operate unperturbed and achieve its goals even after key individuals leave, without any hitch in transitioning from old leadership to new one.

Succession planning typically involves the assessment of skills, abilities, productivity and performance of current employees, identifying potential future leaders, and creating training and development plans to help these individuals acquire the knowledge and experience needed to succeed in their new roles.

Effective succession planning can help organisations build a strong bench of leaders and eliminate the risks associated with leadership transitions.

Why is it Important?

Succession planning is a process that involves identifying, developing and nurturing future leaders within an organisation to take over when current leaders depart. 

It is essential because it ensures continuity of operations while eliminating risks associated with leadership transitions and helps build a strong leadership pipeline. 

By providing employees with  training and development  opportunities, succession planning can enhance their career growth and job prospects, which can help attract and retain top talent.

Finally, effective succession planning is one of the critical elements of organisational success in today’s rapidly changing business scope.

Benefits of Succession Planning

Here are five benefits of succession planning:

1. Ensures Business Continuity:

Succession planning ensures an organisation is always prepared for potential leadership transitions and has a pipeline of future leaders to maintain business continuity and eliminate risks associated with leadership transitions.

Organisations can minimise the impact of unexpected departures by identifying and providing training and developing opportunities for potential successors and ensure that critical roles get filled with qualified and able leaders.

2. Retains Top Talent:

Better decisions and policies are expected if top leadership consists of talented and qualified people, which is bound to translate into organisational success.

Succession planning helps organisations retain top talent by providing employees with clear career paths and development opportunities.

When employees see a clear path for growth and development within an organisation, they are more likely to stay put in it and contribute to its long-term success.

3. Improves Engagement and Morale:

Succession planning can improve engagement and morale by demonstrating that the organisation is investing in its employees’ development, advancement and welfare.

On being provided with opportunities for growth and development, employees feel valued, which improves  employee engagement , which can positively impact their productivity, performance and job satisfaction.

4. Supports Strategic Planning:

Alignment of talent development with business objectives is achieved by efficient succession planning.

By identifying key positions, the skills and competencies required in incumbent candidates for future success, organisations can develop a talent strategy that supports their long-term goals and objectives.

5. Reduces Recruitment Costs:

Succession planning can reduce recruitment costs by providing batches of internal candidates in the pipeline for key positions.

By training and developing internal candidates appropriately for critical positions, organisations can save time and money on external recruitment efforts and ensure that candidates are a perfect fit, culture-wise, for the organisation.

To summarise, succession planning is critical, like groundwork essential for success.

It also provides numerous benefits for organisations, including business continuity during leadership transitions, talent retention, improved engagement and morale, strategic alignment, and cost savings.

The Four Step Process of Succession Planning Explained

Below is an explanation of the four basic steps involved in succession planning:

Step 1: Identification of Key Positions

Identify the key positions within an organisation that need to be filled in the event of a leadership transition.

These positions could be executive-level roles, department managers, or other critical functions that are necessary for the organisation’s success, as well as day-to-day operations.

It’s essential to identify these positions early on to make sure that the organisation is well-prepared for any potential leadership changes.

Step 2: Assess Current Talent

Once the key positions have been identified, the next step is to assess the existing talent within the organisation and who could fill these roles.

This involves reviewing performance evaluations, conducting interviews with employees, or using other assessment tools to evaluate an employee’s skills, knowledge, and experience.

It’s essential to identify potential successors who have the necessary skills and experience to succeed in the role and those who have the desire and motivation to take on a leadership position and plan appropriate training and development opportunities.

Step 3: Develop Succession Plans

Once potential successors have been identified, the next step is to develop individualised succession plans for each employee. 

Providing them with role specific-training and development opportunities, assigning them to mentorship programs, and exposing them to other functions of the organisation to broaden their horizons.

These training and development programs must be tailor-made and a perfect fit for each employee’s specific needs and career goals to ensure that they are motivated and engaged in the process.

Step 4: Monitoring and Evaluation of Progress

The final step in the succession planning process is monitoring and evaluating the progress of potential successors over time.

Reviewing performance metrics, providing feedback and coaching, or conducting regular check-ins to ensure that the employee is on track to meet their career goals are some of the important steps in monitoring and evaluating the success of the potential leadership candidates.

Flexibility and adjustment of the succession plan, as and when needed depending upon the changes in the organisational needs or the employee’s performance, is a critical aspect to be kept in mind.

The succession planning process is a continuous cycle that involves identifying key positions, assessing current talent, developing tailor-made, employee-specific succession plans, and monitoring their progress over time.

Following these steps, organisations can build a solid talent base and future-ready leaders in the pipeline to navigate leadership transitions and eliminate business disruption risks and succeed in the face of all odds.

Top 5 Succession Planning Metrics Every HR Professional Must Know

Below are mentioned five succession planning metrics that every HR professional should be aware of:

Replacement Planning Rate:

The replacement planning rate is the percentage of key organisational positions identifying potential successors.

A high replacement planning rate indicates that the organisation has a robust succession planning program and is prepared for potential leadership transitions.

HR professionals should regularly track this metric to ensure the organisation identifies and develops potential successors for all critical positions.

But talent retention and a high replacement and planning rate are two aspects of succession planning that could be at loggerheads with each other sometimes.

Therefore a prudent evaluation of the critical situation is essential where precocious talent has to be retained as well, as the organisation has to be future-ready with trained potential leaders.

Also, the management must go easy with the replacement rate and be generous.

Succession Pipeline Depth:

This refers to the number of potential successors identified for each key position.

A deep succession pipeline indicates that there are multiple employees who are ready to step into a leadership role as and when needed.

HR professionals should track this metric to ensure the organisation has a strong bench of potential leaders prepared to assume new responsibilities and leadership.

Succession Readiness:

Succession readiness is the percentage of key positions for which the organisation has identified a potential successor who is ready to step into the role immediately.

This metric measures the organisation’s preparedness for unexpected leadership transitions.

HR professionals or the relevant management should monitor succession readiness to ensure the organisation is well-prepared to navigate any potential disruptions due to leadership transitions.

Talent Retention:

Talent retention measures the percentage of high-potential employees who remain with the organisation over a long period.

This metric indicates employee engagement and the effectiveness of the organisation’s succession planning program.

An efficient and effective succession planning program would ensure that the organisation is retaining its top talent and providing them with development opportunities to support their career growth and still be ready with multiple, aptly groomed and trained, future-ready potential leaders to tide over any leadership transition event.

Promotion Rates:

Promotion rates measure the percentage of employees promoted into leadership positions over time.

This metric provides insight into the organisation’s ability to develop and promote internal talent and eliminate stagnation in their career growth.

Promotional rates should be tracked to ensure that the organisation provides employees with ample opportunities to grow and advance in their careers within the company, improving engagement and retention.

By tracking these succession planning metrics, HR professionals can ensure that their organisations have a strong pipeline of future leaders and are prepared for potential leadership transitions.

Succession Planning Best Practices

Here are some best practices for succession planning:

1. Start Early:

Succession planning should start as early as possible, ideally as soon as an employee first joins the organisation or starts to show signs of potential performance above par. This allows the organisation to identify high-potential employees and train them for future leadership roles.

2. Involve Senior Leadership:

Senior leaders should be involved in the succession planning process to ensure that they are aligned with the organisation’s  talent development strategy  and to provide input on key leadership competencies and skills required for future success.

3. Focus on Diversity and Inclusion:

Succession planning should focus on developing a diverse and inclusive pipeline of future leaders. This includes identifying and developing talent from underrepresented groups, providing equal opportunities for career development, and creating an inclusive culture that supports diverse perspectives.

4. Use a Data-Driven Approach:

Succession planning should be based on data and analytics, such as performance metrics, assessment results, and workforce demographics. This enables organisations to identify skill gaps, development needs, and potential barriers to career advancement.

5. Develop Individualised Succession Plans:

Succession plans should be tailored to each employee’s needs and career goals. This includes providing targeted training and development opportunities, assigning mentors, and providing exposure to different parts of the organisation to broaden their experience.

6. Monitor and Evaluate Progress:

Succession planning is a continuous process that requires ongoing monitoring and evaluation of progress. This includes regular check-ins with potential successors, tracking key metrics, and adjusting the succession plan based on changes in the organisation’s needs or the employee’s performance.

By following these best practices, organisations can develop a strong pipeline of future leaders and ensure that they are prepared for potential leadership transitions.

Challenges in Succession Planning

While there may be various challenges associated with succession planning, here are three common ones:

1. Identifying and developing suitable talent

One of the primary challenges in succession planning is accurately identifying individuals with the potential to step into critical leadership roles in the future. It requires a thorough understanding of the organization’s long-term goals and the skills, knowledge, and qualities required for success in those positions. Identifying and nurturing talent within the organization, providing them with the necessary training, mentorship, and growth opportunities, can be a complex and time-consuming process.

2. Overcoming resistance to change

Succession planning often involves significant changes within an organization, such as transitioning from one leader to another or redefining roles and responsibilities. Resistance to change can arise from various sources, including current leaders who may be reluctant to relinquish control or employees who fear uncertainty or potential disruptions. Overcoming this resistance requires effective communication, transparency, and a well-defined transition plan that addresses concerns and engages key stakeholders throughout the process.

3. Balancing short-term needs with long-term planning

Succession planning requires striking a balance between addressing immediate operational needs and investing in the long-term development of future leaders. Organizations often face pressures to fill critical positions quickly, especially during unexpected leadership vacancies. This can lead to compromises in the selection and development process, potentially overlooking suitable candidates or rushing their preparation. Maintaining a strategic focus on long-term planning while effectively managing immediate talent needs is crucial for successful succession planning.

Succession Planning and Diversity

Succession planning and diversity are interconnected for inclusive organizations. Integrating diversity into succession planning promotes equal opportunities, innovation, and better decision-making. It breaks down biases, fostering an inclusive environment.

Organizations can achieve this by setting transparent selection criteria, offering development programs, and providing bias training. Embracing diversity in succession planning builds a pipeline of diverse leaders who reflect the world we live in.

To effectively integrate diversity into succession planning, organizations should establish transparent and objective selection criteria, offer mentorship and development programs for underrepresented groups, and provide unconscious bias training for decision-makers.

Frequently Asked Questions

What is succession planning? Succession planning is the process of identifying and developing employees who have the potential to take on key leadership roles within an organisation.

Why is succession planning important? Succession planning is vital because it enables organisations to prepare for potential leadership transitions, retain top talent, and ensure they have a pipeline of future leaders to support long-term success.

Who is responsible for succession planning? Succession planning is typically the responsibility of the HR department, but it should involve input and participation from senior leadership and other stakeholders within the organisation.

How do you identify potential successors? Potential successors can be identified through a variety of methods, such as performance reviews, leadership assessments, and discussions with managers and other stakeholders.

How do you develop individualised succession plans? Individualised succession plans should be tailored to employees’ needs and career goals. This can involve providing targeted training and development opportunities, assigning mentors, and providing exposure to different parts of the organisation to broaden their experience.

How do you measure the success of a succession planning program? Succession planning programs can be measured by tracking key metrics such as replacement planning rate, succession pipeline depth, succession readiness, talent retention, and promotion rates. By following these metrics over time, organisations can evaluate the effectiveness of their succession planning efforts and make adjustments as needed.

In conclusion, succession planning is a critical process that enables organisations to identify and develop a pipeline of future leaders.

By following a structured approach that involves identifying key positions, assessing potential successors, developing and implementing individualised plans, and monitoring progress, organisations can ensure that they are prepared for possible leadership transitions and have a strong bench of talent to support long-term success.

HR professionals play a vital role in the succession planning process. They should ensure they know the key metrics and best practices to help their organisations develop a robust succession planning program.

Effective succession planning can help organisations retain top talent, improve engagement, and drive business performance.

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What is Succession Planning and Why is it Important to Organizations?

Succession planning is a way of ensuring that your business stays on track by analyzing the backbone of your venture i.e. your employees. Some of the many benefits of succession planning is that it lets ambitious, less-experienced internal candidates know their hard work and skills have been noticed and appreciated enough to be considered for advancement.

It can be an incredible retention tool and motivator for junior managers and subject matter experts who want to advance their careers into management.

In this article we will talk about the meaning of succession management, its benefits and the process of formulating an effective succession management plan.

What is Succession Planning ?

Succession planning is a strategy for passing on leadership roles—often the ownership of a company—to an employee or group of employees. Also known as “replacement planning,” it ensures that businesses continue to run smoothly after a company’s most important people move on to new opportunities, retire, or pass away.

Succession planning involves cross-training employees so that they develop skills, company knowledge, and a holistic understanding of the company.

Why is it Important to Organizations?

The purpose of succession planning is to make sure a company always has the right leaders in place should a change happen quickly. By failing to create an orderly plan for succession, your company may not get a second chance if it doesn’t adapt immediately after a key player leaves the company or passes away.

After all, you can’t anticipate when a serious illness, accident, disaster or pandemic will strike, but you can prepare for what will need to be addressed should one happen.

The Benefits of Succession Planning

Disaster-proofs your business.

You buy insurance to protect the company from hurricanes, floods and fires. You install security systems to defend the company from theft. And you back up data to an off-site location to safeguard your business’s proprietary information.

Many business owners get so busy with the day-to-day operations of their company that they fail to make succession planning a priority. These leaders may think they’re too young to be hit with a serious illness. Or they forget that a key player (or several) could be lured away by another company that needs their skills and is willing to pay top dollar for them. Any of these scenarios can leave a business uniquely vulnerable.

Creates structure for training and development

Some of the employee’s professional development may come in the form of coaching, mentoring, job shadowing or a gradual increase in more advanced responsibilities. Other positions may even require the candidate to go back to school to get additional education or professional certification.

By tapping potential successors early, you give employees time to acquire the skills and experience they’ll need to perform well in their senior roles. You also let employees know that you’re willing to invest in their growth as well as the company’s.

You may also like to read : Role of Technology in Workforce Management

Keeps extra eyes on a job

Once your top prospects are being groomed, your company has a chance to reap perhaps its best tool to grow and thrive. This happens when a junior manager is sitting and talking with their senior leader about why they’re doing things a particular way.

The simple process of explaining the status quo helps reveal weakness in processes and procedures, uncovered sales opportunities and opportunities for positive change. This natural process allows your company to keep an extra set of eyes on its senior roles and encourages questioning of the corporate norms that may have become dated or inefficient.

In this way, succession planning results in future-proofing your company. Conversely, when retiring employees leave, they can act as a sounding board for questions and concerns, troubleshoot customer problems and more. This helps to smooth the transition.

Maintains brand identity

You frequently hear news of CEOs who come into a company from the outside with great promise, only to fail in a short time. Sadly, such disastrous hires often damage the company’s reputation and long-term growth along with them.

This usually happens because the outsider CEO doesn’t understand the fundamental values and mission of their new company because they haven’t “grown up” in it, so to speak. Wanting to put their own stamp on the business, or failing to grasp customer needs, they move the organization away from its core brand.

The benefits of succession planning is that it helps your company avoid this. By identifying and grooming an internal successor, your company ensures it will be led by someone who shares its values and deeply understands the company’s brand promise, its customers and its employees because they’ve lived it themselves.

Helps the company plan for the long-term

Change happens fast. When your company knows where it’s going, your team can plan for the future. If you position succession as part of your company’s overall growth plans, you create a path for retiring employees to hand off their years of hard-earned knowledge and transition important working relationships before they leave.

The objective of a succession plan is to help your company grow with intent as you identify and build plans for vulnerabilities in other areas of the business. Other benefits to succession planning may include providing help in ascertaining which areas require innovation, setting realistic goals for growth and planning for future talent needs that may result from that growth.

How To Develop A Succession Plan?

Review plans & identify key positions.

It is mandatory to review the strategic plans and objectives of your organization. The first step in succession planning is to identify current or future key positions or groups in the organization. At this stage identifying key positions thoughtfully should be your only focus rather than candidates.

Listing The Competencies

All positions require a particular set of skills, abilities, and knowledge. Therefore, find and list the employees who are perfectly suitable for the corresponding job role. One way to list the competencies is to review relevant merit criteria and job description for the associated position and interview current and former job incumbents.

Identifying Potential Candidates

This step of succession planning is similar to that of general job recruitment practice. But the succession planning process goes one step ahead by helping candidates who show great interest in developing the requisite skills for the particular position. Helping and mentoring these candidates prior to the formal recruitment process that begins once, a position becomes vacant.

You may also like to read : What is Talent Management?

Development Plans

Once you’ve found the relevant candidates suitable for the role, based on their potential for success and interest in a key position, the organization should ensure that these employees have access to development opportunities and learning tools.

Implementing The Process

The final step is to implement and evaluate the process. You have to plan the activities and inputs you have to make to get the desired outputs. Every step in this process has to be evaluated to measure the success and progress of the plan. It is essential to monitor the efficiency and effectiveness of the succession plan once it has been established.

Succession planning is a receptive decision by an organization to nurture and promote the continuous development of employees, and to make sure that the key positions in the organization maintain some measure of stability, thus enabling an organization to achieve desired business objectives.

Succession management is all about knowing the goals of the organization and its employees and improving the capacity to address emerging issues that will affect the business in the long run.

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BGF explains: Why succession planning is important for all businesses

For companies of all sizes, from early-stage startups to multinational organisations, effective succession planning is crucial.

For businesses of all sizes, from early-stage startups to multinational organisations, there are a number of advantages of effective succession planning for leadership roles and other critical positions. Why is succession planning so important? Read on to find out.

The importance of succession planning for growing businesses

According to research by Deloitte , 86% of business leaders view succession planning as an urgent priority, yet just 14% believe they do it effectively. Similarly, McKinsey found that four in five global leaders believe they’re unprepared for their new roles. 

Lacking a strong succession plan can have a detrimental effect on business performance — more than half of executives reportedly fail within 18 months of being placed in new leadership positions due to lack of preparation. Developing potential successors over time, through structured training and mentoring opportunities, should lead to better outcomes. But the benefits of succession planning aren’t limited to executive performance. 

At the organisational level, the benefits of formal succession planning include:

Risk management

Succession planning can help your business mitigate risks associated with the departure of key leaders. In case of sudden, unforeseen events such as illness or dismissal, an effective succession plan can help minimise business disruption, customer dissatisfaction and potential financial losses.

Strengthen talent benches

Long-term workforce planning can be a great support to your human resources (HR) team. It can help avoid talent shortages and fill vacancies for business-critical roles faster, by preparing potential candidates in advance. This minimises any impact on product delivery or customer service, without rushing the hiring process, so that you can appoint the best people for the job.

Build stakeholder trust

Business continuity planning can help make your business more agile during uncertain times. Increasing stability will build trust between business owners and shareholders, senior management, your board of directors, and current employees.  

Prepare to exit

Effective succession planning signals to potential buyers that your business is well-prepared for the future, with a strong pipeline of leadership. This can increase your company’s valuation, and also reduce some of the stress and uncertainty associated with an exit event , by ensuring a smooth handover. 

Achieve EDI goals

Succession planning also provides an opportunity to incorporate your equality, diversity and inclusion (EDI) strategy into your hiring processes. It may help you improve diversity among c-suite and senior leaders, and in other key positions across the business.

Create costs efficiencies 

Succession planning gives you the opportunity to streamline your talent development process, and reduce recruitment, onboarding and training costs, by sourcing internal candidates for key roles.

Meanwhile, for employees, an effective succession plan can:

Increase engagement

Having clearly defined career development plans, goals and incentives for high-potential employees helps motivate them in their day-to-day tasks. Investing in their progression also helps them to feel valued by the company, increasing overall job satisfaction. 

Foster strong working relationships 

Including your team in strategic planning and being transparent throughout the succession planning process can increase trust within your team. Certain stages of the process, such as training and mentorship, will also help build stronger relationships between senior executives and key employees.

Build confidence

By giving team members sufficient time to prepare, learn from mistakes, and take part in leadership development programmes, they will feel more confident and perform better in their future roles. They’re also more likely to bring fresh perspectives and ideas, fostering a culture of innovation and growth.

Each of these benefits to employees will also have a knock-on effect for the business. This may increase productivity, reduce staff turnover, and improve wider company culture and morale.

Benefits of succession planning for startups

The cost savings associated with effective succession planning will be an attractive proposition for small businesses. On top of this, SMEs will also benefit from:

Recruiting and retaining top talent

Most startups won’t be able to compete with the salaries and employee benefits offered by larger organisations. But fast progression and strong career development plans can help SMEs attract ambitious and high-performing applicants. It will also help nurture their talent pools and improve retention , which is particularly important for those with relatively young teams (that typically have higher churn rates).

Improving internal processes

Succession planning provides a good opportunity for startups to formalise their hiring and onboarding processes, and to improve any existing talent management strategies. Developing a succession planning strategy will also provide the chance to review your business objectives and determine the roles you see as being critical to future operations.

Skills development

By focusing professional development programmes on multidisciplinary training and your long-term business objectives, future leaders can broaden their skill sets and competencies. This again reduces business risk, by making your startup more agile.

Benefits of succession planning for family-run businesses

In 2018, it was reported that more than half of family-run businesses in the UK had no kind of succession plan in place. Whilst many founders of family businesses have informal plans to pass their companies onto their children, it’s important to establish a clear process for doing so. A lack of preparedness when leadership changes arise won’t just affect family members, but also your employees, customers, and other key stakeholders.

Why is succession planning important for family-run businesses in particular? Having a formal succession plan enables current leaders to retire or take a step back one day, without the uncertainty of what will happen to the business. It’s also a good opportunity to resolve any conflict around who will take over, and gives the next generation time to learn and determine whether it’s the right career path for them. Meanwhile, a tax-efficient succession plan that takes inheritance tax and capital gains tax into consideration can help to protect family wealth.

The information contained in this article is for general information and use. It does not constitute any form of advice and is not intended to be relied upon in making any investment decision. Independent advice should always be sought as to whether a particular transaction is suitable having regard to your personal and financial circumstances.

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Own the Future: How HR Can Add Value to the Succession Planning Process

The HR leader for one of Amazon Web Services’ divisions highlights how CHROs can influence leaders to prioritize succession planning.

When I spoke to an audience of senior HR leaders last fall, I asked them this question: “How many of you are in a role that was created for you through a succession plan?”   While I know that succession planning is an “out of sight, out of mind” topic at many organizations, I expected to see at least several raised hands. The actual result: Only one hand was raised, in an audience of approximately 300 senior HR leaders.

This was a clear message that more work needs to be done to prioritize building and supporting upward mobility within organizations, especially within the HR function.

It’s estimated that about 10,000 Baby Boomers are now retiring each day in the U.S. Yet somehow, data suggests that succession planning still isn’t on the radar for more than half of U.S. organizations. According to a SHRM survey, 56 percent of HR professionals said their organization didn’t have a succession plan in place. Only 21 percent reported having a formal plan, while 24 percent said their organization had an informal plan. The main reason for the apathy was a lack of time and resources to create the plan.

Leadership transitions can happen quickly. Therefore, having a successor in mind for senior and critical roles is imperative to business success. HR leaders know the importance of recognizing that every employee is a whole being and has the potential to be great. Just the same, we often face the challenge of influencing other leaders to think the same way—and to have them focus on developing future leaders in the organization.

A deliberate approach to identify and develop future leaders has been proven to help preserve an organization’s continuity and secure its future. However, many company leaders still need convincing to spend the time needed to prioritize succession planning. This is a challenge that HR leaders can overcome by knowing and addressing the most common barriers to succession planning and common mistakes in the process.

One initial mistake to avoid is combining both your succession plan and your business continuity plan. While the latter is important, combining those conversations—or combining both plans—could result in either one (or both) of them failing to gain the support and attention needed to be effective. Another challenge is the possible lack of enthusiasm that HR leaders are faced with, due to succession planning being a topic that is not always welcomed by other leaders.

Though there are clear challenges and the potential for the succession planning process to be a lengthy one, it is a key part of business functionality, and there are proven ways that HR leaders can have a meaningful and measurable impact.

HR leaders should first conduct research (internally or externally) and use metrics to tell the story of how succession planning has benefited organizations. Second, a key way to gain succession planning buy-in from your executive team is to ensure your plan is developed specifically for and aligned with the organization. Finally, it is imperative that HR leaders identify successors to ensure that other leaders can visualize the plan coming to life and provide feedback on the current bench strength in the organization.

Succession Planning: How to Overcome Objections from Leaders and Managers

As vital as succession planning is to an organization, some of your leaders may not see it as a high priority. It’s important to understand why some leaders don’t embrace succession planning. Here are some of the main reasons for leaders’ resistance and ways to get past that pushback:

They’re reluctant to leave the organization and want to control their legacy. Some leaders are not ready to let go of what they’ve built or the role they’ve come to love. They have put their stamp on the organization, and giving up control is hard to imagine. They may believe they are the only ones capable of maintaining the success that’s been achieved so far.

The solution:  Include leaders in the succession plan as key mentors. This will help alleviate some of these concerns and give leaders more input and control over the succession.

They’re preoccupied with day-to-day business priorities. For many business leaders, the demands of daily responsibilities can be all-consuming. Even if they understand on an academic level the need for succession planning, they have a difficult time slowing down long enough to take action.

The solution:  HR can take the lead in charting the timeline, time commitment and support for leaders to help with this process. This will help leaders recognize that they aren’t handling it alone.

They’re concerned the transition will be immediate. Leaders may assume that the succession conversation is being held with an exit date already in mind. When an HR leader approaches a leader about succession planning, what they may be hearing is, “We want you out!”

The solution:  Share the fact that most succession plans take years to come to life and that most next-level leaders need significant mentorship and exposure to be ready for more-senior roles.

They’re concerned about bench strength and how to fill the skills gap. Leaders may also recognize that they’ve failed to prioritize development of the next generation of leaders and are unsure how to get successors ready.

The solution:  Share performance and potential data for the extended leadership team, and also share the profiles of external leaders that have the necessary skills for senior roles. Highlight the internal resources available to address skills gaps of internal and external talent.

Note: Many leaders are afraid to develop someone and then have them leave. However, when employees recognize that their personal career path is important to their leader and they can see a track to success in the organization, they tend to stay longer, feel more committed and are a little bit more afraid to leave because they don’t know what the future holds elsewhere.  –  P.P. 

Generate Buy-In with Data and Storytelling               

I still remember the first time I needed to influence a board that a succession plan was needed for a CFO, who we knew would be transitioning within two years. While it was such a necessary process, I was surprised by the pushback and lack of interest from the board. The board believed two years was a long time and that “the team” could pick up the slack if there was a gap in CFO coverage once the current leader moved on and before their replacement was named.

I quickly realized that I needed data to help make the case for why a succession plan was necessary and how, through that plan, we could either identify an internal successor or determine the profile needed to attract external candidates.

Through my HR network, I collected data on succession plan success stories, as well as data on the lack of succession planning conversations. The data had to capture the attention of the leaders I needed to influence. This data included industry trends on retention, leadership tenure and the impact on business metrics when leadership transitions take place. I also was able to point to advice from my bookshelf. Jack Welch’s book Winning includes a relevant and detailed succession planning strategy that can help build buy-in.

I also highlighted for the executive team examples within our own company of situations in which employee satisfaction and business results took a hit when a leadership transition resulted in a key role being left unfilled for a long time.

The important part is the blend. When you have both external and internal data to add to storytelling, that really helps generate buy-in with leaders.

Align with Your Business Plan

Part of the process of ensuring that a succession plan conversation is well received is having a plan that is designed specifically for the organization and aligned with its business plan.

When should you propose a new or updated succession plan? I’ve found that the best time is right after an organization has paused to review and adjust its business plan. This timing allows HR leaders to include business concerns and make succession recommendations based on the company’s future business plans. Including these relevant and recent points will help the leadership team appreciate the relevance of the plan as created.

The best succession plans include a clear assessment of the capabilities of the current leadership team and how they have been performing over the past two years. They also include publicly available data for similar leaders in other organizations (in the same or similar industries).

To ensure the succession planning conversation is a smooth one, it’s important to highlight the key roles of the positions. This is an opportunity to ensure the successor of a leader is identified as having the skills needed to fill the current role. It also allows you to pinpoint any areas in which the current leader could be performing at a higher level. For that reason, it’s crucial to gather performance data for the leader who is being succeeded.

Remember, succession planning is not a one-size-fits-all process. Reviewing external case studies and data on how other organizations have been able to seamlessly transition leadership capabilities is a good starting point. But resist the urge to copy and paste any other succession plan. Your plan will be hard to own and embrace if it’s not tailored to your organization’s specific needs.

Succession planning is not a one-size-fits-all process. ... Resist the urge to copy and paste any other plan. Your plan will be hard to own and embrace if it’s not tailored to your organization’s specific needs."

Build support by pinpointing roi.

HR leaders gain the most support for their succession plans when they’re able to identify a specific return on investment for their efforts. This can be done by showing ways the HR processes are built to support succession and by highlighting internal and external succession plan success stories (and horror stories).  

In addition, the performance management process should be designed to capture data that helps identify future leaders based on their current and past performance—and their potential. An extension of the performance management plan should then outline the resources available to develop leaders and bridge any leadership skills gaps.

HR leaders should drive the succession planning process and ensure that it is free of bias. Every opportunity that HR has to call out bias, it should.

HR should also lead a deliberate conversation about diversity in the planning process and discuss ways the organization can be more diverse at its most senior levels, even if that means focusing on external candidates or developing leaders below the extended leadership team in a longer-term process. If you often promote from within, take a look at the future leaders in your organization. If your bench is not diverse, you will likely not be improving diversity anytime soon.

Start Narrow and Scale

While it is tempting to have a succession plan for every leadership role in the organization, such plans are difficult to track and measure. For that reason, it’s best to identify key roles as a starting point and stagger the rollout of the leadership development process. That way, you can ensure that successes can be realized before scaling the program across all of your leadership roles.

Depending on the size of the organization, it could be best to identify one role to focus on for succession planning and use that role and the identified succession candidates as the center of the conversation to obtain alignment from the rest of the business leaders.

When skills gaps are realized in an organization, it is important to have a process to bridge them. As part of creating the process, a plan to develop leaders should be in place, and the plan should be aligned to the business and designed to allow for learning to happen in a meaningful and measurable way.

Once the succession plan is accepted by the leadership team and the process begins, it is important to not let it be forgotten. The success of the plan should be assessed by tracking and measuring the outputs to determine what changes are needed, if any.

The succession planning process is not easy. However, it has the potential to be one of the most rewarding areas that an HR leader owns.

Having the right leaders in an organization ensures its success, and having successors to keep it moving forward after those leaders exit is an essential step in maintaining a strong organization.

Prudence Pitter  is the global head of HR for Amazon Web Services’ Auto/Manufacturing and Healthcare & Life Sciences division.

Succession Planning: 5 Common Mistakes to Avoid

While your situation may not reach the level of mayhem on HBO’s hit drama “Succession,” a sloppy transition can severely damage a company—and an HR leader’s career. According to a 2023 SHRM Executive Network report,  Succession Planning Pitfalls , organizations need to avoid these common mistakes with their succession plans:

Mistake 1: Thinking about replacing the current job holder, not the job.  Many organizations mistakenly think about replacing a particular person and not what that person does. It’s critical to not think about the individuals in the current roles. Instead, think about the goals of that role, the remit and the expected outcomes. Plus, if you think about planning for the role versus the individual, you open your mind to different types of people being able to do the same job. And that’s how you harness the power of diversity and drive inclusion.

Mistake 2: Seeing succession planning as set in stone.  Succession planning can’t be a “set it and forget it” exercise. Successful succession plans must also be revisited, reviewed, adjusted and restarted. They should be “live” documents, meaning the scope and plan should be able to change to mirror the volatility within your organization. A role that is crucial now—and the person earmarked for that role now—may not be the same in six months or one year, and that is very important for making sure you always act according to the reality of your business needs.

Mistake 3: Not telling successors that they’re successors.  Once there is alignment with leaders about your high-potential employees as successors, it is important to share this great news with the envisioned successors. When you do, you may find they were thinking differently about their trajectory in the company—or they don’t want that job at all. Alternatively, it could help to solidify their future with the organization and help them reconsider an exit strategy, if they had one.

Mistake 4: Skipping performance planning.  Preparing and developing successors is integral to a solid succession plan, and it builds a culture that encourages growth. One way to put this into practice is to assess a successor’s level of readiness when you let them know they are a successor (e.g., if they’re ready now, in six months or in two years). With this readiness assessment, you can set better expectations for the successor and create a plan to fill in any gaps. You will also ensure that the performance plan stays alive, because the successor will be keen to continue to develop and learn what they need to know.

Mistake 5: Not making your plans inclusive.  It’s vital that your succession planning is inclusive and doesn’t directly or indirectly leave qualified people out of the process. Historically, succession plans have tried to fill a role by looking for someone similar to the incumbent. That’s why it’s wise to take a strengths-based approach to succession planning, rather than focusing solely on experience. Look at those who maybe haven’t done the role before but have the motivation and skills to build on. This will mean a more diverse group of employees will be earmarked for leadership roles.

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David Oakley in London

The transfer of trillions of dollars of wealth to the next generation — at hundreds of millions of family businesses around the world — has the potential to put trade deals, revenues and jobs at risk if it is not properly managed, according to industry figures. 

“While some families have been preparing their next generation for decades to assume leadership roles, others lack adequate plans for succession,” warns Rebecca Gooch, global head of insights at Deloitte Private, a division of the Big Four consultancy group. “Given that 90 per cent of businesses, globally, are family-owned, it could cause disruptions in the financial system if succession planning is not adequately addressed.” 

Gooch suggests companies could underperform or go bust without proper succession planning — with wider repercussions for the economies and industries that depend on these family groups for job creation, innovation and trade. 

Jason Hollands, managing director of corporate affairs at wealth manager Evelyn Partners, says: “You need the best people to step up and take over. That means you need to plan carefully rather than scrabble around for successors. It can make the difference between success or failure.” 

Hannes Hofmann, global head of the family office group at Citi Private Bank, also points out that “wealth has become more complex, which means there could be disruption if planning is not carried out properly.”

An estimated $18.3tn of collective wealth will be transferred to the next generation by 2030, a report by data provider Wealth-X has calculated — a result of the last of the baby boomers, which the US Census Bureau defines as those born between 1946 and 1964, retiring and passing on their assets.

There’s a well-known proverb: ‘shirtsleeves to shirtsleeves in three generations’ Rebecca Gooch, Deloitte Private

That report — Preservation and Succession: Family Wealth Transfer 2021 — focused on individuals with a net worth of more than $5mn, which totalled about 3mn individuals, holding assets worth more than $62tn worldwide. 

But even the wealthiest families get this transfer process wrong, and end up losing what they had built up. “There’s a well-known proverb: ‘shirtsleeves to shirtsleeves in three generations’, also known as ‘the third-generation curse’,” says Gooch. “This underscores concerns about potential erosion of family wealth over time. Consequently, there’s a growing focus among families to plan for succession.” 

The importance of successful transfers to the wider financial system is highlighted by research from media and data company Visual Capitalist in December which showed 90 per cent of all enterprises, globally, are controlled by families. They run to the hundreds of millions, judging by data from Statista , which estimated the total number of companies worldwide at 333mn in 2021, slightly up on the 328mn in the previous two years.

Euan West, who leads KPMG’s private enterprise business in the UK, says: “The most successful family businesses are those who commit a reasonable amount of time to succession planning. We often find the most difficult step is between the second and third generation as the family is that bit further removed from the founder at that point.” 

One business approaching a transfer from the second to the third generation is the Rigby Group, a technology and real estate company based in Stratford-upon-Avon in the UK. It is headed by co-chief executives Steve and James Rigby, having been founded in 1975 by father Peter, who now chairs the group. 

Steve, aged 51, has no doubts the company, which employs 8,500 people in Europe and has an annual turnover of £4bn, can make the transition to the next generation. “The business has been professionalised in the past two decades and we are confident that a handover can be smooth,” he says. 

“It’s not like the television series Succession [which starred Brian Cox as the patriarch of a family media group likened to the Murdoch empire] where there are squabbles and infighting. That was good television, but very over dramatised.”

Even so, he admits the next generation is likely to take a different approach to life and business. “My brother and I have six children between us. Some of them may wish to come through and take part in the business, but others might not. My generation often followed in the footsteps of the father or parent. But the next generation wants more work-life balance. That may mean the business is taken over by an external manager rather than the children.” 

Another second-generation family business is Nurole, a London-based online board-level recruitment platform with 30 employees. Oliver Cummings, aged 39, runs the company as chief executive, having taken over from his mother Susie, who founded the business in 2014. 

“I think there is a saying, if you have one family member succeeding another family member as chief executive, you get a less good outcome,” says Cummings, who started his career at US investment bank Goldman Sachs before joining the family business. 

“Appointing the right people is critical for a business, but there are two types of succession: an executive or management succession; and a shareholder succession. As far as management is concerned, I have a very good senior leadership team that could take over.” 

Nicholas Bewes, aged 57, chief executive of a small third-generation family-owned property investment company, Howard Group, which is based in Cambridge in the UK, agrees that there is a distinction between handing over management and ownership. 

“It is not an assumption that family members will end up in senior positions or run the business, but all families are different. I know one family business where the son took over at 21. We would not do that.” 

Neil Davy, chief executive of Family Business UK (FBUK), a not-for-profit organisation set up in 2001 to bring companies together, says the group’s more than 200 members are largely prepared for succession, as well as technological change — another vital requirement for success and profitability. 

He adds that FBUK’s members — which have annual revenues of between £4mn and £5.5bn and include the 12th generation C Hoare & Co, the UK’s oldest bank, founded in 1672 by Sir Richard Hoare — would not survive if they failed to plan for the next generation and adapt to new technology.

Patricia Milner, who advises family businesses on succession and tax at London law firm Withers, agrees with Davy. “Some of the best businesses have been successful for generations. Sometimes they are fifth or sixth generation. They’ve had to be ready for succession and embrace technology to be competitive. A business does not last for hundreds of years unless it is well run and prepared for change.”

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Succession Planning for Your Advice Business Praemium Advice Leaders

In this episode of the Praemium Advice Leaders podcast, Samantha Hawkins interviews Bob Neill, the founder and director of Seaview Consulting, about succession planning for advice businesses. Bob discusses why succession planning is important, even for young businesses, and shares his advice on how to create a succession plan that works for you and your business. This episode is a must-listen for any financial planner who is serious about planning for future business transitions.  For more information on succession planning for financial advice businesses, watch the full webinar with Bob Neill now: Mastering succession planning for advice firms.

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