A Guide to Succession Planning

Succession planning is critical to keep a business, big or small, running smoothly. Whether the CEO dies, resigns, or is fired, there needs to be a succession plan in place. Imagine you have no CEO or executive director or one trained to take their place. It could have a disastrous effect on the company.

Definition and Purpose of succession planning

Planning for a successor is the ability to replace the CEO or executive director.  It can also mean replacing board members or other key employees crucial to the successful day-to-day running of the business.  

The purpose of succession planning is to improve and strengthen the overall capacity of the business to retain functionality by highlighting key positions and identifying potential vacancies.  In short, it refers to focusing on the training and development of potential successors for the key roles that have been identified.  

To do this, you must analyze data to select the KSAs (knowledge, skills, and abilities) potential successors require for business continuity.

Analyzing the benefits of succession planning

You may still need to determine whether succession planning is essential.  To help you make up your mind, let’s look at the benefits of succession planning.

• Talent retention – succession plans are very effective at retaining talent because this shows the new employee a clear path for a promotion in the future.  It increases their desire to remain with the company even in the face of better job offers.  

Succession planning is especially effective when the key employee’s departure date is specified.  It also boosts morale because it shows the employee-in-training that they are a valuable asset to the company.

• Organizational clarity – When staff knows what to expect during sudden management changes, it provides stability and security.  Knowing about the succession plan reduces the risk of disruption from regular operations due to employee transition.
• Performance maintenance – Employees perform at their best when they understand the transition phase and know what to expect.  Being aware of the succession plan can minimize its disruptive impact on staff members when undergoing a staffing change. Ensuring all staff members who would be directly affected can maintain performance standards and keep production levels at the company stable. 
• Lower transition costs – Staffing changes can be costly due to several factors, including lost production and searching for suitable new talent.  A succession plan reduces the financial impact on the business.  

If you have already nominated a replacement candidate, or at least a shortlist, it can reduce the cost of finding a replacement or even remove the price altogether.

• Crisis aversion – In the event of an unexpected departure, like the death of a CEO, a succession plan lays out a series of precise steps so you can adapt and respond effectively when emotions may be running high.  

The risks of not having a succession plan

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According to the US Department of Labor, 30% of the workforce will change jobs every 12 months. 

At the same time, according to the United States Bureau of Labor Statistics, the average employee stays at one job for just over four years.  Businesses without a succession plan put themselves in a very vulnerable position.

Risks include: 

• Financial losses due to an interrupted production process
• Disruptions to workplace protocols, processes, and workflows
• Loss of valuable time training a new successor
• Loss of critical knowledge
• Inability to find suitable talent
• Appointment of a successor not suited to the job

By now, you understand you need a succession plan as soon as possible.  The question is whether you will look for new talent within or outside the company.  Let’s look at the different possible approaches:

Different approaches to succession planning

There are two types of succession planning.  Let’s dive in and compare the two options:

Internal succession planning

The process starts with an internal talent assessment, enabling managers to determine which employees should transition to different roles, who requires further development, and who should undergo training for leadership positions. 

Please note that you must correctly define your performance criteria, and you should base your assessments on real-life examples of day-to-day behavior shown by staff members.  This should significantly improve the chances of allocating the right person to the proper role.

We suggest you use the following criteria to shape your company’s talent review process:

• Performance level – What the employee does and how they do it.
• Potential level – The potential level that the employee could reach if they maintain their current level of performance and have the best working conditions.
• Readiness – How much training does the employee need to develop the KSAs for the position in question?

Why use these criteria for succession planning?

• It triggers helpful and insightful communication between members of the leadership team.
• It’s an excellent way to spark accountability and shared ownership for the venture’s talent pool.
• You can use this technique to identify development needs within your organization.

External succession planning

With statistics on job changes being what they are, it would be remiss of an organization to forego a succession plan. 

However, scouting for external talent takes time and resources, so you should consider letting a recruitment agency do it.

Let’s take a look at the three most essential things when succession planning externally:

• Identify target positions 

• Positions with no suitable internal candidates
• Positions that have only one possible internal candidate
• Positions that will require new talent in the following six to eight months
• Departments that would benefit from fresh perspectives, new ideas and different experiences
• Roles within potential growth areas, like new areas, clients, and products.

• Source external talent

Although head-hunting is frowned upon, and some companies even have an anti-poaching clause in their employment contracts, nothing stops you from advertising on job boards.  

It’s a good idea to choose more than one potential successor from among the applicants if your ideal candidate is unavailable when you need them. Another reason is if they lose interest when the position becomes available.

• Build relationships with external talent

If you nurture relationships with external talent, use a lot of tact.  You could even hire individuals part-time as external consultants on specific projects.

Get to know them, ask questions about their career aims, and be ready to compare their current opportunities and why they would be better off working for you.  You should tell them about your succession plan and how pleased you would be if they would consider being part of it.

Three good reasons to implement an external succession plan

• If you look at the statistics from the Labor Department, one of your star internal successors could resign at any time. External talent can bring new business opportunities, clients, partners, and fresh ideas into the venture.
• In general, workers respond better to external replacements. The change in the hierarchy that internal promotions produce can be challenging for workplace dynamics. 

Equipping a successor

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Follow these simple steps to ensure a smooth transition:

• Document – Keep a record of all the accumulated knowledge and insights from your experience to prevent valuable information from getting lost. Maintain a notebook for documenting tasks as you complete them, making preserving and sharing this essential knowledge easier with your successor.

• Demonstrate – Allocate a few hours each week for your successor to shadow you. Additionally, create a development plan to identify areas for improvement, enabling them to refine the necessary skill sets.

• Educate – Organize regular leadership meetings for all interested individuals, incorporating a curriculum that covers budgeting, lease negotiation, and software tutorials.

• Cross-train – Implement cross-training to enhance staff flexibility, increase awareness and respect, and improve workers’ skills. Job rotation programs can alleviate boredom and foster appreciation for colleagues and their work.

• Mentor – Mentoring benefits both the mentor and mentee. Mentors can sharpen their interpersonal skills while mentees expand their professional network, learn best business practices, and gain a supportive ally.

• Expose – Entrust your successor with responsibility for a specific aspect of a project, allowing them to make decisions and interact with other senior staff members and clients. Encourage their enthusiasm for the role, guide them, and evaluate areas where they may require additional training.

Steps to follow for succession planning 

Step 1 – Identify critical positions

This entails identifying which positions are essential to achieving strategic goals and requires highly competent individuals who are geared for leadership roles.

Ask yourself the following questions. 

To what extent does the position : 

• Impact financial results and drive revenue?
• Require decision-making authority?
• Influence other critical positions?
• Involve relations with clients and stakeholders?
• Involve growth opportunities?

If your answers are mostly yes, this is a high criticality role, which signifies that you will probably need a successor within two years.  If the answers are mostly no, rate it as a low criticality factor, which means you have five or six years of grace.

Now you need to calculate how long the critical employee can still be expected to stay at the company before retiring, resigning etc.  That way, you can determine a priority level for focusing on succession planning activities.

Step 2 – Develop success profiles

This is essentially a map for developing your successor candidates’ leadership skills, including future KSAs that may be necessary.  Remember that behavior traits don’t usually change and have a marked influence on an individual’s ability to perform efficiently in a particular company role.  

There are four main groups consisting of KSAs and personality traits to examine when scouting talent for the successor role:

Image source:  Edsi

Below is a template for successor profiles against each key position.  This can be your foundation for job descriptions, evaluations, and training modules.

Step 3 – Assess successors against success profiles

This step will assist in deciding whether or not potential successor candidates have the KSAs and behavioral traits required for a particular role.  Now you must rate the potential successor’s actual skill level against the desired skill level for the critical position. 

This will help you determine how much training and time is required to groom the candidate in readiness for the role.  Once you have a broad timeline, you can create a detailed list with the projected time needed for the candidate to acquire each new level of skill and the amount of time necessary to gain the relevant experience in that particular skill set for them to perform the job effectively.

Step 4 – Create development plans

The more marked the difference between actual KSAs and required KSAs, the more resources will be required to bring the successor candidate up to speed.  If the gap is too large, nominating another potential candidate may be a better judgment call.

Evaluate potential candidates against each other by comparing:

• Which KSAs need brushing up on
• Methods of training, e.g. shadowing, in-service training etc.
• Projected readiness date
• Additional insights or ideas
• Current readiness level of potential candidates

Step 5 – Identify knowledge loss risks and priorities

Knowledge gleaned over years of service is precious to any organization. Some of it is irrecoverable if it isn’t preserved and passed on to the next generation of employees. Taking steps to preserve crucial knowledge is imperative in succession planning.

According to HR Daily Review, 60% of successor candidates report having significant difficulties gaining vital information from their colleagues.  Productivity and efficiency are majorly impacted by how industry knowledge is dealt with.

This is similar to identifying crucial positions within a company, except that it is essential knowledge.  Steps have to be taken to ensure that critical knowledge does not evaporate and disappear when the key employee leaves the venture.

You need to assess the risk to the organization in the event of a particular key employee’s leaving without having passed on the critical knowledge they possess.  Top key employees that contain crucial information should be given three to five years to train a potential successor in readiness to assume their responsibilities. 

Step 6 – Capture at-risk knowledge

The more crucial the knowledge, the longer the training period required.  Once you have identified the most critical knowledge, you will know which knowledge to prioritize document first.

There are many specialized means of knowledge capture:

• Knowledge maps
• Knowledge inventories
• Decision trees
• Job aids
• Documented processes
• Process maps

Preserving organizational knowledge gleaned will boost the company’s bottom line.

Step 7 – Develop an implementation plan

If you want long-term success, you must implement a master succession plan.  You will use this to identify critical responsibilities, aims, and a time log with projected dates.

This is the stage where you review captured data and prioritize and allocate goals to relevant staff members.

Summarize the date and ask yourself the following questions:

• What key positions do I need to groom successors for?
• Which employees need training as potential successors?
• What critical knowledge needs to be recorded?

A five-year high-impact master succession plan is advisable.  This plan must be kept up-to-date and critical players should be held accountable for the defined aims.

By following these steps, you are ensuring a stable future for your business.

How to build resilience into your plan

It’s advisable to build resilience into your succession plan.  This will ensure that your business can bounce back from unexpected challenges.  For instance, if you have only identified and groomed one potential successor for the CEO role, and training has been in progress for three years when both the CEO and the successor are tragically killed in an MVA, do you have a go-to plan in place?

It is always wise to have more than one potential candidate for extremely critical roles within a company to ensure your business’s ability to retain functionality in the direst circumstances.

Engaging stakeholders

The succession planning process works better when there is input from all levels, including stakeholders.  Involving your stakeholders ensures:

• Effective risk management when executing the plan
• The likelihood of the succession plan being successful increases the better the understanding of stakeholders’ needs
• More comprehensive decision making
• A more robust vision of the goal among the most influential key players
• Combined knowledge and expertise strengthen the plan

Doing right by all stakeholders increases the value of your business to shareholders.  Ensure your company’s success by involving your stakeholders in the planning decisions.

Ensuring continuity of leadership

Ensuring continuity of leadership is a step up from the usual succession plan.  Your run-of-the-mill succession plan allows for training time and is in place for when key personnel retire.  But what about catastrophes?  Such as the tragedy above of an MWA where, hypothetically, both the CEO and the CEO’s successor are killed in an MVA.

Do you have a plan in place for an unexpected disaster?  It may be a good idea to scout for talent externally whilst grooming talent internally so that you have a suitably qualified individual in mind if some catastrophe occurs.

Creating opportunities for growth and development

Try to offer industry training courses for interested individuals.  Engage your HODs to regularly assess staff members to identify the most promising individuals.  With a bit of training and more confidence, a quiet and humble individual who doesn’t like to draw attention to themselves could be your most promising candidate.

Encouraging staff members to expand their knowledge and horizons always benefits any organization.  It also increases an employee’s sense of self-worth, resulting in them striving to outperform themselves.

Implementing the plan and monitoring results

All people are different and learn at various rates of speed.  Implementing your succession plan will involve measuring the progress of those chosen to fill successor roles.  You can do this by drawing up a list of training objectives and listing projected achievement dates for new KSA levels next to each goal.

Assess the progress of successors by comparing the estimated dates to the actual dates when they attain new knowledge levels. Some successors might reach the desired outcomes quicker than anticipated, and these individuals should be prepared for crucial positions. Conversely, other successors may require additional time and training to achieve their goals.

That doesn’t mean you made a mistake.  Sometimes those candidates are more likely to remain within your organization, while the quicker learners may be more inclined to move on if a better job offer arises.

Final thoughts

In conclusion, effective succession planning is an essential and strategic process that ensures the continuity and stability of an organization. Businesses can better prepare for leadership transitions while minimizing disruptions by identifying, developing, and nurturing potential successors. Implementing the outlined steps in this guide to succession planning, including documentation, demonstration, education, cross-training, mentoring, and exposure, will enable organizations to cultivate a robust and capable talent pool. By investing in future leaders’ development, organizations can safeguard their success and foster a culture of growth, adaptability, and collaboration, driving long-term prosperity and resilience in an ever-changing business landscape.