Succession planning: 5 simple steps

Three coworkers discuss business plans.Image: Three coworkers discuss business plans.

In a Nutshell

Succession planning can help your company maintain smooth business operations during role transitions. First, identify key company roles, then define roles, look for future talent, provide learning opportunities to potential successors and review your plan regularly.
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Succession planning is an important strategy for any business to have longevity. It creates processes to follow in case key employees move on to other opportunities or retire.

What is succession planning?

Succession planning is an important business strategy to maintain operations in case key employees are lost. It involves identifying critical company positions, the required skills and the employees eligible to take over the role if necessary.

If the business has no eligible employees, succession planning can also involve a hiring strategy to find new talent with the required skills.

Why is succession planning important?

Succession planning is important to create smooth transitions of power in key company roles. Failing to plan these transitions can open the company to many risks. Here are a few challenges that may arise without strategic succession planning.

Losing key business information

If critical business information lives only in an employee’s mind, losing that employee may also mean losing key business knowledge. For example, losing a CFO might also mean losing knowledge of a company’s strategy to build business credit. Major hurdles may arise depending on how critical the lost information was to the business’s mission. 

Naming an unqualified successor

Part of managing a business is finding candidates with the requisite skill sets for the job. For example, you may not want someone rising to the CFO position if they don’t understand basic investing terms.  When naming a CEO, a company may do well to find someone with discipline, vision, business savvy and great interpersonal skills.  

Lost time when getting a new successor up to speed

Along with finding a competent, qualified successor, a succession plan should ideally also strategize how to prepare successors for their future roles well in advance. The more prepared successors are to take over important roles, the less time a company will waste on training during a transition. 

Potential workflow disruptions or breaks in processes

Succession plans should aim to avoid disruptions to normal business operations. This may include outlining transition plans to fill key roles — like naming an interim CEO while the ultimate successor prepares for the role.

5 steps for proper business succession planning

Since succession plans can be vital to a company’s longevity, learning how to create one properly is important. An effective succession plan can be broken down into five steps, as outlined below.

1. Identify key roles

The first step when creating a succession plan is to identify key roles the company may need to fill in the future. You can identify roles that need succession planning based on two factors:

  1. The role’s vulnerability. If the current employee stepped out today, does the company have anyone ready to step into the role effectively? If not, is there a possibility of losing important business information with the lost employee?
  2. The role’s criticality. If the role suddenly became unfilled, would it affect any business operations? Would it impact the business’s ability to reach its mission?

2. Define the role’s responsibilities and eligibility requirements

After identifying key roles to include in succession planning, the next step is to accurately define the criteria for filling the role. This includes understanding what responsibilities this role includes and what skills would make an employee eligible to meet these responsibilities. A few questions to consider in this step may include …

  • What tasks does the role currently perform?
  • What skills are mandatory to perform the role’s tasks successfully?
  • Can new talent learn these skills on the job, or should they already have them?

Make a list of your role’s eligibility criteria, including required skills and those that are desirable but not required. You can also brainstorm on competitive pay for this role during this stage. 

3. Identify talent that meets eligibility requirements

After defining the job’s eligibility requirements, continue succession planning by identifying talent that might fit the role well.

This includes choosing someone who could temporarily step into the role while completing a formal application process. It also includes identifying promising talent within the company that could be eligible to apply for the position when it opens.

If no employees within the company meet the eligibility requirements for the role, consider making these skills a part of your company’s future hiring plan.   

4. Create a development plan

Don’t stop at simply identifying potential successors for key company roles. Instead, be proactive by creating development plans for these employees to prepare them for the role if necessary.

This can include enrolling them in online training courses with business tax tips and allowing them to fill in for the role if the current employee is on vacation. 

5. Regularly review your succession plan and adjust as needed

With key roles and potential successors identified and plans in place for training and transition periods, it’s time to move on to the final step of succession planning: regular review.

When evaluating your succession plan, consider the following questions to gauge how effective your current strategy is …

  • Do you have any talent in key roles at moderate or high risk of becoming lost?
  • How many employees are ready to take over key roles if necessary?
  • Do potential successors need any additional training to be more ready?
  • Do you need to recruit more talent to fill in any gaps?

Succession planning tools

When creating a succession plan, it might help to use software that can effectively organize your key roles, potential successors, and overall action plans. Here are just a few succession planning tools you may find useful.

  • Qooper — This software helps companies match potential successors with current leaders and provides a training platform to help develop their skills. 
  • Motivosity Motivosity allows leaders to give individuals readiness ratings as potential successors and see an overall snapshot of the team’s succession plan. 
  • PerformYard This tool can help you spot future talent by tracking employee performance. You can also use review tools by leveraging questions like, “What is your dream role?” to see where employees’ passions may lie.
  • Cornerstone OnDemand With Cornerstone OnDemand, you can enable internal sourcing to spot talent within your organization when filling a role. You can also use the Cornerstone Opportunity Marketplace to connect employees with learning and development opportunities.
  • PeopleFluent This succession planning tool can help companies identify future talent and grow their skillset.
  • SAP SuccessFactors Manage your succession planning overall with this tool’s powerful and broad features. It helps organizations identify, develop and retain talent.

What’s next: Prepare a basic plan

Succession planning can be an involved process that may require input from multiple stakeholders. To simplify the process, you can always start by creating a basic plan with only a bulleted view of key roles, potential successors and possible next steps.

Once you have a basic plan, you may expand on it with more sophisticated succession planning software. Different tools meet different needs, so researching a few tools before investing may be wise.