What is succession planning?

Succession planning is a strategic process organizations use to identify and develop internal employees with the potential to fill key leadership roles in the future. By having qualified candidates ready to step into critical roles, it ensures that the organization is prepared for future leadership changes, whether due to retirements, resignations, or unforeseen circumstances.

What is a succession plan?

A succession plan is a documented strategy that outlines how an organization will ensure leadership continuity by identifying and preparing individuals to fill specific key roles when they become vacant. This plan details the development and readiness of potential successors for each critical position within the organization, focusing on the transition strategy for each identified role.

Succession plans are typically created on an individual basis, addressing the needs of both the organization and the specific potential successors. The plan might include timelines, development activities, and contingency measures to ensure a smooth and effective transition when a leadership change occurs.

What is the purpose of succession planning?

The primary purpose of succession planning is to ensure the continuity of leadership and maintain the stability of business operations.

By proactively identifying and nurturing talent within the organization, businesses can mitigate risks associated with sudden vacancies and ensure that key positions are filled with qualified candidates who understand the company culture and strategic goals.

What are the key steps involved in succession planning?

The key steps involved in succession planning include:

• Identifying key positions that are critical to the organization’s success
• Assessing the skills and competencies required for these roles
• Evaluating internal candidates' potential through performance reviews, assessments, and feedback
• Developing and implementing tailored development plans for high-potential employees
• Regularly reviewing and updating the succession plan to reflect changes in the business environment and workforce

Complimentary resources:

• How to Measure Employee Performance: Effective Tools and Techniques
• How to Implement an Effective Competency-Based Performance Appraisal in Your Organization
• The Most Effective Training Methods for Performance and Growth

What is the role of mentorship in succession planning?

Mentorship plays a vital role in succession planning by providing high-potential employees with guidance, support, and opportunities to develop their skills and knowledge. Effective mentorship programs pair experienced leaders with emerging talent to facilitate knowledge transfer, build leadership capabilities, and prepare successors for future roles. Mentorship also helps mentees navigate organizational culture and politics, increasing their readiness for leadership positions.

What role does leadership play in succession planning?

Leadership plays a crucial role in succession planning by championing the process and ensuring its alignment with the organization’s strategic goals. Leaders are responsible for identifying potential successors, providing mentorship and development opportunities, and fostering a culture that values and supports succession planning. Their commitment and involvement are essential for the success of the succession planning process.

What are some examples of succession planning?

Barneys New York

Daniella Vitale became CEO of retailer Barneys New York in 2017, taking over from Mark Lee. Before joining Barneys as a Chief Merchant, Vitale worked her way through a series of lateral moves at fashion brands, including Gucci, Armani, and Ferragamo. As CEO of Barneys, Lee invested in Vitale’s future by creating a five-year succession plan that included multiple leadership opportunities.

In her position as COO, she had experienced leadership in almost every business area before becoming CEO herself. Mark Lee’s announcement read,“It’s time to turn the day-to-day management over to Daniella, who has long been my planned successor and is uniquely qualified to take the leadership reins.”

IBM

Ginni Rometty had been IBM’s CEO since 2012 until she announced in early 2020 that she would be handing over the role to her successor, Arvind Krishna. A technical expert with 30 years at IBM, Krishna is widely respected across the company and held the position of Senior Vice President of Cloud and Cognitive Software until his promotion.

This CEO transition has been a year-long planning process under the overview of the IBM board, with Rometty heavily involved in the succession.

Amazon

In 2021, the founding CEO of Amazon, Jeff Bezos, handed over the role to his successor. Before stepping up, Andy Jassy had been the CEO of Amazon Web Services since 2003, leading AWS to control a third of the total cloud computing market.

This succession plan had been in the works for several years, with Bezos stating in 2014, “As the company has grown, my job has changed very much. I’m not going to be here forever.”

Amazon has a succession plan for all senior executives. The strategy includes an annual review of the top executive team’s future plans and backup candidates and a chart that maps out the company’s rising stars. Constant communication between each executive and a selected two or three direct reports ensures consistency in the case of an unexpected structural change.

Apple

Apple has its own signature training ground, established in 2008 by Steve Job as the Apple University. Although they keep their facility and courses secret, the idea is to educate internal employees about the history and goals of the company to find the next generation of talent to continue the legacy.

Current Apple CEO Tim Cook is an instructor at Apple University. He says, “I see my role as CEO [is] to prepare as many people as I can to be CEO.”

Microsoft

In 2013, Steve Ballmer surprised everyone by announcing that he would be stepping down as Microsoft’s CEO. However, without a succession plan in place, the company turned to external recruitment to identify an appropriate person for the job. A search committee headhunted over 100 candidates and shortlisted 20, including Steve Mollenkopf, who became CEO of Qualcomm instead, and Alan Mulally, who pulled out of the race.

After six months without a viable successor, Microsoft turned its attention to an insider, Satya Nadella, to become its third-ever CEO. Microsoft ultimately made a fantastic decision, with the stock rising 30% during the first nine months of Nadella at the helm. However, this was an uncertain period in the company’s history that could have been alleviated with a formal succession plan.

What are the benefits of succession planning?

Succession planning is a strategic process that ensures an organization has the leadership and talent needed to meet future challenges. By identifying and developing internal candidates to fill key positions, succession planning mitigates risks, drives organizational stability, and aligns long-term business goals with talent development.

Below are five key benefits of implementing a robust succession planning strategy:

• Improves organizational performance: Succession planning ensures a pipeline of ready leaders who can step into critical roles seamlessly, minimizing disruptions and maintaining business continuity
• Enhances employee engagement and retention: When employees see clear career paths and opportunities for growth, they are more likely to stay with the organization, reducing turnover and preserving institutional knowledge
• Ensures continuity of leadership: Succession planning prevents leadership voids during unexpected transitions, such as retirements or sudden departures, by having qualified successors prepared to take over key roles
• Reduces recruitment costs and time: By developing internal candidates, organizations save on the costs and time associated with external hiring, ensuring a faster and more efficient transition into leadership roles
• Supports strategic business goals: Succession planning aligns talent development with the organization’s long-term goals, ensuring that the future leadership has the skills and vision to drive the company forward

How does succession planning relate to organizational culture?

Succession planning is closely related to organizational culture as it reflects and reinforces the values, behaviors, and practices important to the organization.

A strong succession planning process can help embed a culture of continuous learning, development, and internal mobility. It demonstrates the organization’s commitment to investing in its people and provides a clear signal that career growth and leadership development are priorities.

This alignment between succession planning and organizational culture can drive employee engagement and loyalty.

How can succession planning be integrated with talent management?

Succession planning can be integrated with talent management by aligning it with other HR processes such as performance management, learning and development, and career planning.

This holistic approach ensures that succession planning is not a standalone activity but part of a broader strategy to attract, develop, and retain top talent.
By linking succession planning with talent management, organizations can create a cohesive plan that addresses both immediate and long-term talent needs.

What challenges might organizations face in succession planning?

Organizations might face several challenges in succession planning, including:

• Identifying and assessing the right candidates
• Ensuring objectivity and fairness in the selection process
• Balancing short-term operational needs with long-term development goals
• Gaining buy-in from senior leadership and managers
• Keeping the succession plan current and relevant amidst changing business conditions
• Addressing these challenges requires a strategic approach, clear communication, and ongoing commitment from all levels of an organization

How do organizations measure the effectiveness of succession planning?

Organizations can measure the effectiveness of succession planning through various metrics, such as:

• The percentage of key positions filled internally
• The time taken to fill leadership roles
• Employee retention rates
• The success rate of promoted individuals

Surveys and feedback from employees and managers can also provide qualitative insights into the process’s effectiveness.
Regularly reviewing these metrics helps organizations identify areas for improvement and adjust their succession planning strategies accordingly.

Ensure successful succession planning with Deel Engage

Successful succession planning isn’t an overnight process—it requires assessments, evaluation, and regular monitoring of your candidate’s growth and development. Deel Engage will streamline the process by helping you:

• Use feedback and performance reviews to identify high-potential employees
• Set development plans for successors and track their progress
• Create learning resources or use the extensive library with resources curated from top educational providers
• Define the expectations for the top positions in your organization so employees know what it takes to arrive there

Additionally, Deel HR, our truly global HRIS solution, is always included for free.

Book a demo to see how our solutions will help you build your next generation of leaders and ensure business continuity.