What is Succession Planning & Why is it Important for Business Strategy?

This article first appeared on Acorn Labs in June 2022.

For a more in-depth look at succession planning, have a read of the full article.

With older generations retiring from the workforce and younger generations beginning their careers, succession planning is more important than ever.

Succession planning is the process of preparing to maintain a talent pipeline. It identifies the knowledge, skills, and behaviors needed for key positions and develops plans to prepare individuals to potentially perform those roles. Rather than choosing successors when roles become vacant, succession plans are proactive and prepared over time.

The importance and risks of succession planning

Done effectively, succession planning ensures leadership continuity by creating a deep talent pool that reduces the risk of vacancies and lost mission-critical knowledge. It also allows organizations to identify capability gaps that may impact business growth, enabling better management of critical roles.

On the other hand, not doing succession planning leaves your business open to risk. Not only will you be unprepared to fill roles if they unexpectedly become vacant, but anyone you do hire for the role will be underprepared to perform it, resulting in reduced performance for new hires and even already-established teams.

The succession planning process

Succession planning is a simple five-step process.

Gap analysis

At a base level, succession planning is all about matching effective job design, employee development, and career goals to an organization’s strategic direction. To plan for that strategic direction, you need to understand the present. Only then will you be able to see the “gaps” in where your business is compared to where your business needs to be.

1. Consider which roles have the greatest impact on your organization’s mission. These will be specific to the business or business function, central to maintaining competitive advantage, and influential in decision-making and resources.
2. Determine which roles don’t have successors, and which roles are vulnerable to knowledge loss. Losing key employees without immediate successors can derail your strategic direction.

Determine eligibility requirements

Profile a role in need of a succession plan using performance expectations and role descriptions. What selection criteria, experience, and capabilities would be necessary if the position were vacant? What KPIs and expected outcomes is the role accountable to?

Match talent to tasks

This is where you identify talent to fill a position, either permanently or temporarily. Evaluate the similarities between the position you’re planning for and other roles in the company to determine which role is best primed to take over another.

Consider which responsibilities or day-to-day tasks are shared or aligned between roles, whether the role’s responsibilities cultivate the capabilities needed for the succeeding position, and what the gaps are between the two positions.

Create learning pathways

Once you know what gaps exist between the two roles, you can establish a development plan to close them. A development plan isn’t just about what training individuals need in order to perform their new roles. It’s also about understanding how long it takes an individual to become proficient at it.

Critical roles are ones that require experiential learning, and a lot of succession candidates will be taking on leadership roles for the first time. So, your learning pathways need to account for this and offer on-the-job training or mentoring.

Continually review

Succession planning isn’t a standalone process—you need to continually and regularly identify gaps in order to develop high-potential employees for the leadership bench. It should be an ongoing commitment to ensure better recruitment practices, performance management, and business plans.

The biggest challenges

It’s easy to assume that succession planning is a problem for the future and doesn’t require any present-day action. That’s not true. The challenge is in getting all the relevant stakeholders to see succession planning the same way you do: As a necessary task providing functional value to all employees. Be transparent about the succession planning process from entry-level to senior leadership roles, and they will see the value of it.

The other challenge is in allowing leaders and managers to choose their own successors, leading to a lack of objectivity when it comes to priming candidates for roles. Role requirements are necessary for picking the best talent to fill positions, rather than opening the door for outgoing employees to pick a successor based on personal feelings. This kind of bias also leads to making decisions based on past performance, rather than future potential.

Finally, succession planning is about future planning, which means that eventually roles evolve, disappear, or new roles are created. Don’t just focus succession planning on the roles that currently exist within the organization. As the industry changes, so too will business priorities and the required roles for business success. Make sure you plan for that future situation, too.