Succession planning is key to business continuity. Are you ready to fill critical roles when people leave? If not, it’s time for a succession planning strategy.
Succession planning is concerned with identifying and developing internal talent to become future leaders in your business.
It’s like a relay race. Passing the baton from one person to the next, keeping things running, maintaining momentum - and staying competitive.
However, despite the bottom-line benefits of succession planning – not to mention shareholder expectations and compliance requirements in some sectors – many companies are unprepared for staff departures.
37% of organizations never discuss succession planning and only 14% say they do it well. And 90% of new CEOs wish their transition had been managed differently.
If you’re interested in what makes a successful succession program – or how to get started with replacement planning – you’re in the right place 😊
Succession planning – sometimes called replacement planning – is the strategic process of deciding who’ll take over key roles when they become vacant.
It’s about preparing high-performing people to step into mission-critical positions – as soon as they’re available – to ensure business continuity.
Proactive succession planning:
Succession planning is a fundamental aspect of responsible business management and risk mitigation.
Whether a critical role becomes vacant due to planned retirement or unexpected staff turnover, it ensures you have the right person ready to fill the position without delay or a disruptive learning curve. This protects the business from operational issues, productivity losses, and even reputational damage.
Research shows that when future leaders are onboarded through an effective succession planning process:
Despite this, many organizations fail to engage in succession planning, putting their business at risk.
According to McKinsey and Co., 84% of executives recognize the importance of succession planning, even though their organizations struggle to get it right. So why is succession planning so important? Here’s three headline reasons.
Critical staff departures can be highly disruptive, especially if they’re unexpected and require reactive recruitment. This disruption can lead to instability and even loss of public confidence. Harvard Business Review reports that poorly managed C-suite transitions within S&P 1500 companies result in nearly $1 trillion in market value erosion annually 😲
Succession planning is so critical to business continuity that it’s actually a requirement in many regulated sectors. In the financial sector, for example, regulatory bodies require succession plans for key executive positions. Even in unregulated sectors, shareholders demand succession plans to safeguard the subject of their investment.
Succession planning supports the principle that talent is better ‘built not bought’. According to a Korn Ferry survey, most businesses agree that the workforce should be 67% built and only 33% bought. But 50% of organizations still rely heavily on external recruitment. This incurs higher costs and increases the time to competence, which can disrupt business operations.
Ambitious, high-potential employees are more likely to stick around if they see a future in the organization - which means succession planning can form part of your strategy for retaining top talent.
Transparent succession planning provides employees with the opportunity to prove themselves, pursue their career goals, and progress to the highest ranks of the business. This can motivate skills development, high performance, and loyalty to the business.
Without proactive succession planning, businesses are left scrambling to fill critical vacancies through reactive succession planning.
Reactive succession planning is when an organization only begins the succession planning process in response to a position becomes available.
This exposes the business to risks like:
At a basic level, successful succession planning involves:
Of course, there’s a lot involved in each step. We’ll get into a more detailed breakdown below.
27% to 46% of executive transitions are viewed as failures or disappointments after two years. And only a third of executives are satisfied with the outcome of their CEO succession program. So why is succession planning so hard to get right?
As with all things business, your succession planning plans will wither without senior leaders’ support. You need the backing of your executive team to secure resources and budget, to champion the process, and – of course – to engage in mentoring and training their own successor.
Many organizations struggle to identify top internal talent: particularly in larger enterprises, talent discoverability can be a real issue. Scale, silos, and remote working can obscure the potential of your people. Appropriate skills management practices and tools are essential for uncovering and recognizing hidden talent.
It takes time and budget to train and mentor people. And it takes people away from their day-to-day duties, which can increase pressure on other resources. Succession planning needs to be appropriately funded and supported.
Succession planning could be mistakenly viewed as a way to maintain the status quo and simply meet immediate operational needs, rather than as a chance to pursue ambitious strategic goals. But this misses the opportunity to prepare successors who can think differently and make change happen.
Whether it’s current leaders afraid they’re going to be replaced – or line managers reluctant to release their team members for training and development – resistance is a real risk to succession planning success. Reassurance and resources are the answer.
Biases in succession planning can hinder diversity. Personal biases (like sexism or racism), similarity bias (favoring people most like us), proximity bias (favoring people who are physically present), and favoritism can result in qualified candidates being overlooked, as well as reinforcing inequalities.
If succession planning seems like a done deal, people will mistrust the process and be reluctant to put themselves forward for consideration. Even in a meritocracy, unclear processes might mean people don’t understand how to put themselves forward for opportunities. This can undermine talent retention goals.
This stage involves identifying the positions that require a succession plan and anticipating the roles most likely to become available.
Review your organization's strategic objectives and operational goals. Which positions are crucial to achieve them? Don’t just think about senior leadership. Mission-critical roles might include executive roles, specialized technical positions, or roles with significant impact on key projects or departments.
Next, it makes sense to identify critical positions most likely to churn. Some staff departures may be easily anticipated – for example, if someone is approaching retirement or has said they plan to move on from your company. But you can also use churn rate data to understand how often key positions become available and anticipate likely turnover.
Having identified mission-critical roles, analyze them to determine the qualities and qualifications a successor will need. Consider:
Equipped with a detailed knowledge of each critical role, you can develop a transition plan that sets out key timelines and milestones, as well as the responsibilities of the outgoing postholder and their successor. The plan should include sufficient overlap to allow for knowledge transfer and transfer of responsibility.
The next stage is to look at your internal talent and identify people with the ambition and potential to step up to more responsibility.
High-potential individuals have strong skills, a proven track record in past roles, and aspire to progress within your business. Ideally, they’ll be a good cultural fit and identify with your business mission and values. But how do you find them? Here’s some places to start.
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Next, compare each candidate against the required skills and competencies identified in Step 1. Assess candidates based on performance reviews, skills assessments, recommendations and referrals, leadership capabilities, and alignment with organizational values and team culture.
You should now have a shortlist of candidates to take forward into your succession plan. This is likely to comprise core elements – such as leadership development training and mentoring – as well as elements tailored to individual needs – such as exposure to certain areas of the business or specific skills development.
This step is concerned with developing the people you’ve selected for your succession program. Here are some opportunities to consider.
Offer opportunities for employees to move laterally within the organization, allowing them to gain diverse experiences and perspectives. Encourage participation in cross-functional teams and experience in different departments to broaden their understanding of different functions within the organization.
Assign challenging projects or roles that stretch their skills and capabilities. For example, if your potential successor is in a highly skilled technical role with no managerial responsibilities, support them to take on a project management role, to become more comfortable with decision-making, managing people, and other management skills.
Assess the skills profile of each potential successor and identify any areas for improvement, to equip them for the new role. Create a tailored mix of internal and external training opportunities, such as in-house upskilling and external courses and accreditation.
Provide opportunities for successors to shadow current incumbents in critical roles. This firsthand experience gives candidates the chance to learn about the role, witness the decision-making process, meet key contacts, and gain strategic insights.
Candidates may also benefit from seeing a mentor or coach to help them focus on their professional goals, overcome roadblocks, and unlock their potential. Something that’s often overlooked is that leadership is different to management. Coaching and mentoring can help managers become leaders.
Decision time! You’re ready to put your succession plan into action. It’s time to select the successful candidate.
Your replacement planning program should be supported by a succession planning committee. They drive the succession strategy and make key decisions. The panel should include key stakeholders such as senior management, HR professionals, and relevant department heads. Aim for diverse membership to reduce the risk of similarity bias.
The panel should assess the readiness of each candidate to assume the new role. Consider factors like their performance in development activities, readiness for increased responsibility, and cultural fit with the organization. They should then select the most suitable candidate and recommend them for final approval by senior leaders or the board of directors.
It’s now time to implement your transition plan. Ensure there’s enough overlap between the incumbent and the successor to allow for knowledge transfer. Implement a communications plan with key stakeholders so employees, shareholders, clients, customers, and suppliers have confidence in the process.
Now you know the basics of succession planning, let’s look at some expert best practices. These will help you dodge the pitfalls identified above and position you in the 30% of executives who are happy with the outcome of succession planning efforts.
Succession planning is often reserved for just C-suite roles, particularly the CEO. However, savvy businesses should have succession plans for any mission-critical role. If losing a particular person would cause serious disruption to your business, you need to plan for their replacement. Who can’t you live without?
It might seem pessimistic but you should start planning the replacement of critical positions as soon as the new postholder takes office. Succession planning should be an ongoing process – matching the revolving door reality of employee turnover – not a reactive measure when a transition is imminent.
It’s important to align succession plans with future strategic needs, not just replace like-for-like. The board and CEO must agree on the company's future strategy and the competencies required for success, then assess candidates based on these criteria.
As RJ Heckman, President of Leadership and Talent Consulting at Korn Ferry advises:
The companies that win are those that strategically align the succession management plan with the direction of the business."
Similarity bias is when boards and outgoing postholders favor candidates who think and act – and look – like them. Rather than thinking about what’s best for the company, they fall for the ‘representativeness heuristic’ – a mental shortcut that says the familiar choice is the right choice.
To reduce the risk of bias and ensure a more objective process, McKinsey’s ‘bias busters’ report recommends establishing a diverse task force or succession planning committee well in advance of any expected transitions.
Proximity bias is a newer phenomenon related to hybrid and remote workforces. It’s when managers and leaders favor people who are more visible in the workplace – those who work more frequently from physical workspaces. This can disadvantage people for whom remote work is preferable, such as people with disabilities, those with caring responsibilities, or people from marginalized groups.
According to Korn Ferry, only 13% of skilled professionals are included in succession programs. What a waste!
To reduce the risk of proximity bias, ensure a rigorous candidate identification process using data from your HR and resource management systems to get an objective view of people’s talent and potential.
Use capacity and capability planning to forecast the organization’s future hiring needs. Use your resource management system data to analyze workforce demographics, identify skills gaps, and model future scenarios that could impact staffing levels and future roles. This ensures you have the right talent management and development processes in place to meet future business demands.
Less than 1 in 4 companies believe they have a ‘ready now’ talent pipeline. Invest in creating a pipeline that flows from entry-level roles right up to the C-suite. Build relationships with colleges and candidates to attract new talent to the business. Then work hard to retain and nurture that talent through meaningful work, upskilling, development programs, and internal mobility. Ensure you have a strategic staffing model to ensure you have the people your business needs for success.
Maintain open and transparent communication about succession planning processes and decisions. This helps build trust and get excited about career planning with the company. Ensuring transparency in the succession planning process builds trust among employees and motivates them to actively pursue developmental opportunities.
Runn provides strategic businesses with the insights they need for seamless succession planning – as well as effortless resource and project management.
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