What is succession planning?

Succession planning is a plan that focuses on identifying potential leaders and high performers, helping them develop so they can move up in their organization. Succession planning  is important  because, as an organization grows, it is more cost-effective to develop existing employees for key positions rather than hire new people. Giving employees a clear path to advance in their careers through succession planning can also boost engagement and retention.

Unfortunately, many organizations do not prioritize succession planning, choosing instead to focus on business growth rather than the development of their people. Of the organizations that do have some type of succession plan,  54 percent  take an informal or mostly informal approach, and most do not believe their succession plan is effective.

What is the purpose of succession planning?

In short, the purpose of succession planning is to promote employees from within the organization. It helps fill the void left by previous leaders with qualified employees who already know your organization, which helps move both your people and your company forward.

Succession planning also aims to reduce your business's turnover rate. If a valuable employee's leadership potential is recognized by the company and he or she is allowed to advance in his or her career, he or she is less likely to leave the company.

Ensuring that the right people take the helm also reduces turnover by acting as a morale boost for the rest of your staff. It's an assurance that the company is still in good hands. Employees are often adept at recognizing red flags within a company -   they'll be more compelled to leave if they see signs of leadership problems at your company.

In a way, developing succession plans is like buying insurance for your business in the event of an emergency – except it also involves training employees to become leaders someday.

Benefits of Succession Planning

At its core, an effective succession plan should help the organization select and develop the right people for leadership positions. Doing so can be a huge boon when you consider that  in 82 percent of cases  , companies fail to select people with the right skills to take on manager roles. Managers can make or break a team’s productivity, performance, engagement, and more, so choosing the right leader is critical to long-term success. In addition to filling leadership positions with great people, organizations can also reap many other benefits when they take the time to develop a formal, thoughtful succession plan, such as:

• Lower recruitment costs
• Strong internal hiring
• Fewer vacancies for key positions
• Better career growth
• Increased employee engagement
• High Performance
• Increased Retention

Key Elements of Succession Planning

Although succession planning may be slightly different in each organization, most succession plans should include the following:

• Defined goals:  Your organization should define what the ultimate goal of succession planning is, whether it's helping employees increase their expertise, learn managerial skills, or something else.
• Tasks or Requirements:  This is essentially a list of requirements that are necessary to reach the ultimate goal of the succession plan.
• Timeframe:  Knowing how long employee development can take will help your organization align succession planning with the time you will need to bring people into new roles.
• Budget:  Determine how much money or what resources you will dedicate to succession planning, as this will shape every other element of your organization's plan.
• Strategy:  Finally, define how you will present, execute, and measure the results of the succession plan.

What is involved in succession planning?

A successful succession plan includes several key components.

Leadership/ownership change

If you are preparing employees to move into a C-level position, the plan should detail how leadership or ownership of the company will be transferred from the current leader to the new leader. This includes the following factors:

• Transfer of responsibilities
• Determining how future business decisions are made (for example by a formal executive board)
• Tax Planning

Staff succession

As higher-level employees move up the corporate ladder, you will need employees who are prepared to take over the positions left behind. In addition to determining what these positions are, succession planning needs to consider the following:

• Which employees could be key players
• What skills do employees need
• What development programs should be made?

Human Resource Management and Culture

Leadership changes can sometimes lead to change. Your succession plan should include human resource strategies to retain or recruit employees interested in taking on the new position. It also helps to create an office culture that encourages its employees to further develop their talents and be more open to changes in the workplace.

How to Write a Succession Plan?

There are certain steps to follow when writing a succession plan.

1. Determine the type of plan

Writing a plan begins with what kind of plan you want to create. The basic types of succession plans are death and exit succession.

• Death succession:  This type of planning is for situations where there is a power vacuum due to the sudden death of a leader or boss. It will help survivors know who should take the leadership role until everything is settled.
• Exit succession:  This plan is meant to help you transition leaders within a timetable, such as before the current leader retires. For a founder or longtime CEO, part of this involves whether they are stepping aside completely or staying involved in a reduced capacity.

2. Write down the names of potential successors

What should a real succession plan look like? Who will be promoted into key roles when the opportunity arises? For many leaders or business owners, the successor may be a family member, business partner, or trusted employee. But it could also be someone who buys the company.

Listing only one successor's name could pose a problem if that person doesn't want the position or plans to leave the company, so consider listing a few other candidates with the help of hiring managers or leaders within the company.

3. Create a checklist of succession processes

This checklist is a guideline for you and the company to follow during the succession phase, such as:

• The type of training each potential candidate needs
• When to hold a training event
• Temporary worker roles (e.g., who to report to if you are involved in an accident or otherwise incapacitated)
• How the succession plan will be funded so that the successor has the resources they need