Succession planning at an organization is crucial for the smooth replacement of high-performing and mission-critical employees.
Unfortunately, according to a study from Deloitte, while 86% of leaders believe that succession planning is an important priority, only 14% believe that they do it well. Why the gap? We’re speculating, but it’s likely because succession planning takes time and effort, And, you need the right succession planning processes in place to see results. Without all three elements, it’s hard to stick with the succession planning program long term.
What is succession planning?
Succession planning, at its core, is a strategy that identifies and develops future leaders at all levels of the company.
The goal of succession planning is to ensure that your company is prepared for the future. To do so, organizations recruit new talent, or train internal candidates, who will eventually move into a leadership position once the current one leaves.
The succession planning process, therefore, includes the policies and steps needed to groom one or multiple candidates into a more senior leadership position.
This process provides contingency plans for when employees leave, and ensures that productivity and knowledge is not disrupted due to the departure of mission-critical leaders.
Why is succession planning important?
Planning for your future is important in any organization. Thinking multiple steps ahead, and identifying who will step in to fill leadership roles, is equally important as ensuring that you have the proper cash flow and company infrastructure in place for the long term to hit your business goals.
There are multiple reasons why 86% of the leaders surveyed by Deloitte consider succession planning to be important. These include:
- It ensures that you never – or rarely – have a key role unfilled for which another employee is not prepared
- It develops a deep talent bench strength at your organization, leading to better productivity, innovation, and knowledge sharing
- It keeps your top performers motivated and engaged, and is a critical component of long term talent management and retention
- It allows you to proactively identify key roles at your organization, and ensures that you have a backup plan in place to ensure continuity
In a nutshell, succession planning allows you to future-proof your organization by proactively identifying and backfilling the most important positions. Failure to do so can create harmful, and expensive, voids in knowledge and leadership at your organization.
Benefits of succession planning
Now that we’ve looked at what succession planning is, and why it’s important, let’s talk about its benefits in more depth.
Here are 10 commonly cited benefits of succession planning:
- Reduces risk and allows your company to quickly pivot and adapt to unforeseen situations and changes.
- Enables long term planning, by aligning business strategy with human resources and forcing a three to five year planning horizon.
- Reduces loss of knowledge transfer when one employee leaves by accounting and planning for that eventuality.
- Empowers and motivates employees by giving them ownership over their own future with the company.
- Forces you to look at your business in a 360-degree view to determine where your strengths, weaknesses, opportunities, and threats lie from a human resource perspective.
- Shows your company’s commitment to employee growth and training thereby positioning you as a company that values and promotes development.
- Creates a more diverse portfolio of leaders, especially when you use an objective and unbiased process to identify future leaders.
- Leads to higher quality decisions around promotions and development due to a more concerted effort to identify and train the right successor.
- Creates a stronger company culture due to the ability to advance leaders who already embody the organization’s core beliefs.
- Leads to greater organizational stability and resilience by removing or reducing disruptions from natural attrition.
It’s important, therefore, that succession planning takes center stage at your organization, and that those currently in leadership positions take this requirement seriously.
Who is responsible for succession planning?
When thinking about who is responsible for succession planning at your organization, ask yourself this question: “Who is ultimately responsible for ensuring that the company has the right plan and resources in place to succeed?”
If your answer to the above question was “The Board” then you would be correct.
Succession planning starts at the very top of the company, and the buck typically stops with the group of people to sign off on the strategic direction and resource allocation for the company.
From there, the job of actually executing the succession planning process rests, ultimately, with the CEO. That person is responsible for ensuring that the team below him or her has the direction, resources, and empowerment needed to keep the succession planning process on track.
If the CEO fails to do that, then the Board is again responsible for the succession planning of the CEO themself.
Trickling down from the CEO, the three key groups of people who are responsible for the day-to-day succession planning activities are:
- Human resources who is in charge of developing and executing the succession planning strategy, liaising with senior leadership, securing resources as needed, forecasting future skills needs, and monitoring progress.
- Senior managers and leaders who are in charge of owning their own succession planning assignments and outcomes, including identifying and training top talent in the skills they’ll eventually need to step into more senior roles.
- Top talent who are chosen for grooming into leadership positions, and are responsible for completing their development assignments, and staying aligned with their leader and mentor.
Succession planning is a company-wide initiative that requires buy-in and commitment from all levels of the organization. Because there are many moving parts – and people – it’s helpful to have a structured succession planning process in place at all times.
The succession planning process
There are six key steps in any succession planning process, which we’ll outline below. Consider this to be a starter succession planning template that you can adapt and use to create your own strategy.
1. Assess your current and future strategic goals
The first step in developing a succession planning process is to get a clear handle on where your company is today, and where you want to be in three to five years.
Top leadership – at the C-Suite and Board level – needs to develop and communicate a clear vision and strategic roadmap for your company’s future. This should include a detailed assessment of your current business model, that of your competition, and all strengths, weaknesses, opportunities, threats, and any other external factors that need to be accounted for to hit this strategic goal.
Helpful tools to complete this step include:
- SWOT analysis (strengths, weaknesses, opportunities, threats)
- Business model reviews
- Competitive analysis
- DESTEP analysis (demographic, economic, sociocultural, technological, ecological, political/legal)
Once this has been communicated, the conversation should shift to an assessment of what resources will be needed to attain that goal. This should include infrastructure, data, capital, and human resources.
Once you have those marching orders in place, you can turn your attention to assessing your workforce.
2. Review your workforce and take a skills inventory
Take a detailed inventory of who you have in your workforce, and what they do. Map that analysis back to your current and future strategic goals to answer these questions:
- Who are your key players?
- What skills do they have?
- What are you / they missing?
- Who are the mission-critical employees?
This process will naturally lead into a skills gap analysis: an activity that uncovers what skills and knowledge you currently have in your workforce, and how that aligns with the skills you need to achieve your goals.
When doing so, look at all levels of your organization to identify the most critical positions for your current and future needs.
Flag any and all roles that you cannot go without for a prolonged period of time. These should be your targets for succession planning.
3. Choose your succession planning strategy
Not all succession planning processes are created equal. To be successful, you need to find or develop one that closely aligns with your existing workforce and strategic goals.
Some key questions to ask when developing your strategic planning strategy include:
- Do you want to include every employee and position in succession planning, or just high priority ones?
- Is your succession planning program just for leadership and management positions, or is backfilling skills also a priority?
- Is there a specific skills gap that you’re looking to fill? Is so, when do you need to fill it?
- Are there external factors that make succession planning for specific skills or positions more urgent than others?
- How will you incorporate compensation into your succession plans?
- How will you motivate managers and employees to remain engaged in succession planning?
- How will you support your managers to account for the added workload from identifying and training their successors?
- How will you assign and manage resources to support employee development?
- How often will progress be reviewed? Who will do the reviewing? What will the action items be?
- What are the success factors that guide your strategy, execution and refinement?
- How often will you review progress and measure success?
- Who are the key stakeholders in this process? Who will monitor and report on daily, weekly, monthly, and quarterly activities?
- Is your succession planning strategy permanent, or is it designed to get you to a specific stage in your company’s growth?
Human resources, senior leadership, and the Board should review each of these questions to clearly establish who, where, and why succession planning will take place, and what success looks like.
Once these questions have been answered, a clearer strategy and roadmap for succession planning will come into frame.
4. Choose your succession planning tools
Once you’ve determined what you want to do, the next step is finding the tools to do it. There are a wide variety of possible succession planning tools you can use to aid in this process, including:
- Performance management software to track and monitor performance, feedback, and employee evaluations to identify high-potential candidates for more senior roles.
- Applicant tracking systems to create and manage a talent pool of potential candidates to backfill essential skills and positions.
- Candidate relationship management systems to stay in touch with those high potential candidates, making it easier to convert them into new hires when needed.
- Learning management systems to provide and track training materials and progress for candidates chosen for succession planning.
- Succession planning tools that are purpose built to create scalable processes, performance templates, and compensation plans for these strategies.
Once you have your succession planning tools in place, the next step is execution.
5. Identify who you will groom for succession planning
At this stage, human resources and senior leadership should objectively review performance metrics and evaluations to determine who the best succession candidate is for each critical role.
For senior leadership positions, it’s not uncommon to have two or three potential candidates. That will, of course, depend on the size of your company and the role in question.
Look for people who show signs of being ready to take on more senior roles. Approach them and explain your plans. Get their buy in, and ask the employee’s manager to work with them to create a tailored succession planning program.
As the candidate works through their succession plan program, assess their progress and tweak their assignment as needed.
6. Evaluate the effectiveness of your succession planning program
Lastly, you should regularly monitor and assess the effectiveness of your succession planning process. This should be done at four levels:
- Have succession plans been developed for all key positions identified in section three?
- How are your succession plan candidates progressing through their programs?
- Are key positions – when made vacant – being filled quickly by one of the groomed candidates?
- How effectively are employees performing in their more senior positions? Are there minimal delays in time to productivity, and minimal loss of knowledge?
The first two points can be monitored on a monthly or quarterly basis in a similar manner that you would use for performance management.
The second two points, however, will be on a much longer timeline. It’s important, therefore, to not forget about your succession planning strategy and to continue to monitor and review the results each time a transition between roles is made.
Succession planning is, inherently, a long game. It takes time to develop, and even longer to see the results of your effort. Those results, however, can mean the difference between smooth transitions of productivity and knowledge and lost output at critical stages in your company’s strategic growth.