Definition

succession planning

What is succession planning?

Succession planning is a process of developing talent to replace executive, leadership or other key employees when they transition to another role, leave the company, are fired, retire or die. It is relevant to all companies, from the largest to the smallest, in both the for-profit and not-for-profit sectors.

The planning process is meant to create a talent pipeline of successors that will keep the organization running with little to no interruption when inevitable staff changes occur.

Effective succession planning works by assessing staffing needs that may arise as well as creating long-term goals and strategies to manage those gaps, including through leadership development. HR departments, sometimes referred to as the human resources management (HRM) department, are typically a key driver in succession planning, although support from top leadership and other stakeholders is critical to success. Succession planning is also sometimes referred to as replacement planning.

Succession planning ensures that a business can continue running smoothly after an important role becomes vacant. An organization may want a succession plan to retain internal company knowledge, identify skill gap needs for training and to invest in employees. The process helps identify employees with the right skill sets and talent that can fill the vacant position.

The four objectives of HRM
HRM departments normally play an important role in succession planning.

In the event that a higher position suddenly becomes vacant, like a CEO, a succession plan ensures that there is already a method in place to replace that role. It gives an organization time to prepare candidates with high potential to fill that role. During this time, potential candidates are evaluated, strengths and knowledge gaps are identified, then the candidate receives training in needed areas.

Succession plans should also fit into larger strategic visions. Used narrowly, succession planning refers to replacing the CEO or executive director. When used in a more expanded sense, the term can refer to board members, key leaders or the C-suite. When used only in the sense of replacement plans for the top leader or leaders, succession planning has specifics that may not apply when used more generally. For example, if referring to the CEO, the board of directors must be involved, whereas this will be less likely when discussing role replacements farther down the corporate ladder.

Still, while the top executive is a key factor in a company's performance, taking a wider lens to the concept of succession planning is increasingly seen as critical, particularly in the current challenges facing talent management in companies today.

When an employee leaves, there is a ripple effect. It may be most evident when the key leader leaves, but the hole created when an employee leaves his or her position can be profound, even at lower levels. Replacing employees can be a difficult task, especially in industries with noted talent shortages and skills gaps. It can be a lengthy process to get a replacement employee to full productivity. A lack of planning can especially sink smaller and family businesses, which don't have the sheer candidate numbers to choose from.

What are the benefits of succession planning?

The need for succession planning relates closely to its benefits. Some benefits include the following:

  • Succession planning helps save time and cost. The time needed to find an employee's replacement will cost lost productivity, time and money.
  • With more baby boomers retiring, succession planning helps ensure there are more employees available with the skill set to replace senior executives.
  • When a candidate-driven market exists, companies compete for a scarcity of talent, which typically makes hiring desired candidates more difficult. Choosing internal employees to fill vacant critical roles helps avoid this challenge.
  • It boosts employee engagement through career development and makes workers feel valued.
  • Succession planning helps an organization create a better reputation as a talent destination.
  • It provides for smoother business operations and delivery of uninterrupted excellence, as skilled employees can immediately fill needed high-level roles.
  • It helps to align HR and the vision for an organization, and supports HR and managers in creating and supporting proactive programs.
  • Supervisors mentor employees, transferring their expertise.
  • Management keeps better track of potential valuable employees.
The basic steps of succession planning.
This image is a basic set of steps in the process of succession planning.

How does the succession planning process work?

Depending on the size of the organization and its goals, the strategic planning for the succession planning process can vary wildly. However, fundamentals include the following:

  • gaining the support of key stakeholders, including the CEO or executive director;
  • assessing key positions (and individuals) and deciding which ones to focus on;
  • identifying high-potential employees for key leadership positions and creating learning and development plans tailored to a wider range of employees for more expansive succession plans;
  • assessing the extent to which internal candidates can fill roles (likely with development), who will be more familiar with company culture and processes, and which roles HR should look externally for the right talent pool;
  • creating effective learning and professional development processes that support the succession strategy, especially experiential development, such as job shadowing and cross-functional moves; and
  • determining which HR software will be used in support of the succession planning strategy and process.

Best practices for succession planning

Some best practices to follow when enacting succession planning include these:

  • Be proactive. Prepare for unforeseen instances where a high-level executive suddenly leaves. This way, an organization can keep operating as normal.
  • Clarify the roles included in the succession plan. Communicate the positions and the people involved in the plan. Decide if the positions included will be the CEO or will include other C-suite positions.
  • Engage stakeholders in the process. HR should not be in charge of everything in the process; the role of HR should be to enable the process and provide tools as needed.
  • Don't exclusively choose the employee closest in rank to the role that needs to be filled. Other promising employees should be chosen if their skills have the most potential.
  • Start backward. Before training an employee to fill a specific role, begin by defining the core skills, abilities and competencies needed for that role.
  • Train successors with mentors and job rotations. Having a supervisor act as a mentor allows the mentor to transfer expertise and allows employees to gain more knowledge of certain roles and experiences.
  • Give regular feedback. Include evaluations of progress on understood skills and those that need to be developed further.
  • Create individual development plans. This way, employees receive the specific attention they need to develop any required skills. Managers should also give continual feedback.
  • Have trial runs. A trial run is when a potential successor assumes some of the responsibilities of the role they are inheriting. This practice will allow the successor to gain potentially valuable experience.
stages of employee lifecycle
Succession planning should be on the radar of organizations (big or small), as it can mitigate the disruptions when employees leave or are promoted as part of the employee lifecycle.

Different uses of the term succession planning

It's important to note that succession planning is often used narrowly in reference to the CEO or executive director, or slightly more expanded to include board members, key leaders or the C-suite.

However, extending the concept of succession planning to a broader range of employees is also gaining widespread traction, especially through the use of HR software, generally, or talent management software, specifically. Succession planning may also be used to indicate the passing of company ownership onto employees.

Real-world succession planning example

As an example, for several years before Steve Jobs stepped down as CEO of Apple in 2011, he had groomed successor Tim Cook to take the top leadership role. This included Cook working a wide range of operational roles and directly with Jobs for CEO-specific experience. Cook also stepped in to lead day-to-day operations twice when Jobs was on sick leave.

In addition to a succession plan for the top leadership role, Jobs also founded Apple University in 2008 as a way to provide a leadership curriculum based on Jobs' experiences and business savvy.

Learn more about different key aspects of a succession planning strategy.

This was last updated in November 2021

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