The complete guide to succession planning for business
Succession planning is an essential strategy that helps organisations prepare for the future of their business and provide their people with clear career opportunities. Discover how developing critical skills to meet future business needs is valuable to both your business and your employees.
Table of Contents
Table of Contents
In a world of quick wins and unpredictable ups and downs, it’s hard to see the short-term benefits of planning your future talent strategy. But succession planning for business is essential for organisations to prepare for long-term change readiness.
This type of planning can help your organisation retain your top performers and develop the skills they need to keep your talent pipelines full for critical roles. By providing your people with more clarity into their own career paths and developing skills for crucial roles, you set your organisation up to thrive in the long run.
So why isn’t succession planning a key part of talent management? It can be difficult to feel motivated to succession plan when people come and go from organisations abruptly. Your people are unpredictable, and how to build an effective succession plan isn’t always clear. Deloitte found that only 14% of leaders believe they do succession planning well. While the intent is there, something is missing in the execution of succession planning for business.
If you’re creating a five-year plan that includes a specific team, depending on people to stay isn’t always a realistic path to success. It’s natural to feel discouraged if you’re pinpointing certain people as future team leads or crucial experts and they leave unexpectedly.
Instead of taking a narrow view that involves training select people to fill certain roles, consider that effective succession planning comes down to ensuring your people have the skills they need to accomplish critical tasks within essential roles your team needs. Think about your teams in terms of skills, instead of roles. With this mindset, you can nurture a talent pool of essential skills for the new world of work.
This guide will give you and your team actionable steps to build a succession planning for business model that works for your organisation’s future.
Table of Contents:
Chapter 1: Why succession planning is important
What would you do if an essential team member left tomorrow? What tasks would you need to immediately reassign? What skills would the team now be missing? Many definitions of succession planning refer to leadership roles, but the unexpected departure of a subject matter expert, middle manager, or key technical player can leave a vital hole in your team.
So what is succession planning, exactly? Succession planning is the process of preparing for your future workforce and developing individuals to progress into critical roles. This type of preparation is a crucial business strategy that pays off in the long run, especially when you have a holistic view of your organisation’s future goals. When you have the right people in the right roles in the years to come, this type of planning allows your organisations to be more agile and helps you future-proof your business.
Why employees want succession planning
People are what drive your business forward. Since people are your organisation’s greatest asset, your talent management strategy should align with your business strategy for long-term success. To keep teams together and performing well, you need to be looking ahead at future empty seats as individuals naturally progress in their careers.
Employees agree. In our 2023 Pulse of Talent report, a career development plan was the top answer for what employers can offer to help employees achieve their career aspirations.
It’s not that employees specifically look for succession planning in Glassdoor reviews and job listings. What people value is organisations that provide learning and development opportunities as well as a sense of respect and recognition of their individual career path. Eighty-four percent of 2023 Pulse of Talent respondents said having a clear career path makes them more loyal to their employer.
When it comes to reducing attrition, succession planning is one of the most effective retention strategies. Employees want visibility. They want their employers to show them the possibilities their career path could hold and give them more opportunities.
Considering succession planning from this perspective: You can identify what roles are vital for your organisation and what skills are needed for each of these positions.
With succession planning, employers can see what is needed for the future and think about developing employees for those future needs. This type of clarity can give your employees more transparency into their own individual career paths and help guide them to a series of future options. It allows your employees to connect a dot and see a clearer future at your organisation.
Why talent mobility is valuable for your organisation
Succession planning for business has tremendous value for both the individual and the greater organisation. Ceridian’s 2022 Executive Survey reports that 88% of global leaders use succession planning, but their plans are often incomplete. While 73% of respondents use succession planning for senior leadership roles, only 49% use succession planning for people leaders. There’s more opportunity to build a pipeline of critical technical experts, subject matter experts, and strong middle managers to support all of your teams.
Consider the succession planning benefits across your greater organisation:
There’s clear value for HR teams to prepare for gaps: Organisations can improve employee engagement and retention rates with internal succession planning models that plan for career paths within the company.
When you nurture a strong internal pool of skills, you can efficiently fill open roles: Succession planning can help you make better talent decisions and plan for a change-ready workforce.
Financial teams can also benefit from reduced operational risk: Across all industries, having a plan for talent mobility can help minimise turnover and attrition to control labour costs.
The extended benefit of shareholder confidence: Public organisations may have to consider how succession planning affects their greater corporate footprint. As played out in the HBO show Succession, a leader’s departure without a clear replacement plan can have a destabilizing effect on the company, shareholders, and even greater reverberations.
Proper planning can benefit your shareholders when new candidates are involved in operations years beforehand. Your investors may stay engaged and confident in your company’s future when they see a well-communicated succession plan.
The secret to employee retention
It’s not always easy to understand why people stay or leave organisations. In an ultra-competitive labour market, employers should consider how succession planning can be an essential retention strategy.
Chapter 2: Developing succession plan models
Building an internal talent pipeline doesn’t happen overnight. In a world where it’s harder than ever to find great, external hires, your internal talent mobility, training, and retention become even more important for ensuring your business continuity.
Developing a succession plan can require a lot of employee information, such as data about performance history, flight risk, compensation, and key skills and traits. The more data you’re able to factor in, the better insights you’re able to generate to make more impactful talent decisions.
And when your strategy can leverage data across your entire workforce, you can more easily find the right match for key roles. Better yet, with a clear succession planning model to communicate with your team, you can ensure your employees are part of the plan so you’re working towards a common goal.
Common types of succession plans
Depending on how urgently your team needs to plan for departures, there are different types of succession plans that you should consider preparing for. Building Leaderful Organisations outlines three types of succession plans:
Defined departure: Planning for executive or C-suite exits
Ongoing: Developing key talent to be potential successors
Emergency or interim: Temporary plans to continue operations
Your organisation may need to prepare for any of these short or long-term scenarios. Smaller businesses may have individualised plans to train the next generation while larger organisations need a more formalised structure to organise their talent strategy across their workforce. Strategies may include:
- Upskilling and cross-training
- Educational courses
- Career development programs
These are all valuable training initiatives to create plans for any position, from executive roles down to entry level. When they’re tied to a formalised succession plan, it becomes easier to set goals and track the progress of preparing for people changes. A structured process can help you track potential candidates over time and make better decisions about how to run effective succession management for your organisation.
There’s no one and done with succession plans, similar to other employee engagement initiatives. With the right structure, you can evaluate every six months how your people are responding to your program and adjust your succession plan with an up-to-date talent pool.
Steps to develop a succession plan
Identifying future staffing needs doesn’t have to be a daunting process. Your first steps in succession planning should cover three objectives:
- Ensure your succession plan is tied to your overall business strategy and goals.
- Define what skills need to be developed for essential roles.
- Engage leaders, and communicate their role in the process.
After addressing these three objectives, you can take a systematic approach to building a succession planning model that works for your unique organisation.
Assess organisational challenges and goals
To ensure that your business strategy is tied to your succession planning model, take the time to identify your top business challenges over the next five years. This assessment will help you with the next step of identifying critical positions on your team necessary to meet your goals.
Begin your succession plan model by documenting your current and future organisational structure. Which job roles will your team need to achieve your future goals? This can include people managers, subject matter experts, technical roles, sales and communications, and everything in between.
Develop success profiles
Determine the requirements for each essential job role. What are the competencies and knowledge required for success?
You can keep your greater talent pool progressing in the right direction by tracking key traits and nurturing the skills that both your organisations and individual employees will need for the future.
Your knowledge management system is critical for preserving institutional knowledge of your business. Make planning for the future second nature for everyday tasks and processes and urge your current team to make documentation a habit. From here, you’re on your way to developing a succession planning model that can help close the skills gap and improve your employee value proposition.
Keep in mind, however, that succession planning isn’t a one-size-fits all. There’s isn’t a clear succession planning model that works perfectly for every organisation. Identify your organisation’s critical positions and required skills to keep operations running and preserve knowledge management.
How technology supports succession-planning success
Research shows that companies that use technology to support succession programs are more likely to have effective processes. Read more about how organisations can streamline their development programs for better succession planning management.
What’s getting in the way of effective succession planning?
Only about a third (35%) of HR professionals believe they have an effective succession management program. Interestingly, lack of time and financial resources are not the key barriers. Rather, it’s that organisations are not making succession planning a priority. Companies that lack the defined processes and technology to make it successful could benefit from a formalised succession planning model.
Chapter 3: Why succession planning fails
While it can be a challenge to show the ROI of succession planning, the alternative option can be expensive. Many employers estimate that the average cost per hire can be three to four times the position, according to SHRM. As an umbrella program, it can help improve retention, engagement, workforce development, and internal hiring decisions.
However, succession planning best practices aren’t always the easiest to follow. Here are some common factors as to why companies have unsuccessful efforts.
Planning for future departures can feel destabilising
Succession planning can feel uncomfortable for your team, and sometimes maybe even threatening. Current leaders don’t always want to signal their future intentions or feel like they’re cutting their current role short. Similarly, employees may want to show they’re committed team members and aren’t looking to move up.
It’s also difficult to show your people a path to leadership from within your organisation unless they see it happening. Ceridian’s Executive Survey found 74% of employers are still hiring external candidates for leadership roles.
Falling behind the pace of change
Organisations don’t plan for the future the same way they did a decade ago. In a fast-paced world, many companies don’t have a clear talent strategy that includes succession planning processes to handle change. Developing a strong methodology takes time and tools. With so much unpredicted disruption, many organisations don’t have the time to test and measure the impact of different succession planning strategies.
Succession planning is also a long game, which isn’t always prioritised when leaders are focused on quick wins or even annual plans. The world is changing quickly, and many people can find planning far in advance to be an ineffective strategy.
Relying on subjective decisions
It’s difficult to make objective decisions when it comes to people. Collecting impactful data and evaluating your people on a matrix requires specialised tools. And yet, when leaders do have talent data to support their choices, factors such as likeability or tenure often still become the deciding factor. These subjective decisions can be difficult to navigate.
Visibility issues in hybrid world
Navigating the world of hybrid work has changed how many teams collaborate. Many managers have less face-to-face time with their direct reports and need to find the right balance and frequency of communication.
If you were previously used to seeing your team daily and in person, remote work can cause a shift in how quickly you build a connection with someone. Especially when past succession planning models have relied on knowing someone’s character, it can be more difficult to see the strengths and skills of every member of your team.
Difficulty retaining planned successors
Employee retention has become a major area of focus following past talent trends like The Great Resignation and quiet quitting. Gartner reports that HR’s top priorities for 2023 are to find a new approach to leadership development, support change management, and improve the employee experience. Understanding why your people stay or leave is pivotal, otherwise, it’s a major barrier to effective succession planning for business.
Lack of diversity in the talent pipeline
DEI is a top priority for many organisations, but workforce diversity can’t be achieved with external hiring alone. A well-structured succession plan includes developing individuals from different backgrounds who can bring different experiences to the table. Your plan should also consider any internal barriers that are preventing people from advancing in your organisation.
Men still outnumber women at the manager level. One such barrier, which was recently reported on by McKinsey in Women in the Workplace 2022 report notes that for every 100 men who are promoted from entry-level positions to manager roles, only 87 women are promoted, and only 82 women of color. This doesn’t leave space for catch-up, with a smaller talent pool of women to promote to senior leadership positions.
The pipeline of diverse leaders has another problem. Women leaders are leaving their companies at the highest rate seen since 2017, as found in McKinsey’s report. The number one factor prompting women to leave is the lack of opportunities to advance. It’s important that organisations are aware of these barriers so that you can nurture and retain a diverse talent pool.
Up to this point, we’ve covered the importance of succession planning and actionable steps to develop an impactful model. Here are three succession planning best practices to keep your initiatives top of mind in between formal planning meetings.
Make it a priority
To make your plans impactful in the years to come, you need buy-in from the full C-suite. Succession planning requires your entire organisation to be invested, from top to bottom. Show that employee retention and experience are a top priority by taking action with succession planning.
At the leadership level, identify areas to target before progressing with your plans to develop talent pipelines for all your essential roles.
Make it continuous
Don’t limit succession planning to biannual check-in meetings or performance reviews. Leadership teams should include preparation as part of their greater talent strategy. Managers should be helping their direct reports develop skills throughout the year. Employee learning and knowledge management can become the backbone of your company culture with the right habits.
Make it personal
A personalised plan is more meaningful than identifying a handful of employees to fill select slots. Knowing there is a plan for future opportunities can help reinforce your employee’s commitment and confidence in career development. Clear communication is essential for sharing your succession planning aspirations and showing employees the array of opportunities they have within your organisation.
Prepare talent in house instead of recruiting outside for missing skills. You can track, measure, and make decisions based on real-time performance and prepare teams for new skills they need today when your team is engaged in a culture of continuous learning.
Chapter 4: Setting people up for success
Earlier in this guide, we touched on why employees want succession planning. Your individual employees value when their employer communicates clear and personalised opportunities to advance. This transparency helps employees connect a dot and plan potential career routes.
Providing a clear path forward is a succession planning benefit that shouldn’t be overlooked. Past succession planning models have focused heavily on developing future leaders. While strong leaders are essential to guiding the ship, many other positions are essential for success. Not every role in an organisation requires leadership or people management skills, including essential positions for generating innovation and business growth. And not everyone aspires to an executive role. Only 17% of 2023 Pulse of Talent survey respondents said they aspire for a senior leadership position, and only 14% said they want to become a people manager.
HR leaders are dealing with a lot of change right now, and keeping up with filling empty rolls can be a never-ending task. While improving your retention rates isn’t an exact science, there’s been a clear movement in recent times towards personalisation. People want to be treated as individuals – not just another cog in the wheel – and to bring their whole selves to work.
Becoming a subject matter expert or specialist was the top answer for “Which best describes your highest career aspiration” over executive or people manager, according to 2023 Pulse of Talent.
When you refocus succession planning to become a core part of your talent management strategy, you focus on the potential of your people. The modern employee value proposition has changed, and your people want to find personal value and purpose at work. Gartner touches on the need to make work a win-win proposition for employees and employers.
It’s time for your people strategy to change as well. You need a strategy that empowers your people with the ability to develop skills they need for both personal and professional growth. By giving your employees the respect and attention they deserve, you can show them that you appreciate them and their skills for the long run.
The right succession planning strategy going forward
When succession planning naturally aligns to your learning and performance management strategy, it can help your organisation run more efficiently. From a long-term lens, both your business and your employees benefit from focusing on developing critical skills to meet future business needs. However, only 19% of Pulse of Talent respondents strongly agree that their employer has a good understanding of the skills they have.
Addressing the skills gap is an essential element of succession planning because it allows you to nurture your internal talent pool. You can train your people for specialised roles, enable leaders to further mentor teams, and build an engaged workforce of subject matter experts.
When you offer personalised development opportunities for your talent pool, you can prepare more people to step into essential positions and provide individuals clearer roadmaps for their own careers. Retaining and developing the right people is critical for business continuity. That’s why you need an effective succession planning strategy for business.
Employees value training opportunities. You can invest in developing the skills your organisation needs instead of relying on external hires with those capabilities. Read more about reskilling as a retention strategy.