What Is Succession Planning? A Comprehensive Guide
By Indeed Editorial Team
Published 26 September 2022
The Indeed Editorial Team comprises a diverse and talented team of writers, researchers and subject matter experts equipped with Indeed's data and insights to deliver useful tips to help guide your career journey.
For businesses to be successful, it's important to have a group of talented individuals who are ready to move into key positions when employees leave. This requires planning ahead and training selected individuals before the situation happens. Learning about succession planning can help you identify the right candidates to fill vacant roles in the company. In this article, we discuss the definition of succession planning, provide the steps to do it and share its benefits.
What is succession planning?
Succession planning is a strategy that businesses use to identify and develop future leaders in the company. It's a process of passing leadership roles to other employees when some of them leave their current positions or the company. This ensures that companies can continue to run their business operations smoothly with minimal disruptions, even though there may be significant changes in people holding key positions.
When considering certain roles, it's important for the company's leaders to identify which of the existing staff members may be a suitable fit for those positions based on their characteristics, skills and experience levels. Succession plans are a vital part of a company's hiring and talent management strategy and it's necessary for leaders to regularly review and update these plans to effectively manage changes in the future. It's a good way for companies to be prepared to promote and advance all employees.
What is the succession planning process?
The process is largely dependent on the size of the company, but many leaders typically decide on the stages of succession planning when they craft a strategy. For larger companies, the board of directors and the chief executive officer (CEO) typically oversee the planning and the strategy may include every individual and position. It can affect employees and owners and shareholders alike. In such companies, there may be a focus on training mid-level employees to take over higher-level positions.
In contrast, small businesses and family-owned companies may only focus on upper management and leadership positions. It may mostly focus on training the next generation to take over the business. The process requires significant time and effort and entails these two main aspects:
Recruitment: It's essential to identify candidates who have the capacity to advance to higher positions in the company at the recruitment stage. For example, some candidates may have relevant leadership experience or specialised skills to head a department in the future.
Training: Training of existing employees may include organising courses for them to attend to develop their skills and knowledge and making sure they attain certain certifications. It may also involve setting up mentoring programmes and having them shadow senior employees in various positions so that they can gain an in-depth knowledge of the company's operations and acquire the necessary skill sets to fill higher positions.
How to create a succession plan
Here are several steps you can follow to craft an effective succession plan:
1. Understand the company's vision and values
This process is unique and addresses the specific needs of each business. With an understanding of the key values and vision of the business, leaders can decide which individuals are best suited for important roles. As an example, a cafe startup company has a different vision from a multinational pharmaceutical corporation. The startup might focus on building a unique brand image for itself, introducing signature dishes and opening new branches across the island. As part of its succession plans, it may focus on developing leaders who have helped grow and establish startup companies.
The multinational corporation may not require leaders with experience in growing a small business, but may focus on developing leaders who can oversee production facilities and launch products in regional markets. Each company requires different types of leaders according to their long-term growth plans, making this planning process very individualised.
2. Evaluate the current employees
It's important to be proactive and assess the current workforce. This entails analysing the strengths and skill sets of employees and matching them with potential positions they could take up. Company leaders may identify employees in lower or mid-level positions who are supporting the company with their strong skills. For example, a copywriter who writes excellent articles and receives praise from the client may be a suitable candidate for a supervisory role. As a supervisor, they can train writers and editors and oversee the entire process to ensure a high level of quality and adherence to the style guide.
During this process, it is also helpful to consider employees who may not be the ones next in line in the organisational chart as they may have exceptional skills and characteristics despite their current title. Look into the performance of employees and be attentive to their desire for career advancement. These individuals may be the ones who tend to go for additional training and education or are keen to take on additional responsibilities. Highly capable individuals usually have strong problem-solving skills and are very adaptable.
3. Apply the Nine-Box Grid
The Nine-Box Grid is a framework that can assist you in organising employees according to their performance and skill levels. The nine boxes consist of low, medium and high boxes for performance and potential. Potential refers to an individual's ability to use their skills in a different position and learn new tasks while performance refers to how well an individual is doing in their current position. The top-performing employees usually occupy the high boxes in both categories and those who display potential may fit into the top left box.
In the process of identifying and evaluating high-performing individuals, leaders may also be able to pinpoint employees who have low potential and performance. It might be better to consider these employees for another role in the company or send them for training.
4. Speak to the potential candidates
You may have identified a suitable candidate but before including them in the plan, it's a good idea to speak to them to understand their career goals and future plans. By doing so, you can learn if their goals align with the company's plans and focus on candidates who are truly interested in growing with the company. For example, a candidate may disclose that they're planning to pursue a master's degree, switch careers or that they're content in their current role. This can help a leader to save time and effort by excluding them from the process.
It's also essential to communicate that though they're being considered for higher positions in the future, the situation may change due to various circumstances and that there are no guarantees.
5. Increase professional development efforts
The company may already have a leadership development programme in place to train the successors. Review these programmes and tailor them according to the needs of the candidates you've chosen. For example, you can introduce job rotation so that the candidates can get exposure to the various departments in the organisation and acquire valuable knowledge and experience. Appointing mentors can help them hone their leadership skills, such as communication and interpersonal abilities.
Benefits of long-term succession planning
There are several advantages to implementing a succession plan, such as:
promotes high-performing employees, thereby increasing job satisfaction and improving retention
attracts talented individuals as they know there are opportunities for career development
ensures transfer of knowledge and expertise from senior employees to junior employees
fulfils the need for a group of leaders when there are a large number of employees retiring
increases the ability of management to keep track of employees and fill positions internally
promotes stability, as shareholders and investors may continue to remain confident in the company even when the CEO resigns or retires
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