Mastering Succession Planning: A Comprehensive Guide for HR

Succession planning is a critical aspect of organizational strategy that often doesn’t receive the attention it deserves. In a world where many organizations face the challenges of leadership transitions, retirements, or unexpected departures, the need for a well-structured succession plan has become imperative.

In this article, we will provide a step-by-step guide to help HR professionals and people managers navigate the intricacies of succession planning, empowering them to build a pipeline of potential leaders and secure the long-term success of their organizations. Let’s jump right in!

What is succession planning?

Succession planning is the strategic process of identifying and nurturing potential successors for key leadership positions within the organization. The aim of succession plans is to ensure continuity and minimize disruptions that can be caused by:

• talent departures
• promotions
• retirements

It’s worth pointing out that while succession planning usually targets leadership positions, other non-leadership roles can also be considered if they are critical to the organization and its long-term goals.

Why is succession planning important?

Succession planning is especially important in the modern world of work, where current employees are less likely to stay at one company for very long periods of time (compared to previous generations in the workplace). It helps to:

• Reduce the risk of knowledge and skill gaps: the transfer of critical expertise to potential successors is key to business continuity, especially those skills, and knowledge that cannot always be passed on through formal development plans.
• Keep business operations running smoothly: when it comes to business, the truth is some roles are simply more important than others, and having them vacant for a long period of time can prove to be extremely costly.
• Improves employee engagement and retention: Having clear and exciting career paths will raise the morale of your employees and give them something to strive for.
• Save money on external hiring: Training top performers and potential leaders who are already inside the company is less expensive (and can be even faster) than going through a full recruitment process.

What are the benefits of succession planning?

The points we’ve highlighted above, which prove the importance of succession planning, can easily (and rightly) also be seen as benefits. But in addition to those, succession planning also:

Increases organizational agility

Having a pool of internal candidates who are ready to hit the ground running fast will help organizations respond to leadership vacancies faster. And, thanks to the transferrable nature of soft and leadership skills, the same candidates could (sometimes with some extra training) be able to cover multiple leadership positions.

Improves the succession decision-making process

Know the saying “A bad plan is better than no plan.”? Well, it also applies to succession planning. Identifying and assessing potential leaders in advance will help organizations make better and more informed choices — something that wouldn’t be possible in a situation where a surprise departure or retirement would force HR and top management to quickly identify and hire someone.

Sustains long-term organizational success

Finding and training potential leaders not only ensures continuity and long-term stability but also brings innovation and different perspectives. Younger candidates who are prepared for future leadership roles will bring novel ideas and visions to the table. And in an ever-changing business world, no company can afford to overlook this.

What are the key steps of succession planning?

Depending on the needs and approach of each organization, succession planning strategies can differ. However, you cannot go wrong by following these steps:

1. Choose the critical roles you want to target

As we’ve mentioned in the beginning, succession planning usually aims to prepare successors for leadership positions. But this isn’t always so. In fact, Cady O’Grady, Director of Human Resources at Greensfelder believes in having a succession plan for every role:

That being said, not all companies can afford such a large-scale process; which is why during the first step of succession planning HR and top management should establish the critical roles that represent the highest priority and focus on them.

During this first step, you also need to map these critical roles to the skills (must-have and nice-to-have) and capabilities required to meet performance levels. This way, you’ll have an easier time deciding which candidates have the potential to fill in these positions.

2. Identify employees with leadership potential

The next step is to naturally look at your workforce and determine who has the skills, traits, and inclination to become a leader.

In the case of some workers, this can be a straightforward process: they already display all the desired characteristics and abilities and have expressed their interest in taking on higher responsibilities.

For hidden gems, you’ll have to use multiple methods of assessment. Performance appraisals are a great start, but top performers aren’t necessarily great leaders. You should make use of 360-degree feedback, leadership simulations, or even psychometric assessments to determine their suitability.

3. Define leadership development frameworks and opportunities

Before you start preparing candidates with the potential to become leaders, it’s important to define clear development frameworks that present all the different ways — supported and embraced by the company — through which these candidates can fill their skill and knowledge gaps.

While these frameworks will highlight a wider range of steps and growth actions, the next ‘sub-step’, if we can call it that, is to determine the best-fit opportunities for each potential leader.

This will be based on the unique needs of every suitable candidate and will ensure that leadership development efforts are targeted and have the desired outcome. Less traditional growth initiatives, like job shadowing, talent sharing, coaching, or mentorship are crucial during this step and should receive the attention they deserve.

4. Develop future leaders

Once you have a list of ideal candidates and a development framework, it’s time to announce this opportunity and see if they’re on board.

At this stage, keep in mind that not everyone who will go through the leadership development process will succeed — which is why you should have a good number of candidates. While 1 or 2 may not be enough, 10 could be way too many and it might even lead to unwanted side effects, like increased competition.

During this process, potential leaders should be paired with the people they might replace (or other highly experienced employees) and learn based on guidance and feedback. They should be challenged and exposed to different critical aspects of their future roles to determine if they could handle things when the time comes.

As pointed out earlier, shadowing, coaching, and mentorship programs are definitely a must during this step. But stretch assignments or learning in the flow of work shouldn’t be overlooked either.

5. Create a succession matrix

At the end of the leadership development process, you should have a list of the top employees who have displayed the potential to become future leaders and ensure business continuity.

Creating a succession matrix involves deciding which candidate will be in line for which role and how many potential leaders you want for each position. This can be tricky for the same reason we’ve mentioned earlier: competition.

You should also consider the fact that potential leaders could also leave, especially if they feel ready for high leadership roles but aren’t given the opportunity. It’s important to find ways to manage expectations while still keeping people engaged and ready to step in the shoes of their highly experienced peers.

6. Evaluate and improve succession planning

To remain efficient, succession planning strategies need to stay up-to-date and relevant. After each cycle — or at other intervals decided by the company — you should look at every step of the succession planning process and decide what went well, what could be improved, and how technology can help.

For example, it’s difficult to see how organizations could go through such a complex process without succession planning tools. These platforms can automate many of the steps associated with identifying potential leaders and can even highlight the best-fit development opportunities to address their leadership skill gaps.

Real-time insights from succession planning tools will not only reveal who has the potential do to more but can also identify people in critical roles with lower engagement and a higher attrition risk — helping you prepare for their (potential) departure well in advance.

Best practices for successful succession planning

To have an easier time overcoming the challenges associated with succession planning (which we’ll explore in the next section), here are a few best practices to keep in mind:

Get the top management on board

You should use case studies or other insightful data that prove without any doubt how succession planning can have a huge positive impact on long-term organizational stability and growth.

The key words here are “long-term”. Present your case transparently and let top management know that succession planning represents an investment that will pay off in time, not necessarily this quarter or the next.

Efforts in this direction only apply if executive support and commitment are not already offered.

Be proactive and have a long-term vision

Succession planning is, by its nature, a proactive initiative. Making the case for its importance after the organization loses key employees will prove to be very costly (and late).

This is why the process should start as early as possible since identifying the potential leaders will take time and can involve trial and error along the way.

Anticipating future leadership departures (and replacements) will also boost the organization’s efforts to meet long-term goals and respond rapidly to the dynamics of fast-changing markets and customer expectations.

Foster a culture of continuous learning

To increase the likelihood of having more people with leadership potential, you should encourage employee development at all levels and through various methods, formal and informal.

Companies with this type of culture also inspire their people to take ownership of their careers and actually offer them a wide range of opportunities to grow and expand their skills.

Make employees part of the process

While the initial stage of succession planning is limited to decision-makers, the next steps should involve employees in the process and listening to their opinion. Feedback and self-assessment opportunities are excellent tools in that direction.

Communicate clearly and transparently

Succession planning efforts can turn against the company when employees don’t have a clear overall picture of the program or its end goals.

HR and relevant shareholders should manage their expectations and explain the benefits of exploring their potential as leaders and how it can help their careers going forward. At the same time, there should be transparency regarding:

• how long it might take to fill in the role of a leader who departs
• how the succeeding leader will be chosen from the pool of candidates
• what will happen to the candidates who aren’t selected

Challenges in the succession planning process

You might be already sold on the concept of succession planning but this doesn’t mean it is always a smooth process. Various risk factors and variables can slow it down or limit its success. Let’s look at a few examples and how to overcome them:

Focusing on the wrong roles

This can be a challenge when organizations focus on roles that are essential now but not necessarily in the future. Again, we’re stressing the importance of aligning succession planning with long-term business goals to prevent this from happening.

Similarly, people succession planners could focus too much on certain positions instead of others or on leaders who have little to no intention of leaving or retiring in the next 10 years. This isn’t only a waste of resources but also a great frustration for the candidates who go through the leadership development process only to find out there’s no opening in the near future.

Ignoring key succession metrics

While different variables can be taken into account when assessing your succession planning efforts, you shouldn’t focus too much on the process itself, but rather on its measurable results. Some of the metrics to keep in mind are:

• how many employees with leadership potential are identified
• what percentage of them go through the leadership development process successfully
• the ratio between high-level positions and candidates ready to fill in these positions if needed
• the long-term success of potential leaders after taking on these roles
• the number of critical positions filled in internally vs externally

Not prioritizing leadership development

This has a higher risk of happening among employees, who already have enough responsibilities and tasks on their plate — which can make it difficult to set time aside for development.

To prevent this from happening, leadership development activities should be included in their schedule and be considered an integral part of their activities. Their coaches and mentors can also organize regular check-ins to evaluate progress and see how candidates are dealing with their stretch assignments.

Example of succession planning

Let’s also have a quick look at a made-up example of a succession plan:

Key roles

• Founder and CEO: John
• Chief Operating Officer (COO): Sarah
• Vice President of Sales: Michael

Key steps in the succession plan

1. Identifying succession needs

The board of directors, led by John, recognizes the need for a succession plan to ensure a smooth leadership transition in the event of his retirement.

The board appoints a Succession Planning Committee consisting of senior executives, board members, and HR staff.

2. Identifying potential successors

The Succession Planning Committee conducts a thorough assessment of internal candidates to identify potential successors.

After considering various factors like leadership skills, industry knowledge, and experience, they shortlist two strong candidates: Sarah and Michael.

3. Leadership development and mentoring

Sarah, the COO, and Michael, the VP of Sales, are informed about their selection as potential successors.

John personally mentors both candidates and provides them with exposure to different aspects of the business, including strategic decision-making, financial management, and team leadership.

They are encouraged to attend leadership development programs and participate in executive education to enhance their skills.

4. Transition planning

As retirement approaches, John begins gradually transferring responsibilities to Sarah and Michael.

They work closely with him to understand the company’s vision, goals, and values, ensuring a smooth transition of leadership.

John creates opportunities for them to lead important initiatives, allowing them to gain hands-on experience in their new roles.

5. Test phase and evaluation

A designated test phase is initiated where Sarah and Michael temporarily assume the CEO’s role to handle critical business decisions under John’s guidance.

This phase provides an opportunity to assess their ability to handle the challenges of the position effectively.

Regular evaluations are conducted to gauge their performance, receive feedback, and identify areas for improvement.

6. Formal succession

Based on the evaluations and overall performance during the test phase, the board of directors officially appoints Sarah as the new CEO.

Michael also is promoted to the position of COO, effectively filling Sarah’s previous role.

A formal announcement is made to the employees and stakeholders, emphasizing the seamless transition and the trust placed in the new leadership.

7. Ongoing support and development

The board, along with John, provides continuous support to the newly appointed CEO and COO.

Regular check-ins, coaching sessions, and leadership development opportunities are provided to help them excel in their new roles.

In time, Sarah and Michael are encouraged to develop their own succession plans and mentor potential future leaders within the company.

Final thoughts

Implementing a well-designed succession planning process is crucial for long-term organizational success. By following this step-by-step guide, we hope you can establish a solid foundation for a robust succession plan tailored to the needs of your organization.

From identifying critical roles to developing future leaders and leveraging technology, each step contributes to a smooth leadership transition and organizational continuity.

By investing in succession planning today, you can ensure a pipeline of future leaders that fuels growth and resilience and puts sets up the company for sustained success in a rapidly evolving business landscape.