This article is going to explain what succession planning is and how it can be applied to your business.
After reading this guide, you will have a strong idea of creating or improving your succession planning process and the best practices involved.
Succession planning is the process whereby you identify new leaders and develop them to take over the role of the incumbent.
For businesses to thrive, it needs to avoid moments of crisis and lack of leadership.
At some point, succession planning will help with such a situation by preparing a candidate for a planned or emergency replacement. This could be because of retirement, a new opportunity, or in the event of death.
Succession planning is your safety net to ensure that business operations can remain smooth. A robust process will help you identify key individuals who could fill leadership positions.
In the best-case scenario, you will be given advance notice when someone is going to leave. A succession plan prepares you for the worst-case scenario and no notice.
At the same time, an effective succession planning strategy will avoid any questions of succession where leadership positions are concerned.
In the monarchy, this is often resolved through the order of succession. A well-understood model that passes the office to the nearest descendant. This model is also common with family-run businesses that intend to leave the business to their children or next of kin.
In business, succession planning plays a vital role in identifying candidates to take on more challenging roles. When an important postholder departs they leave behind a void that can disrupt the company.
No matter the size of your business, a succession plan is a key to having a smooth transition.
Large companies such as Pepsi, Microsoft, and General Electric have well-known succession plans for executive talent.
For large corporations, it will typically fall to the CEO and the board of directors to oversee the succession plans. They will evaluate employees to identify leadership qualities and provide training for those in consideration.
Often the succession plan will look internally for candidates to take over positions. However, some companies may look to external candidates and may even employ the use of headhunters.
Smaller-scale companies may not need a comprehensive succession plan compared to large businesses. However, there will still be a need to identify someone to take over in the event of an emergency.
Therefore it is wise to train potential successors so they are prepared to step up if the need arises.
There are two types of succession plans that should be considered. This will give your business something to fall back on in the case of an emergency.
The first type of succession plan you should consider is your long-term succession plan. This is the plan that you will more or less stick to as a standard for key positions.
A succession plan of this nature can be reevaluated and changed as the company grows. For large companies, this would be the plan that outlines the details of succession for all key positions.
A secondary emergency succession plan can also be created, where appropriate, to be deployed in the event of an emergency.
This type of plan may involve more temporary measures but is intended to keep operations running smoothly.
This could see other senior members of staff take on extra responsibilities while a replacement is sought.
Many small and medium businesses do not have a succession plan. Of those that do, some of them have only informal plans.
This can be a risk for your business as there could be unforeseen incidents that could occur such as death. It is worth creating a formal, written succession plan that is developed and easily accessible.
Here are some of the benefits for businesses of any size to create a succession plan:
When an upcoming promotion, retirement, or departure is approaching you will have the next generation of leaders ready to go.
Thanks to your succession plan the replacement will already have the skills required to take over the role.
Your succession plan can help your managers to start developing lower-level employees.
The plan helps to define clear progression routes through the company so managers can share appropriate training and information with junior staff.
Managers will also be able to start training their replacement when promotions are approaching.
Employees report higher job satisfaction when there is a succession plan at their company. This is because it helps to define routes to progressions and lowers job insecurity.
A succession plan can help employees understand what they need to do to achieve a promotion. It can help with goal-setting and giving employees a sense of direction at work.
Succession planning can help your managers to track employee progress through performance reviews.
Internal opportunities can also be quickly filled with knowledgeable employees who have been upskilled and crossed trained.
Whenever a high-ranking postholder leaves the organization it can leave shareholders feeling uneasy.
In some cases, they may look to sell their shares. A good succession plan can help keep investors on board.
For positions like CEO or CFO, the board may have had some input into the choice of successor. This will give the shareholders confidence in the company and the new postholder.
Having a strong culture of promoting from within can lead to increased company loyalty.
You can attract talented employees who will stay with you for a long time. This helps them to have a strong understanding of the businesses, morals, and expectations.
Employees are more likely to stick around for the long term if there are defined advancement opportunities.
Instead of an informal plan, it’s a good idea to make a comprehensive document that outlines how succession should work.
Small and family businesses may only need a limited plan that outlines succession for a single person.
Larger corporations may need a comprehensive document that starts with the hiring process and works its way through the ranks and details different leadership positions.
The fundamentals of your succession plan will remain the same which is what we’re going to look at now.
It’s also worth pointing out that this document can be revised and amended whenever it is necessary.
You will need to figure out how comprehensive you want your succession planning to be.
A small business might only need to find a replacement for ownership. Medium and large businesses may only want to consider the succession plan for their C-suite of employees.
It may also be the case you want a succession plan that covers every eventuality from store manager to distribution to CEO.
Ask yourself the following questions to decide what is best for your business:
It’s important to understand what your specific needs are as well as the needs of the business.
The size and type of your business can help to inform some of your decisions but ultimately every business will be different.
First, you have to identify the key roles in your organization that will be good to secure.
It could be the CEO, CFO, CCO, CHRO, and different heads of departments.
Second, you might have some specific specialists that are unique to the industry or your business, e.g. it might be some highly skilled engineer, programmer, scientist, etc.
Consider the following questions to identify key positions and the skills needed for that post:
The objective is to figure out how crucial the position is. If the company would be severely affected by a vacated position then this is one that should be considered within your succession plan.
You will also need to understand what specific attributes are needed for the role. That way you can build your training and development around nurturing those key skills.
Perhaps the most crucial stage is finding the employees that might be suited to a tougher challenge.
You could ask the current postholder for help determining who could step up in their absence.
It’s also worth considering that the right person for the job isn’t necessarily the next in line. Candidates could be sidestepped in the role or there could be other promising candidates in the business.
You may wish to make hiring a part of the plan and therefore can use interviews to vet potential recruits for career prospects.
Try to answer the next questions:
It’s important to identify people who want more responsibility. Your top choice maybe someone who is happy in their current role and not looking to change.
This is something that can be gauged during annual reviews or in meetings about their professional goals.
It would be wise to speak with the people you are considering.
This will give you a clear answer if they would be interested in the role.
Don’t make any promises but explain that they are being considered for leadership.
Explain that nothing is guaranteed as there are plenty of moving factors to consider. This includes the current postholder, the company, and the candidates.
However, you can gauge their interest and it may help to encourage high-performing individuals to remain loyal to the company.
Leadership development is worth investing in particularly for employees you have identified for succession into key roles.
There are a variety of ways to develop potential successors and help them to develop leadership skills.
You can create a leadership development plan to ensure candidates have the right skills and are a good fit for leading positions. Employees being groomed for leadership roles can be developed in several ways.
You need to test your employees to make sure they can meet the demands of the increased responsibilities.
Some of the ways this can be achieved are through:
Connect the candidates with business leaders in your company. They can help to develop the skills of succession candidates and even share knowledge that might not be immediately obvious.
You can send prospects on courses to help develop their skills. These could be in-house courses or ones run through independent third parties.
Task forces and project management is a great way to test your candidates. This will give them the opportunity to lead a team and test how well they cope under pressure.
When you think about development consider the following questions:
The focus should be on improving a candidate’s interpersonal abilities and communication skills that are important in a leading position.
You will also want to give them the opportunity to learn and develop the necessary skills required to do the specific job.
There should be ample opportunity to give your succession plan a trial run with the candidates you are considering. For example, if the postholder is away on holiday or off sick for an extended period you can use this as an opportunity to try someone in the role.
The benefit here is twofold, the candidate will get a feel for the position and appreciate the opportunity. While you can assess whether they are the right candidate for the position.
Note: Such tests can affect the team so pay close attention to this. This is especially true for external candidates and people from different teams. Not everybody will like it, unless the candidate is a strong leader from the inside of the team.
This is what you need to consider:
You want to see them step up and take control of the position. This will help identify if there is any specific training they need to take the role full-time.
You can gauge whether someone is wrong for the position. This may come down to their interpersonal skills or ability to deal with new challenges.
Your succession plan is something that can be developed over time.
It may be that what was working years ago isn’t quite the same now.
You may need to adjust the succession plan to adapt to a changing business landscape. As the business grows you may need to redefine what is included in your succession plan.
It would be prudent to start with the most important roles in the business. After all, you can’t totally predict when a key position will become vacant.
Once you have those key positions locked down you can start to expand the scope of your succession plan.
You should start with the most important roles first.
Which of the positions will have the greatest effect on your business if the postholder doesn’t turn up tomorrow?
Roles at an executive level are going to be the most disruptive ones. From there work out the specific skills and knowledge required for the role. This will help you to create your plan and identify potential successors.
Once the most pressing roles are covered you can look at what other roles are important to include.
Your succession plan will affect people and may make some people feel nervous.
It’s important to explain the scope of the succession plan and why certain roles are included in it.
You may only look to include executive positions or your plan may include managers and supervisory staff as well.
By giving a clearly defined scope you can avoid members of staff second-guessing their position.
This is a process that should be driven by the business leaders with support from HR where necessary.
It is not strictly an HR process and therefore senior leadership should be communicated with regarding the succession plan.
Gain insights, input, and information from across the senior positions to help the succession plan run smoothly. Interviewing the post holders about the wants and needs of their job can provide crucial information.
You should have an emergency succession plan in place that can deal with the untimely vacancy of a position.
Alongside this, you can create a detailed forecast and a longer-term plan. This is necessary to address things like upcoming retirement and promotions.
You will also need to consider how quickly the business can mobilize to fill this position.
A strong succession plan will understand how it will impact the business in 6 months, 1 year, and 5 years.
Create a pipeline of talent so you have individuals ready to take up new challenges as they arrive.
A pipeline of this kind is essential for finding a talented successor but it’s also a good idea to help fill newly created positions. New recruits can be included in your pipeline of talent.
You can learn about this in our talent acquisition guide.
Even if you don’t have any open positions currently, you can still start cultivating a pool of talented individuals.
Your succession plan is something that should be continually developed.
This includes reviewing the candidates on an annual basis or more. People may have moved on or into new positions within your company. Promising candidates may no longer be performing at the standard you would like.
Take a look at your succession plan every year and adapt and change things where it is necessary.
It will help you nurture and grow potential candidates as well as new talents.
When you have identified the individuals that are being considered for senior positions you will need to develop their skills.
You can work with the candidates and they can lead their own individual development plan.
This ensures that their progress is actively monitored and they can take ownership of the process.
Managers should be on hand to provide guidance, resources, and provide timely reviews.
Succession plans make your business disaster-proof. They provide a concrete plan for filling key roles and help to avoid times of uncertainty. It can be reassuring for investors to know that there is a carefully considered plan in place.
Succession planning should be conducted by business leaders with support from the HR teams. All affected individuals need to be involved in the process. Start with the end goal to identify what you need to achieve. Each business will have different needs so consider which positions will have the biggest effect on operations.
Business succession planning is the process whereby you identify candidates to be groomed for senior positions. Specifically, when the incumbent leaves the role, this could be for a promotion, retirement, or an untimely death. Your business succession plan is in place to facilitate a transfer of power and keep your business sailing smoothly.