What is succession planning?

Succession planning, or replacement planning, is when someone in a leadership position, like the owner of a company, hands their role over to another employee or a group of employees. Planning your succession can help the transition or retirement or a move to a different company run smoothly with minimal interruption in the business processes. Succession planning is an ongoing process of training employees so that you can prepare them to take on new roles whenever employees change positions. Business leaders keep thinking about which team members would be a good fit for the most important positions.

Succession planning strategies are part of organizations’ hiring and talent management strategies. For larger companies, succession management could include every position and employee. However, many smaller businesses only focus on leadership and upper management positions.

Why is succession planning important?

Succession planning provides a variety of benefits for companies:

• Preparation for unexpected events
• Better retention
• Improved performance
• Lower recruiting and hiring costs

Preparation for unexpected events

Succession plans let companies adapt quickly when someone becomes ill, resigns, or retires. They keep businesses from becoming dependent on just one or two employees, to take care of essential tasks if one of those people can’t work.

Better retention

Succession planning can increase retention for employees by creating a defined structure for training and development. People can see what qualifications they require for higher positions, get the training they need, and let their employers know when they’re interested. This gives them a better likelihood of being considered and advancing their careers when there’s an opening.

Improved performance

People are more motivated to do their best at work when they know a promotion is a possibility. Employees can also expand their knowledge with regular training from supervisors. Additionally, the opportunity to cover for their superiors when they’re on leave can give employees the experience they need to hone their skills and improve their confidence.

Lower recruiting and hiring costs

Advertising for an open position, looking through applications, conducting interviews, choosing a candidate, and training them can be time-consuming and costly. Deciding which employees to promote and provide the on-the-job training is less expensive, and it helps companies keep their most skilled staff members.

Steps to writing a succession plan

Here are some useful steps for creating an effective succession plan:

1. Start planning immediately
2. Gain a clear understanding of the business’s vision and values
3. Assess the existing workforce
4. Communicate with employees
5. Offer opportunities for additional training to top performers
6. Conduct trial runs

1. Start planning immediately

Even if there’s no reason to expect any upcoming changes in staffing, it’s a good idea to have a detailed succession plan. That way, you can prepare for unexpected events. After you open a company and it becomes established, you can form your succession plan. If possible, start planning within five years of starting your business.

2. Gain a clear understanding of the business’s vision and values

Identifying the values of a business lets leaders decide who should step into key roles more easily. They can search for candidates with similar values who agree with existing executives and their strategies for the organization’s future.

3. Assess the existing workforce

Look at performance reviews, comments from customers, sales statistics, attendance records, and other information to identify the best employees. Businesses should focus on people with leadership skills who aren’t working in leadership roles. For example, a customer service representative who receives outstanding feedback could be a good fit in a supervisory role and teach other representatives their skills. Also, look for problem-solvers who can adapt to change quickly.

Starting a file with top performer accomplishments can make decisions easier when it’s time for a final choice about an employee’s succession. It also makes choosing who receives bonuses or awards easier for Managers.

4. Communicate with employees

Before business leaders add an employee to the succession planning process, they should speak to the person and find out more about their career goals. That way, executives can avoid wasting their time with individuals who aren’t interested in advancing at the company. Also, help potential successors develop their skills by communicating with them about their strengths and areas where they need improvement.

5. Offer opportunities for additional training to top performers

After you identify potential successors, develop their skills by offering additional training, mentorship, or job shadowing. Make sure they know about important events and procedures in their department and help them prepare to replace an employee in a higher position when one opens.

6. Conduct trial runs

You can decide whether an employee is ready for a leadership role by giving them more responsibility and seeing how they handle it. For example, a business could leave the Assistant Manager in charge for a week while the Manager takes a vacation. The Assistant Manager could then work independently, gain more experience, and ask the owner or District Manager for help when needed.

Types of succession plan

Here are some templates you can use to create your succession plan:

Chart

You can create a chart to help you organize your succession plan. Create a spreadsheet with the first column labelled “Position title” and in that column, list the titles of the most important positions in your company. Then, create columns to the right with the following labels:

• Incumbent name: List the names of the people currently working in those positions
• Retirement date: if you know the dates they plan to stop working,
• Candidate’s name: Add the name of the potential candidate
• Current position: List the candidate’s current and salaries
• Readiness ratings: Give a rating for how ready the candidate is to step into a new role
• Potential training: List potential skills that need to be developed and training you can recommend for the candidate

This chart can help you keep track of candidate’s positions, as well as how they are developing their skills to prepare to take on further responsibility. Keeping this chart updated can help you track the progress of your candidates and keep track of what candidates move up into leadership positions.

Written steps

If you have a more complex company structure, you may need more information than the chart above provides. You can create a plan using written steps organized by the order of events. Each step of the process can include its own written analysis of the actions that were taken and the next steps. Create a list of events structured like this:

• Step 1. [List of succession priorities, missions and goals]
• Step 2. [Evaluations of current roles, including priority level, and likelihood of upcoming turnover in that role]
• Step 3. [Determine key qualifications that candidates must possess to be considered]
• Step 4. [Decide on the order of successions for candidates]
• Step 5. [Create and describe a development plan for each potential candidate]
• Step 6. [Describe each candidate’s monitored progress]
• Step 7. [Evaluate new leaders and their transition into their new roles]

These written steps can culminate into an ongoing succession plan that you can update as people change positions. This type of plan is more in-depth so you can keep more detailed notes about each candidate and their progress.

Succession planning FAQs

Here are some frequently asked questions about succession planning:

Who handles succession planning?

Company leaders or executives usually start the succession management process by identifying key positions and employees. However, they may not have extensive knowledge of all the employees at the company. Managers and members of the human resources department add information as well. They’ll also update the plan when people’s roles change or the company tries a different strategy.

When should you use a succession plan?

Companies should consult their succession plans whenever they need to fill leadership or management positions. They can then decide whether to promote the candidate listed or post the job and start taking applications.

How do you identify successors in succession planning?

To compare people in different departments, create a consistent system for rating employees. For example, you could add a quick survey for supervisors to every employee performance evaluation. People with more than a certain score would have their evaluation and other records examined to decide if they would make good successors to any current leaders.

Read More: Leadership Skills: Definition and Examples

What are some questions you need to ask when succession planning?

You can help guide your company’s succession planning process by asking these key questions:

• What training opportunities should you make available to employees?
• How will the business grow in the next three to five years, and what people will it need on the team?
• Where will the company look for candidates?
• What variables could impact the organization’s ability to recruit the best candidates?
• Is external recruiting needed?
• How many employees will leave the business in the next five to seven years?
• Will the company experience any gaps in skill sets when those people leave?