One vitally important strategic planning process that’s sometimes put off by business leaders, especially at closely held companies, is succession planning.

Effective succession planning helps protect your company from the worst outcomes, should something unforeseen happen to any key employee—but it does more than that. By following specific succession planning steps, your leadership team can:

  • Identify and develop future leaders
  • Create attractive career paths
  • Address training needs
  • Reduce recruiting costs
  • Protect and retain institutional knowledge
  • Break down departmental silos
  • Build company culture and improve employee morale

Following a structured replacement planning process takes time, which is one reason it’s often neglected. But when top leadership sets an example by embracing the effort, you may find the momentum picks up fast, and soon the whole organization can benefit from the positive effects of active succession planning.

Steps in the succession planning process are pretty straightforward:

  1. Identify key positions, such as leadership roles and other at-risk positions
  2. Summarize the talent profile for each role
  3. Establish internal pipelines to move talent into those roles
  4. Identify and assess internal succession candidates
  5. Create development plans for those candidates
  6. Implement knowledge transfer and skill development plans
  7. Monitor, evaluate, and update plans regularly

Succession Planning Starts With an Org Chart

A current company-wide organizational chart is an essential tool to get started. Your org chart helps illustrate workflows and interactions, highlights interdependence between roles, and can offer a helpful visual to refer back to about who is where, doing what, relying upon whom, etc. This helps understand the impact of an absence.

You can also use a version of your org chart with specific individuals removed as a hypothetical template for replacement planning exercises. If you don’t already have an org chart, you can find easy-to-use tools online to complete one.

Along with an org chart, it makes sense to delegate the succession planning responsibility to a strategic team. In most cases, the CEO, human resources, and other top leadership guide the process since the company’s mission, vision, and values are at the core of succession and role replacement decisions. It’s also important to get participation from leaders of all major departments, to build a silo-free culture.

Once the team and tools are in place, start with the most critical roles to build out a plan that would maintain stability and continuity.

1. Identify critical roles and at-risk positions, including critical SMEs

These might be leadership and management roles, but it’s just as important to acknowledge employees with specific in-demand skill sets, such as your most critical subject matter experts. Assess roles by asking the following questions:

  • Do their decisions have an outsize impact on the company?
  • Does the position require specialized knowledge or hard-to-acquire experience?
  • Are their tasks complex?
  • What is the risk if they join a competitor? 
  • How hard, costly, or time-consuming is filling the position?

The answers to these questions should clarify which succession plans should be developed with the greatest urgency.

2. Summarize talent profiles

This planning step can help you better conceptualize the value each role delivers as you catalog the knowledge, skills, competencies, and qualities employees bring to their roles. Consider what selection criteria you would use to fill the role if it were vacant. In many cases, current employees can help round out the information with the help of human resources and their managers.

3. Establish internal talent pipelines where possible

Identify positions that may make sense to, at least temporarily, step into empty positions if the need arises. It can be an illuminating step in the process to evaluate who may or may not be strong succession candidates. You’re likely to see immediate development needs in terms of skills gaps.

You might also discover redundancies, alignments between roles, and even personalities that may be very effective in their current roles but not necessarily well suited to lead a team (or even interested in a leadership role). Ask yourself: which positions can be used to cultivate or develop the skills and competencies needed to build a successor? What changes may need to be made in roles?

4. Identify and assess internal succession candidates

Identifying high-potential successors for roles should take a cascading approach, but start with successors for your top line and key players. Look for:

  • Consistently high performers
  • Leadership qualities and positive impact on others
  • Cultural alignment and values fit with the long-term vision
  • Internal motivation to develop, improve, and grow
  • Innovation within their current roles to add value to the company

Here, it’s important to recognize there may be no single employee who’s perfectly poised to take over in the case of an urgent absence. Expecting to find a natural successor for every key role can lead not only to disappointment, but wasted resources. Be candid and fair in your evaluation of employees, so you can help them forge paths to success.

5. Create training and development plans for those candidates

After identifying gaps between succession candidates’ current abilities and the capabilities needed to fill the step-up role, it’s critical to build out a workable development plan to help them develop into the best possible candidate. Plans can include:

  • Continuing education
  • Training, cross-training, mentoring, and coaching
  • Stepping in for the incumbent when they are away
  • Taking on shorter-term special projects to gain exposure and experience
  • Planning some overlap for the transition, once the incumbent plans a departure

And by all means, make sure employees know when they’re succession candidates. That encourages them to seek development opportunities and engage with the process.

6. Implement employee development plans

At this point, the participation of those in key roles is essential, and top leadership has an important management role to play in exerting control over transitions. Keeping interactions positive, maintaining expectations about horizons, and assuring employees company-wide that the changes are indicative of positive developments (not negative ones) are incredibly important, and the communication needs can be quite nuanced.

Remember, too, that too many transitions at once can create a sense of chaos or an appearance of employee churn. That’s the opposite of the desired effect, and a certain level of transparency can dispel rumors and support successful transitions.

7. Monitor, evaluate, and update development and succession plans regularly

Succession planning is not a once-and-done exercise. Even with your best efforts, some internal succession candidates may leave. Others might not be the match you thought they were, requiring your team to regroup and identify new candidates. If something isn’t working, dig in to find out why, and fix it.

Even a successful development and succession plan leads to the need for another development plan, as roles are vacated and filled. Changes to your industry, technological changes, and other developments can also impact your organizational structure and succession planning needs.

Keep in mind that as employees and even job candidates see these talent pipelines in place, they perceive more than just a job at your company. Rather, they can see a career path. That adds recruiting and retention value to your organization, too.

Why Bother With Succession Planning?

It can be challenging to think about departing from a company you’ve spent a significant part of your life building, but as a business owner or key leader, you have a tremendous opportunity to leave a legacy of success. Developing a succession plan is, first, an act of humility as a leader: you recognize not only your mortality, but the importance of supporting the work of all employees to maintain a stable business and continue serving customers.

That’s why it’s important to start thinking about your exit — and your exit strategy — well before an urgent need arises. The sooner you get a clear understanding of your exit strategy options, their pros and cons, the timelines involved, and how they can impact your future finances … the greater peace of mind you’ll have rounding the next corner of your career as a business owner.

Get a no-nonsense picture of your options with our free eBook, Your Ultimate Guide to Business Exit Strategies. It takes a closer look at third-party sales, mergers and acquisitions, selling to family, employee stock ownership plans (ESOPs), and more, with consideration for tax implications, cash and liquidity, sale price and business value, as well as leadership succession. Click the link below to download your copy today.New call-to-action