Managing Succession – A Step by Step Guide

Written by Andrew Johnson, Founder and CEO HRGuide - Wed 23rd Oct 2024

Introduction

For businesses to succeed, they need to avoid a lack of talent to lead and grow the business. Succession planning is the process whereby you identify new leaders and develop them to take over the role of the incumbent.

At some point, succession planning will help with such a situation by preparing an existing team member for a planned or emergency replacement. This could be because of a leaver, retirement or ill health.

Succession planning is your safety net to ensure that business operations can remain smooth. A robust process will help you identify key individuals who could fill leadership positions.

In the best-case scenario, you will be given advance notice when someone is going to leave. A succession plan prepares you for the worst-case scenario and no notice.

At the same time, an effective succession planning strategy will avoid any questions of succession where leadership positions are concerned.

Benefits of succession planning

Many small and medium businesses do not have a succession plan. Of those that do, some of them have only informal plans. This can be a risk for a business. Often, owner operators assume every employee is as loyal and engaged as they are. Unless you truly engage with employees and reward them well, they could easily be poached or attracted to your competitors.  It is worth creating a formal, written succession plan that is developed and easily accessible.

Here are some of the benefits for businesses of any size to create a succession plan:

1. Candidates ready to start - When an upcoming promotion, retirement, or departure is approaching you will have the next generation of leaders ready to go. Thanks to your succession plan the replacement will already have the skills required to take over the role.

2. Encourages managers to develop junior employees - Your succession plan can help your managers to start developing lower-level employees. Businesses often only allow an employee’s promotion if they have in turn developed their successor. This is a powerful incentive. The plan helps to define clear progression routes through the company so managers can share appropriate training and information with junior staff.

3. It leads to higher job satisfaction - Employees report higher job satisfaction when there is a succession plan at their company. This is because it helps to define routes to progressions and lowers job insecurity. A succession plan can help employees understand what they need to do to achieve a promotion. It can help with goal setting and giving employees a sense of direction at work. Succession planning can also help your managers to track employee progress through performance reviews.

4. Cultivate and maintain company loyalty - Having a strong culture of promoting from within can lead to increased company loyalty.

You can attract talented employees who will stay with you for a long time. This helps them to have a strong understanding of the business’s values, culture and expectations. Employees are more likely to stick around for the long term if there are defined advancement opportunities.

Types of succession plans

There are two types of succession plans that should be considered. This will give your business something to fall back on in the case of an emergency.

1. Long-term succession plan

The first type of succession plan you should consider is your long-term succession plan. This is the plan that you will stick to as a standard for key positions. A succession plan of this nature can be reevaluated and changed as the company grows.

2. Emergency succession plan

A secondary emergency succession plan can also be created, where appropriate, to be deployed in the event of an emergency. This type of plan may involve more temporary measures but is intended to keep operations running smoothly. This could see other senior members of staff take on extra responsibilities while a replacement is sought.

The Succession planning process

Instead of an informal plan, it’s a good idea to make a comprehensive document that outlines how succession should work. Small and family businesses may only need a limited plan that outlines succession for some key roles or for some experienced, valued team members.

1. Determine the scope - You will need to figure out how comprehensive you want your succession planning to be. A small business might only need to find a replacement for the next generation of owners or the salaried middle to senior management team.

You will need to ask yourself the following questions to decide what is best for your business:

• Do you only need a plan that covers senior management?
• Do you want a succession plan that covers the entire organization?
• Are there any vulnerabilities in your business? Such as having a division with a higher amount of employees nearing retirement. Are you prepared for that? I work with an organization where the average age of their engineers is 57 years old. They have a genuine need to attract recruit and train young engineers to replace the retiring cohort.
• Should performance reviews be used to help identify potential candidates?
• Should the talent acquisition process be a part of your succession plan?

It’s important to understand what your specific needs are as well as the needs of the business.

2. Identify key positions and skills - First, you have to identify the key roles in your organization that will be good to secure. It could be the Managing Director, Finance Director, Ops Director, HR Director, and different heads of departments. Second, you might have some specific specialists that are unique to the industry or your business, e.g. it might be some highly skilled engineer, programmer, scientist, etc.

Consider the following questions to identify key positions and the skills needed for that post:

• How does this position impact the company?
• If this position became vacant, how would that affect the company?
• Are there some big risks if this position became vacant?
• What skills (both hard and soft) are needed for this specific role?

The objective is to figure out how crucial the position is. If the company would be severely affected by a vacated position then this is one that should be considered within your succession plan. You will also need to understand what specific attributes are needed for the role. That way you can build your training and development around nurturing those key skills.

3. Identify potential candidates - Perhaps the most crucial stage is finding the employees that might be suited to a tougher challenge. You could ask the current postholder for help determining who could step up in their absence. It’s also worth considering that the right person for the job isn’t necessarily the next in line. Candidates could be sidestepped in the role or there could be other promising candidates in the business. You may wish to make recruiting a part of the plan and therefore can use interviews to vet potential recruits for career prospects.

4. Speak to the candidates - It would be wise to speak with the people you are considering. This will give you a clear answer if they would be interested in the role. Don’t make any promises but explain that they are being considered for leadership. Explain that nothing is guaranteed as there are plenty of moving factors to consider. This includes the current postholder, the company, and the candidates. However, you can gauge their interest and it may help to encourage high-performing individuals to remain loyal to the company.

5. Work on professional development - Leadership development is worth investing in particularly for employees you have identified for succession into key roles. There are a variety of ways to develop potential successors and help them to develop leadership skills. You can create a leadership development plan to ensure candidates have the right skills and are a good fit for leading positions. Employees being groomed for leadership roles can be developed in several ways.

You need to test your employees to make sure they can meet the demands of the increased responsibilities.

Some of the ways this can be achieved are through:

• Mentoring

Connect the candidates with business leaders in your company. They can help to develop the skills of succession candidates and even share knowledge that might not be immediately obvious.

• Training

You can send prospects on courses to help develop their skills. These could be in-house courses or ones run through independent third parties.

 

A well-developed succession plan future proofs your business to the risks of resignation of key players in key roles. It also motivates and retains team members because they have a career plan in your business. Download our more detailed step by step HR How to Guide for more detail on Succession Planning by subscribing to https://www.hrguide.co.uk/subscribe.php

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