Effective Succession Planning Can Help Your Organization Thrive for Years to Come
What happens to an organization when a key leader leaves? Even those in the highest positions of a company eventually retire, move on to another job, or are replaced during an organization’s transition. That’s a challenge when it comes to making decisions and choosing a strategy. Companies that aren’t prepared often struggle, and new leaders may find it difficult to make the right decisions without experience.
However, surprisingly few companies have plans for filling leadership positions. Chief Executive reports only around 54% of Fortune 500 companies are actively developing their CEO successor, while 40% don’t have any picks for a successor at all. Among smaller and private companies, these numbers can fall much lower. A 2021 survey of members of the Society for Human Resource Management showed that only 21% of their organizations had a formal plan for succession. This can spell trouble when key decision-makers in charge of long-term processes leave the company.
How does succession planning help? Let’s define succession planning, look at how to create a succession plan, and how to avoid making mistakes when setting one up.
What is Succession Planning?
Effective succession planning has two parts. First, it identifies all positions in the company that are critical for success. These positions need to stay filled, and those leaders need to have the relevant experience to carry out associated responsibilities.
The second part is developing a plan to choose a successor for that position, and create a training program for them. That training can take different forms, but it often includes mentorship from the person currently in the position. It also ensures that the successor has all necessary skills needed to excel in that position.
How many positions in an organization need succession planning? That depends. Some only reserve it for the CEO, although this creates risks. In most cases, there are many other key decision-makers beyond those at the very top. Some businesses even choose to have a succession plan for almost every employee. This can depend on the business structure and how many key roles are in the organization.
A quick point of clarification: Sometimes, the terms succession planning and succession management are used to mean two different things. In this case, succession planning is used to talk about the direct selection and mentorship of an individual for a specific position. Succession management is a broader strategy about how the company structures its leadership, and attracts leadership talent in ongoing efforts.
Benefits of Succession Planning
Succession planning isn’t just about finding necessary replacements. When implemented effectively, this planning has adjacent benefits for an organization.
- Important company visions and long-term strategies are preserved with succession planning. This helps the organization continue making good decisions, and avoiding sudden changes or mistakes due to inexperience or a leader who’s a poor fit for the company.
- Key positions in the company are quickly and smoothly filled. This ensures there are no gaps in critical decision making that could create serious problems. It also means that employees are usually already used to the potential successor and won’t struggle getting used to new leadership.
- Succession planning and related mentorship can pass along plenty of emotional knowledge and insights into the company that can’t be acquired through training.
- Succession planning can encourage employees with the knowledge that the company promotes from within and is willing to develop talent.
- Potential successors can take on valuable roles in the company as their skills increase. Successors aren’t just waiting to take a position. They are usually busy managing projects and employees of their own. Improving their leadership skills and connections also benefits the work that they currently perform for the company.
- Hiring for succession is an excellent opportunity to improve talent recruitment and general talent development for the entire HR department. It can often lead to recruiting more high-level talent even if hires are not targeted for succession.
Succession Planning Pitfalls to Avoid
If not managed well, the challenges of succession planning can create serious problems with company strategy and culture. Here are some of the biggest problems to avoid:
Don’t put off succession planning: One of the most common succession planning mistakes is waiting until a leader announces their intention to retire or leave the company. This is usually much too late to begin a succession plan. Ideally, top-level succession planning should begin when a company leader is hired. It can take years to find and develop the right talent for replacement.
Don’t promote for the wrong reasons. This is one of the more frequent succession planning tips. Many employees may want to be in a leadership role, and may compete for it. There can also be pressure to award particular positions to employees with certain connections, perceived loyalty to the company, and so on. But potential successors should not be chosen based on favoritism or other factors not related to their ability to do the job.
Don’t feel required to hire the familiar. Organizations shouldn’t pick a replacement just because they are similar to the leader they had before. This can lead to overlooking key individuals that could help the company evolve for the future.
Don’t let succession plans stifle structural growth. Companies change over time. These changes may create new leadership positions, different leadership roles, and older roles may be removed as they become obsolete. This is normal and important for growth. Don’t let a succession plan interfere with important changes like these. A little adaptability can go a long way..
Don’t make a plan for just one person. Planning succession for just one person is risky, and could be bad for the future of the company. It’s common for even talented employees to move on with their own plans for the future. Sometimes problems like nepotism or a desire to “keep it in the family” can create situations like this, too. It can be difficult for HR to solve these problems, because they don’t usually have the last word here. However, it’s important to emphasize why there should be a talent pool developed for potential successors.
How to Strengthen Your Succession Plan
Are you looking for ways to improve an existing succession plan? Clear processes and strong communication can help. Let’s look at some best practices.
- Consider dividing succession plans into different levels depending on different positions in the company, each with their own set of steps. Department managers, for example, may just need basic mentorship for a few weeks or months for their successors. C-suite executives may need far more involved plans. Ownership succession may require an entirely different kind of strategy. Dividing plans like this can make it easier to organize them.
- Create an environment of honesty and direct conversation. In many cases company leadership may not want to consider or discuss retirement, especially if they’ve never thought about it before. Or organizations may want to avoid creating tension or hurt feelings by denying certain employees leadership positions. This can be toxic for succession plans. A policy of honest discussion, even about difficult topics, is necessary for effective succession management.
- Incorporate broader talent into succession planning. Potential successors don’t always work out, but this can sometimes be a benefit instead of a problem. Well-trained talent can find important roles elsewhere in the organization, where they can thrive and grow. This can benefit many different departments and teams. It’s also a good reason to keep ongoing talent pools of potential successors, although this can become complicated at times.
- Create training goals for potential successors. A sole mentorship program isn’t usually enough for a successor to gain all the skills and tools they need to perform well. Clear training goals can give them something more concrete to work toward.
- Improve communication between HR and high-level decision makers. Succession planning takes a lot of work. HR needs to be able to effectively communicate with the highest levels of the company, whether that’s a board of directors or the family that owns the business. That includes meetings to discuss metrics for choosing successors, as well as what potential candidates should be considered.
Are you looking for more ideas on how to manage a succession plan for your organization? KnowledgeCity’s effective, yet quick-to-complete courses are an amazing place to start!
Our courses can help you reach your goals whether you are planning for successions for the first time, or improving on an existing succession strategy. Our Succession Planning course is rich in insights about ways to measure employee potential to aid in decision-making. We also have nearly one-hundred leadership courses to aid in training your potential successors. Let KnowledgeCity future-proof your company today!