What is succession planning?

Succession planning is the process of identifying the responsibilities and contributions of critical roles and proactively preparing for others to assume these positions. This business model can help ensure a company continues to operate with minimal disruption during employee changeover.

What are the five steps in succession planning?

Below are five succession planning steps that can help you maintain organizational stability.

1. Identify key positions

The roles that correlate with the success and sustainability of your organization often point to leadership positions or those that require specialized skills. Actionable steps can include:

• performing a complete analysis of your organizational structure
• identifying positions that have a significant impact on business operations and strategy
• considering future needs and potential changes within the organization

2. Assess current talent

Evaluating your current employees can help you identify potential candidates who can fill key positions in the future. Practical steps may include:

• administering performance reviews and assessments
• identifying employees with the skills, experience, and potential for leadership roles
• gathering feedback from managers and peers

3. Develop talent

Consider creating a plan to enhance the skills and competencies of potential successors. Specific measures may include:

• designing individualized development plans that include training, mentoring, and coaching
• providing opportunities for high-potential employees to gain experience in critical areas
• implementing leadership development programs and cross-functional projects

4. Create a succession plan

Documenting your succession planning process and outlining the steps for transitioning roles can be beneficial. Steps you might consider include:

• developing a formal plan that outlines timelines, responsibilities, and developmental activities
• establishing clear criteria for choosing and promoting successors
• communicating your succession plan to relevant stakeholders, ensuring transparency and understanding

5. Monitor and review

Regularly reviewing and amending your succession plan can ensure its effectiveness and relevance. Actionable steps may involve:

• managing periodic reviews of your succession plan and adjusting as needed
• monitoring the progress of your development plans and the readiness of potential successors
• gathering feedback and continually improving the process

What are the benefits of succession planning?

Succession planning offers various benefits, including:

• Alignment with business goals: Helps leadership changes stay consistent with your organization’s long-term objectives and culture.
• Leadership engagement: Executives’ and senior leaders’ involvement in talent development can encourage their commitment and keep stakeholders informed.
• Talent development: Creates clear advancement for high-potential employees, empowering them to become future company leaders.
• Clear roles and expectations: Enhances transparency and alignment throughout your organization, minimizing confusion.
• Improved efficiency: Streamlines your processes, guiding HR professionals and leadership teams through each stage.
• Enhanced consistency: Standardizes the approach, ensuring all stakeholders clearly understand and minimize bias.
• Better time management: Proactively addresses succession planning, saving time and resources by avoiding last-minute, high-pressure transitions.
• Future proofing: Identifies and develops internal talent, maintaining continuity and stability even during periods of change.

Succession planning best practices

You can increase your confidence in your succession plan with the following best practices:

Starting early

Beginning the process well before anyone retires allows ample time to prepare the successor and gradually transition responsibilities. For ownership changes, this process includes getting your business financially ready, handling legal issues, and addressing tax considerations.

Communicating the plan 

Tell your staff and external stakeholders once you know of an impending departure. Clear communication can ensure everyone understands the situation, protecting your business from potentially harmful rumours. Keeping employees informed about succession planning efforts can instill a culture where people feel valued and are aware of the growth potential within the company.

Incorporating succession planning into strategic planning 

Succession planning differs from regular hiring, as it can impact your entire organization. Integrating it into your strategic planning process and reviewing and revising your succession plan annually can accommodate changes in your business, market conditions, or other relevant factors.

Emphasizing diversity and inclusion

Combining diversity and inclusion into your succession planning can fill your talent pool with various backgrounds, experiences, and perspectives to promote innovation and resilience in your business.

Consistently reviewing your plan

Treating succession planning as ongoing rather than a one-time event can better align with evolving business priorities and market changes. Setting metrics to evaluate the progress of your succession planning and tracking key indicators, such as talent retention and promotion rates, can help measure the impact of your strategies.

Preparing for contingencies

Planning for potential challenges in your succession strategy by developing contingency plans can allow business continuity and smooth leadership transitions in the face of unexpected events.

Seeking external advice

Ownership changes can have significant financial and legal implications. Experts such as lawyers, tax accountants, strategic consultants, business evaluators, and bankers can offer valuable advice.

Celebrating successes

Recognizing and celebrating achievements resulting from your succession planning efforts can reinforce a positive message among your employees.

Types of succession planning

Proactive succession planning can help maintain continuity in business functions. Let’s explore different strategies for preparing for leadership change:

Basic succession planning

Basic succession planning can involve creating a standard procedure to ensure seamless organizational transitions. You can establish a basic succession plan by:

• Defining key positions: Start by defining critical roles within your organization. These positions can include technical, executive, or other roles integral to business functioning.
• Assessing current talent: Evaluating your existing employees’ skills, experiences, and potential can help fill certain positions.
• Developing a talent funnel: You can implement strategies and techniques to help develop high-potential employees by providing mentorship, training, and exposure to different parts of the business while encouraging cross-functional experiences to expand their skill sets.
• Creating plans for critical roles: Consider developing a succession plan for each position that identifies potential candidates and their development paths. You could also define clear promotion criteria and set milestones for career progression.
• Monitoring and adjusting: Since business priorities and employee situations can evolve, adjusting your plan to reflect these changes may be necessary. Consistently tracking the progress and growth of potential successors can ensure they stay aligned with your organization’s goals.

Emergency succession planning

Emergency succession planning can safeguard against operational disruptions. You may risk leaving critical roles vacant without a contingency plan for unexpected departures, sudden illness, and other unforeseen events. You can create an emergency succession plan by:

• Identifying critical roles: Determine the essential roles within your organization for daily operations and long-term success.
• Appointing back-up candidates: Train backups to be ready to take on new responsibilities at any given time.
• Recording processes and procedures: Document and provide candidates with the necessary information to step into their new roles quickly.
• Communicating transparently: Maintain open lines of communication so everyone is clear about their roles and responsibilities in case of a sudden change.

Executive succession planning

Developing a CEO succession strategy can entail identifying and grooming potential candidates for the executive role. Effectively managing CEO succession planning often involves:

• Recognizing leadership attributes: Define the essential qualities, expertise, and experience needed for the CEO position in your company. Look for people who reflect your company’s values and vision.
• Nurturing internal talent: Foster a pool of internal talent through initiatives such as leadership development programs and mentoring. Dedicate resources to support the progress and promotion of employees willing and able to take on the CEO position.
• Evaluating external candidates: Although you may favour internal candidates, it can be valuable to consider external candidates who offer new perspectives and experiences. Consider performing comprehensive evaluations to confirm alignment with your company culture and strategic objectives.
• Forming a succession planning committee: To manage the CEO succession process, consider establishing a specialized committee of board members, executives, and HR professionals to handle the work.
• Using clear communication: Transparent communication during the CEO succession planning process can encourage trust and confidence in the leadership transition and keep investors and other parties informed.

Succession planning is typically a forward-thinking approach to sustaining streamlined operations. Business owners can effectively manage challenging transitions by identifying skill gaps, developing internal leadership channels, and adhering to best practices.