What is a Succession Plan?
A succession plan is a strategy for passing on leadership roles—often the ownership of a company—to an employee or group of employees. Also known as "replacement planning," it ensures that businesses continue to run smoothly after a company's most important people move on to new opportunities, retire, or pass away.
Succession planning can also provide a liquidity event enabling the transfer of ownership in a going concern to rising employees.
Benefits of Succession Planning
Disaster-proofs your business
You buy insurance to protect the company from hurricanes, floods and fires. You install security systems to defend the company from theft. And you back up data to an off-site location to safeguard your business’s proprietary information.
Many business owners get so busy with the day-to-day operations of their company that they fail to make succession planning a priority. These leaders may think they’re too young to be hit with a serious illness. Or they forget that a key player (or several) could be lured away by another company that needs their skills and is willing to pay top dollar for them. Any of these scenarios can leave a business uniquely vulnerable.
Succession planning is simply another step in your senior leadership’s strategy to protect the company – whether you are physically there for its long-term success or not. Think of it as business continuity insurance that requires grooming employees.
Identifies your most-qualified future leaders
Formal succession planning requires your company to:
- Identify those positions most critical to the future success of the company. These might not all be C-suite positions.
- Identify internal candidates with the values, skills and desire to take on those critical jobs.
- Talk to potential candidates about their interests and career plans.
These crucial steps in succession planning lead to several benefits. First, a thorough look at your org chart helps your leadership better understand potential vulnerabilities and can bring a sense of urgency to cross-train key employees in certain roles.
On the other hand, if there are truly no internal candidates who seem right for leadership positions, then you know to begin an external search early on.
Most importantly, succession planning lets ambitious, less-experienced internal candidates know their hard work and skills have been noticed and appreciated enough to be considered for advancement. This can be an incredible retention tool and motivator for junior managers and subject matter experts who want to advance their careers into management.
Creates a structure for training and development
Once your company has identified that Sally, Bob and Bruce are interested in moving into senior positions, you can identify any competency gaps and begin grooming them for their eventual succession.
Some of the employee’s professional development may come in the form of coaching, mentoring, job shadowing or a gradual increase in more advanced responsibilities. Other positions may even require the candidate to go back to school to get additional education or professional certification.
By tapping potential successors early, you give employees time to acquire the skills and experience they’ll need to perform well in their senior roles. You also let employees know that you’re willing to invest in their growth as well as the company's.
Keeps extra eyes on a job
Once your top prospects are being groomed, your company has a chance to reap perhaps its best tool to grow and thrive. This happens when a junior manager is sitting and talking with their senior leader about why they’re doing things a particular way.
The simple process of explaining the status quo helps reveal a weakness in processes and procedures, uncovered sales opportunities and opportunities for positive change. This natural process allows your company to keep an extra set of eyes on its senior roles and encourages questioning of the corporate norms that may have become dated or inefficient.
In this way, succession planning results in future-proofing your company.
Conversely, when retiring employees leave, they can act as a sounding board for questions and concerns, troubleshoot customer problems and more. This helps to smooth the transition.
Maintains brand identity
You frequently hear news of CEOs who come into a company from the outside with great promise, only to fail in a short time. Sadly, such disastrous hires often damage the company’s reputation and long-term growth along with them.
This usually happens because the outsider CEO doesn’t understand the fundamental values and mission of their new company because they haven’t “grown-up” in it, so to speak. Wanting to put their own stamp on the business, or failing to grasp customer needs, they move the organization away from its core brand.
Succession planning helps your company avoid this. By identifying and grooming an internal successor, your company ensures it will be led by someone who shares its values and deeply understand the company’s brand promise, its customers and its employees because they’ve lived it themselves.
Helps the company plan for the long-term
Change happens fast. When your company knows where it’s going, your team can plan for the future.
If you position succession as part of your company’s overall growth plans, you create a path for retiring employees to hand off their years of hard-earned knowledge and transition important working relationships before they leave.
A succession plan can also help your company grow with intent as you identify and build plans for vulnerabilities in other areas of the business. Other benefits to succession planning include providing help in ascertaining which areas require innovation, setting realistic goals for growth and planning for future talent needs that may result from that growth.
What are the steps of succession planning?
Be proactive with succession planning
It can take time to find and prepare a promising candidate for a leadership role. As such, don’t dawdle with this part of your plan. Even if you don’t think you’ll need a replacement in the near future, prepping someone to assume an important role creates an invaluable safety net.
Keep an open mind
While the obvious successor may be the second in command, don’t disregard other promising employees. Look for people who best display the skills necessary to thrive in higher positions, regardless of their current title.
Make the vision known
Include potential managers in strategy conversations to help them acquire planning and leadership skills, as well as a broad vision of the organization and its objectives. Consider sharing your succession planning with human resources and your board of directors.
Offer regular feedback to leaders
When someone uses well-honed presentation skills or outperforms on a project, make a note of it. Keep track of these achievements in a top-performer file so you have something to reference the next time a management position opens. Diligently chronicling topics like strong work and achievement will also come in handy during performance reviews.
Provide training to peak performers
As you identify your top performers, offer mentoring relationships, job shadowing and training, which are true articles of value to help them develop new skills and refine existing ones. Remember that good leaders not only need technical acumen but also strong interpersonal skills, including standout verbal and written communication abilities, as well as tact and diplomacy.
Use your plan to develop a hiring strategy
Once you’ve identified internal employees as successors for key roles in your organization, take note of any talent gaps. In this way, the succession planning process can help you identify where to focus your recruiting efforts.
Last but not least, a succession plan is an investment in your company's future. If you are making plans to move up the ranks in the C-suite, bear in mind you’ll need a successor, too, who’s enthusiastic about being a boss. Knowing the importance of identifying potential future leaders and developing a succession plan, you help employees feel valued for their contributions and eager to realize their potential within the company.