If you wish to retain intellectual capital in your top management and maintain business continuity, one of the best things you can do is start succession planning. That way, if you lose any of your top talent, you can quickly place an internal resource who has already been well-groomed for a key business role.

Not paying adequate attention to leadership pipelines can wipe out $1 trillion a year in S&P 1500 and lead to undesirable executive turnover. Companies can do better by establishing talent succession plans before they are required. This ensures ongoing business operations with zero unscheduled interruptions.

Let's review what succession planning is and how you can create a succession planning strategy with a step-by-step plan.

What is succession planning?

Succession planning is an intentional process of identifying future successors to critical roles in an organization. The organization seeks to identify the employees who can take over a role if the current employee in that position is promoted or exits the company.

Companies prepare succession plans for 12 months to three years in advance so the successor (employee to be placed in the role) can be comprehensively trained. For executive roles, the succession plans tend to be longer, with a minimum of 12 months or more in lead time.

Why is succession planning important?

Apart from improving employee turnover rates, succession planning allows company operations to continue without being affected by employees leaving.

The company is able to retain its top-performing staff while achieving team and organizational goals. Here's a closer look at the benefits of succession planning:

  • Streamlines business continuity by having a structured succession plan in place
  • Projected team and organizational goals are achievable with the right talent available to steer tasks to completion
  • Naming staff as future successors to top roles boosts employee morale
  • Retaining the top performers becomes easier as they can pursue a planned career path within the company
  • Enhances the company's competitive edge as they attract new talent and retain current top performers

Key succession planning steps

To get the best from succession planning, you must integrate it into the organization's DNA. Spending a lunch hour reviewing the org chart and then going back to work will not cut it. Succession planning needs to be an ongoing process and a flexible plan with specific results.

Succession plans should be evaluated regularly and modified to reflect the current environment and priorities. You should revisit them semi-annually or annually to ensure they are up-to-date. Let's review the different succession planning steps.

Step 1: Create a plan

To start with, identify the key business role that needs a succession plan. Brainstorm with relevant stakeholders to outline the key skills, competencies, and experience required in an incumbent.

Review the company and team needs, including turnover trends, compensation policies, and prerequisite training that may be required. Modify the role’s job description based on the data and feedback gathered in the process.

Step 2: List all potential successors

With the job description created in step one as a reference, create a list of all potential candidates suitable for the open position. Ignore any bias and welcome HR support to complete this step.

Gain insights on individual candidates' capabilities, goals, and engagement levels by conducting surveys, focus groups, and informal interviews.

Step 3: Keep candidates informed

Wondering if potential successors should be informed about their potential role or not? Choose the option that best fits your company and team. Note that informing potential successors both motivates them and helps them visualize a career path in the company.

Have a clear communication channel to share the succession plan. Keeping the potential candidates in the loop also prevents top performers from jumping ship even as the company considers them for senior roles.

Step 4: Establish a succession planning strategy

Putting succession planning into action requires an active strategy to train and upskill employees. This is not just a simple training or development plan, but a comprehensive strategy that supports employees beyond their current roles and skills.

Ditch specialist silos to support potential candidates in their journey towards moving to the next level. Succession plans should include a personalized individual development plan, regular feedback, training programs, coaching, mentoring, and free-flowing discussions with employees and their managers.

Step 5: Go for a test drive

To become top contenders for leadership roles, potential candidates will need to accelerate their growth. Start trials to expose them to future responsibilities and test their knowledge. They can gain first-hand experience of situations and think through possible solutions and plans of action.

Potential candidates can gain close insights into the company's goals through activities such as:

  • Job shadowing with a senior executive and reviewing their daily tasks
  • Handling additional project responsibilities in the absence of their managers
  • Joining top-level internal meetings and strategy sessions
  • Involvement in cross-functional responsibilities and junior staff recruitment

Step 6: Fill the hiring gap

When the existing employee is ready to exit, you'll want the identified candidate to come and fill that position.

Let the employees interact and engage to ensure a smooth transition as an external hire or an internally promoted employee.

Step 7: Execute the transition

Finally, it's time to implement the hiring plan and celebrate the succession with an official announcement across the company.

Doing this promotes the company's goodwill, shows strong leadership, and signals to employees that team members are highly valued. For the company's continued success, ensure that the succession plan is based on the company's present and future needs.

What is Succession Planning & Why Does it Matter? 2
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Succession plan examples

Here is a successful succession plan example that happened in the public domain.

In 2012, IBM was applauded for a smooth CEO transition when Virginia Rometty was chosen for the top job. She was also the first-ever woman CEO in the company. This is a prime example of internal succession planning done right. Here are a few best practices that can be picked up from this case:

  • A merit-based, global and integrated approach was pursued to hire for the role. Rometty was well-versed with the company culture, had a great track record, and was a known face to top management.
  • The cultural fit was apt as Virginia started her journey in IBM as a systems engineer. Before becoming CEO, she gradually rose to the SVP position, followed by Group Executive for Sales, Marketing, and Strategy.

3 key succession planning best practices

Grooming a suitable executive successor is top management's responsibility. If they aren't setting up a smooth future leadership pipeline, they aren't doing their job well.

Sudden surprises or market-shaking drama isn't good for any company. Remember the frantic scramble for Bank of America to hire Ken Lewis's replacement in 2009?

Here are three key succession planning best practices to help your company stay ahead of the curve:

Set up a talent pipeline

Setting up an internal talent pipeline is a win-win for everyone. Companies get culture-fit candidates while employees rejoice as they are promoted and feel valued. Still, only 54% of companies have an active succession planning process.

Research says that scrambling to find CEO replacements can cost companies $1.8 billion in shareholder value. Start cultivating the talent pipeline and identify your high potential employees, even if you don't have any open positions.

Invest in your people

Most organizations aren't prepared for exits. Make sure your identified candidates are ready to take on the new roles as and when exits occur. Facilitate the process by making them aware of upcoming responsibilities and building robust capabilities.

Put a succession planning strategy in place that grooms them for leadership and provides opportunities for stretch roles and responsibilities. Offer mentoring and leadership coaching programs to meet the needs of high potential employees and help them handle the role's challenges better.

Keep an eye on your bench strength

With a 37% rise in CEO exits in 2019, companies need to evaluate their bench strength regularly. As organizations and people keep evolving, so should your leadership pipeline. Conduct regular assessments to see if any new talent can be added to the list.

How to create a succession planning strategy with Wrike

When developing future leaders, consider identifying high potential employees across all levels. With a structured succession planning process, cultivating your top talent becomes organic and gets embedded in the company's DNA. 

Discover how Wrike’s powerful work management software can facilitate your succession planning process. Not only can it drive a holistic succession planning approach, but it also makes it more employee-centric. 

For example, you can use remote work templates to streamline succession planning from anywhere. Want to see more? Get started with a two-week free trial today.