Have you ever been caught out when an important member of your team has left unexpectedly, and it’s taken longer than planned to hire a replacement?
As many companies are finding it hard to recruit, now may be the time to introduce succession planning as a proactive way to fill business-critical roles. In this article, we provide a complete overview of succession planning in the workplace, succession planning best practices and a step-by-step guide for implementation.
We will cover:
- What is succession planning?
- What’s the difference between succession planning and development initiatives?
- What are the benefits of succession planning?
- The role of people professionals in succession planning
- How to implement succession planning in your organisation
- Tips for embedding succession planning.
What is succession planning?
Employee turnover is to be expected. People may leave their role for a variety of reasons, including promotion, transfer, resignation, retirement, ill health or death. Turnover can be positive for a business as it creates an opportunity to bring in new skills, fresh ideas and a different perspective. However, the unexpected resignation of an individual who is vital to business success can be destabilising and is likely to impact the bottom line. Businesses should have a plan in place to respond to this situation. Surprisingly, a global survey has shown that 53% of companies do not have a succession plan in place for their CEO.
The goal of succession planning is to ensure that business critical roles aren’t left vacant or filled by unsuitable candidates, and that business continuity is maintained. Succession planning involves identifying key talent to progress into critical roles and providing them with the training and development they need to succeed. An effective succession plan will ensure that there is someone ready, qualified and fully trained to step into the role immediately.
Succession planning should be directly linked to the business strategy. Those involved in the succession planning process must have a strong understanding of the strategic direction, as this will inform the future skillset and capabilities needed in business-critical roles.
What’s the difference between succession planning and development initiatives?
Development initiatives (such as coaching, mentoring, on the job learning, training and qualifications) are aimed at increasing an employee’s work performance by enhancing their skills, knowledge and competency.
In comparison, the purpose of succession planning is to ensure that for each business-critical role a successor has been identified and developed, minimising risk when staff changes take place. Succession planning takes a proactive approach to recruitment, rather than a reactive approach after a role becomes vacant.
Both development initiatives and succession planning are core components of workforce planning, i.e. ensuring ‘the right number of people with the right skills are employed in the right place at the right time to deliver on the organisation’s objectives.’
Why is succession planning important?
Research shows that costs can escalate when a senior leader leaves unexpectedly without an obvious successor in place. One study found there was an average of an 18% decrease in operating profits following unexpected CEO departures. Succession planning also enables businesses to save on expensive recruitment fees.
However, succession planning benefits aren’t limited to cost savings. As AIHR states, a succession plan ‘reduces risk and disruption and ensures business continuity in the case of an unexpected departure’. Without a succession plan, resignations from critical roles can result in turmoil, uncertainty and missed opportunities for growth. There can also be a knock-on impact on the morale and engagement of other employees within the business.
An effective succession plan will ensure the successor receives the training, support and development they need to step into their new role, as well as the transfer of knowledge and expertise, enabling a smooth transition. Furthermore, exposing the individual to development opportunities such as project work or internal transfers, will enable the business to test their suitability for the role.
Perhaps most importantly, succession planning is an effective way of engaging your high performers, making them feel valued and increasing their retention levels. If they can see a clearly defined career path, they will be less likely to look externally for career progression.
Without a succession plan in place, the new person appointed to the role will often be an unknown quantity making it less likely that they will succeed. External appointments to senior leadership roles have always been notoriously risky. In recent years, businesses have faced an increasingly challenging labour market due to a high number of job vacancies, low unemployment and national skills shortages. A CIPD survey in 2022 revealed that 77% of businesses had found it difficult to attract candidates, with recruitment for senior and skilled roles proving particularly difficult.
Despite these clear benefits, just 28% of small and medium size businesses use formal succession planning.
The role of people professionals in succession planning
To deliver results, succession planning should be owned and championed by the leadership team. However, people professionals also play a significant role, including:
- influencing the leadership team to see the value of succession planning in the workplace;
- creating and implementing a process which is aligned with the business strategy;
- supporting line managers with succession planning, including selecting successors and identifying individual development needs;
- monitoring and reporting on progress; and
- ensuring the process is fair, transparent and inclusive.
How to implement succession planning in your organisation
As many industries are experiencing difficulties recruiting, succession planning has never been more important. These are the stages involved in implementing company succession planning:
Identify the business strategy
Start by identifying the strategic direction of the company and the impact this will have on the skillset, capabilities and development needed in business critical roles. For example, if the business strategy involves introducing artificial intelligence to achieve efficiencies, the succession planning process should reflect this as future roles are likely to require AI capability.
Select the critical roles
The next step is to identify the critical roles within the business that require a succession plan. Critical roles are those that are essential to the success of the business, or as AIHR states, those roles that ‘if vacant for a few months or filled by a bad hire, would lead to significant damage to the company’. This may include senior leadership roles, technical roles that require a unique or scarce skillset or any role that requires a high level of organisational or industry specific knowledge.
Identify the required skillset
The next step is to identify the skills, competencies and knowledge required for critical roles in the future, as determined by the strategic direction of the company. Don’t make the mistake of assuming the current role requirements will remain the same!
If we use the example of the business that plans to drive efficiencies by using AI, the required skillset for senior leadership roles is likely to include AI expertise, or the potential to learn and develop AI capability.
Identify successors
Once you have identified the future skillset needed in critical roles, this can then be used as the selection criteria for successors. These successors may be selected using informal methods (such as feedback from line managers) or formal techniques, such as performance appraisals or competency assessments. The CIPD advises taking into consideration an individual’s potential, as well as their current performance and experience.
Think carefully about the number of successors identified per business-critical role. If only one successor is identified, this runs the risk that they may resign and the investment you’ve made in their development is wasted. However, if you identify too many successors, this could lead to the individuals becoming frustrated at their lack of progress.
Prepare successors for their future role
Assess each individual’s current skillset and capabilities, and the development they need to prepare them for the role. Clearly identify the specific training and development opportunities that are required and ensure these are implemented. This could include a range of different activities, such as coaching and mentoring, leadership development, 360 degree feedback, gaining experience of different areas of the business via transfers, secondments, project work or exposure to key clients/suppliers, external training and qualifications. It could also include involving them in key business decisions and strategic planning. The goal is to ensure that when a critical role becomes vacant, there is someone ready and capable of stepping into that role immediately thereby ensuring business continuity.
Tips for embedding succession planning
An effective succession plan involves a significant investment in time, commitment and money. Here are some tips for embedding succession planning in your workplace:
Manage expectations
Open and transparent communication with successors will be vital as a way of managing their expectations. Realism is key. Don’t let successors believe that they will be promoted imminently if you know the role is unlikely to be vacant for several years. The last thing you want is for them to become disengaged or to resign.
Don’t make assumptions
Don’t second-guess an individual’s aspirations. Not everyone wants to become the next CEO. Have regular conversations with team members to understand their career plans. This will help build trust and engagement, and will also mean that you don’t waste time and money on developing someone into a role that they aren’t interested in.
Fairness and transparency
Succession planning isn’t something to be kept secret. Be transparent, and openly discuss the success planning process with employees. This will enable succession planning to become part of your workplace culture and will encourage individuals to take ownership of their own development.
Review regularly
Succession planning should be part of your DNA, i.e. a fundamental part of how you operate. Succession plans should be continuously reviewed and adapted to reflect the evolving needs of the business. Opportunities to develop successors should be kept front of mind.
Avoid a box ticking exercise!
Don’t treat this as a box ticking exercise. All this will do is lull you into a false sense of security. Effective succession planning is about creating sustainable leadership through accelerated development. This involves a significant investment in the development of successors.
Be forward-looking
All too often the selection process for senior leadership roles will assess how a candidate has performed in past business models. But is this really forward-looking? Changes in technology or within the industry may mean that a different skillset is required in the future.
Measure outcomes
To ensure succession planning is successful, it’s important to measure outcomes. This will enable you to adjust the process if it isn’t working effectively and will also help gain buy-in from leaders. Metrics could include: the percentage of critical roles with an identified successor; the percentage of critical roles filled internally; and turnover of individuals identified as successors.
Embrace diversity
For many businesses, diversity in the boardroom remains a concern. Research shows that diversity can boost creativity, innovation and decision-making, as well as impacting the bottom line. The more successors you identify from diverse backgrounds, the greater your chances of building a diverse future senior leadership team.
What can we do to help?
If you would like advice on succession planning, give us a call on 0330 223 5253 or email office@fitzgeraldhr.co.uk. We’ll be really happy to hear from you.
Further reading
We hope you found this guide useful. You may find the following articles on our Knowledge Hub an interesting read:
