In any organization, there can be a number of people who carry a disproportionate part of the load or are uniquely responsible for a company’s success. If you lose any of those people, without a plan, it can seriously damage a company’s growth prospects and force everyone to take two steps back.
As such, you need to plan for these eventualities so that your company continues to operate at the standards you set long after you and your key personnel have left. But surprisingly, research from ATD Research shows that only 35% of organizations have a formalized succession planning process. In this article, we’ll show you how to join this cohort so that you can mitigate the risk of key person dependencies while simultaneously making your company more future-proof.
What is Succession Planning?
Your key personnel are not going to be with you forever, and succession planning refers to the strategies that you put in place to manage this turnover over the short, medium, and long term. The goal is to identify the key positions and people that are critical to your company’s success and create plans for how to replace them effectively when the time comes so that the company continues to operate at the same standard as it was previously.
This planning can take many forms, as every company has different circumstances, but at its core, you should identify the internal and external resources at your disposal that help to develop continuity and manage the risk of a single person becoming a point of risk or a bottleneck for the organization’s growth.
Why is Succession Planning Important?
Here are some of the key reasons why succession planning is an important component of long-term business success:
- It makes your training and development efforts more precise. When you take succession planning seriously, you’ll identify the core areas and skills that need development both now and in the future. This can then inform how you think about your training and development – helping you spend your time and money more effectively on the things that really matter. It also helps your key up-and-coming employees to see where upskilling can help them – which then increases buy-in for these programs.
- It saves money in terms of recruitment. Being unprepared when a key person leaves can be a very costly exercise. The urgency and importance of the recruitment and rehiring process are immediately felt, and you’re often forced to overspend on getting the right person in. However, with the right succession planning in place, you can have a plan that’s ready to go and, hopefully, the right skills in-house in order to fill the gap. This saves a lot of money and headaches because you’re more proactive and less reactive.
- It helps you identify key leaders. This might sound obvious, but the act of thinking about who is an invaluable asset is an important one. Identifying those key leaders who move the needle for you can inform how you manage them, how you compensate them, and how you think about their development. The other component is that you can start to look for the key leaders of the future so that you can invest in their growth and prepare them for when they inevitably need to step in.
- It promotes long-term planning. It’s easy for a business to get caught up in short-term objectives, so any opportunity to incentivize long-term planning should be capitalized upon. Succession planning forces you to expand your horizons and envision the long-term future of your company. You’ll be surprised how often this can change decisions in the present and help you grow more sustainably and more consistently.
- It mitigates existential risk to your company. It might not be easy to admit, but often, key personnel can be so important to your operations that losing them might represent an existential risk to the business. If this is the case, succession planning helps you to manage this risk and find ways to spread out the load so that you aren’t vulnerable to one key person leaving the organization.
- It helps to establish your legacy as a company. The long-lasting companies that we all admire always go on to transcend their founding team and any specific individuals. They represent the larger mission and become greater than the sum of their parts. If you seek to build such a legacy with your company, then succession planning is critical – because it allows you to build something that outlives you and all of the team members that you currently cherish. It helps you stand for something bigger.
- It shapes a potential exit strategy. If you’re hoping to sell your company at some point, having strong succession planning is going to be a critical component of that process. Any prospective buyers or investors are going to need to be convinced that the company can still operate and grow without key personnel that might leave. Crafting a strategy for this thus mitigates that risk and helps to improve your prospects for an exit.
- It can help you develop a more diverse portfolio of leaders. Succession planning is a good opportunity to evaluate the current and future leaders of your company – and work towards achieving more diversity in terms of background, skills, gender, race, and other demographic factors. This diversity will again serve to improve the working environment and make the organization more resilient to future risks because your leadership structure can better represent the communities that you’re serving.
These benefits alone show why succession planning is such an important exercise for any company. It’s a critical part of long-term success, and while it might never seem urgent, it should be prioritized because being proactive is significantly better than being caught unprepared.
How Do You Create a Succession Plan?
Every succession plan is going to look different because the contexts can vary so widely. Here are six best practices that you can use to guide your thinking as you create the one that suits your company. These are some of the principles and tasks that you should be considering:
1. Conduct a thorough business, organization, and leadership review
Before you can start succession planning, you need to have a good understanding of where your business currently is. Try to be as honest and objective as you can and review every part of your operations. You’re looking for key person dependencies, places where there is not a lot of depth, and drivers that are impacting the most important parts of your company.
2. Forecast your future talent needs
Now that you have a lay of the land, you can look forward and, with your long-term objectives in mind, think about the future skills and talent that you will require. Be open-minded here and think deeply about the growth opportunities ahead of you so that you can be as comprehensive as possible. This needs assessment will then inform how you think about preparing for the future when it comes to your personnel.
3. Define your succession criteria
With a forward-looking strategy in place, you can now define how you are going to think about succession as a company. How aggressive are you going to be when moving people on? What leadership profile are you looking for from your senior team members? What is your policy going to be regarding internal promotion vs external hiring? It’s helpful to articulate these criteria as they will determine your actions moving forward.
4. Refine your training and development programs
Now that you have some plans in place, you can fine-tune your training and development so that it aligns with where you’re heading as an organization. This helps to prioritize what truly matters and ensure that your employees are getting the growth opportunities that they need to fit into your long-term plans.
5. Scale up your mentoring and coaching.
A key part of this exercise is to put structures in place that help to move key knowledge throughout the organization so that you don’t lose it when senior people leave. This happens through mentorship and coaching – so it’s well worth investing in this aggressively so that the up-and-coming leaders can learn from the experience of those who have already done it.
6. Continuously update your succession plan over time
Lastly, it’s worth emphasizing that this planning is not a one-time thing. You should constantly refine it and adapt over time as your company’s circumstances change. This continuous iteration helps to keep the plan alive and relevant so that you’re always prepared if you do happen to lose someone key to the company’s success unexpectedly.
If you can go through this process, you’ll end up with a thorough succession plan that can then be acted upon. Of course, this requires effort and the investment of resources – but it will save you a lot of struggle in the future. This is what is required to build a company that can grow beyond you.
4 Key Principles for Ensuring the Success of Your Succession Planning
We’d like to leave you with some final thoughts about how you can give your succession plan the best chance of succeeding. Here at The Renaissance Network, we’ve seen the good, bad, and the ugly in our clients, and so we wanted to share some of that experience with you here:
- Ensure that your leaders are engaged with the process. Without buy-in from your key personnel, this can be a very painful process. That’s why it is important to have them engaged from the very start and for them to be an integral part of the planning. Ideally, your C-Suite executives should be identifying their own successors because no one knows their roles better than they do. Make this a collaborative exercise, and you’ll have much better success.
- Align your succession planning with your business objectives. It’s important to have a forward-looking view when you think about succession. Aligning your plan with your future aspirations might mean a change in structure where a replacement is coming into a completely different role than what is being replaced. In most cases, you’re not just looking for a carbon-copy replacement, but rather someone who has the new skills and outlook that are needed to move things to the next level.
- Incorporate succession planning into your performance management. The best way to enforce accountability and build the right incentives into the company is to include succession planning as part of your leaders’ performance criteria. This gives it some weight and ensures that you’re critically evaluating your succession planning on a regular basis.
- Have a proactive plan for knowledge transfer. We’ve mentioned this above, but the amount of information that can be lost when a key person leaves is immense. Be proactive about knowledge transfer and create opportunities for key personnel to institutionalize that knowledge so that it lives on beyond them.
If you can execute these four principles, you’ll give yourself the best possible chance of building a succession plan that works. This is not an easy process, but a very important one – especially if you want to build a company legacy that stands for something bigger than the founding team.
Finding Top Executives and Assembling Goal-Driven Teams
Here at The Renaissance Network, we’ve helped many Education, Technology, and Impact companies with succession planning – especially with sourcing external talent that can come in to fill critical skill and experience gaps. We can also help you with your current leadership team design and even provide assessment services to get the best from your C-Suite and greater organization. If that’s something that you might benefit from, get in touch today, and let’s see how we can help!
