As a business owner or leader, you must always think ahead to prepare your company and team for the future. And while you may not want to think about your top-performing employees leaving, people will inevitably move on, retire, or pass away.
So, how can you ensure smooth transitions, minimize downtime, and reduce costs? By creating a succession plan!
Succession planning is the process of identifying and preparing employees in your organization to fill leadership roles as senior employees exit. The plan often includes:
- Staffing and policy changes related to the employee’s departure
- Shadowing and mentorship for the advancing employee
- Multiple succession plans for one role based on various situations
Below, learn why this process is crucial for securing your company’s future, along with the steps for succession planning.
Why is Succession Planning Important?
So, why is succession planning important? Is it something every employer needs to spend time and resources on?
The short answer: Yes!
A succession plan safeguards your business against uncertainty and disruption when a leader exits. It ensures the continued operation of your company for both planned and unexpected departures of key employees.
Succession planning offers five vital benefits:
Improve Performance Management
During the succession planning process, you will identify and develop employees with unique skills and talents who can grow into executive positions. This also enables you to spot their weak areas and develop strategies for improvement. You can monitor and address these areas during regular performance reviews.
Additionally, a succession plan helps maintain clear expectations for each employee affected by the staffing change. Performance and productivity will continue without significant hiccups.
Boost Employee Retention
Most employees seek opportunities and room for growth. Show them they have a future with your business with a succession plan that maps out their potential path. When you know of a senior employee leaving on a specific date, a succession plan for the advancing employee can be a powerful motivator by providing certainty about their promotion.
Demonstrating to your staff that you value them and want them to remain part of your team long-term will instill company loyalty and increase employee retention.
Maintain Stability & Productivity
Succession planning provides clarity and expectations for staff by communicating who will fill the position and any other related changes. It also supports continued business and employee productivity because everyone understands and is sufficiently trained for their role.
A succession plan is crucial for sudden departures, which could severely impact your organization and team if unprepared. Plus, it can boost morale by providing stability, which helps employees feel confident and secure. It can even motivate employees to take the initiative.
Reduce Recruiting Costs
Of course, one of the primary benefits of succession planning is the savings! Promoting current employees saves on recruiting and hiring costs to find external candidates.
Recent benchmarking data from the Society for Human Resource Management (SHRM) states that the average cost per hire is nearly $4,700. But many employers estimate the total cost can be three to four times the new hire’s salary when considering soft costs (i.e., time spent by executives and managers to support the hiring process).
Talk about adding up quickly!
Once again, succession planning minimizes productivity loss because an existing employee already understands your organization and won’t require as extensive training and lead time. The replacement will learn from the departing leader, absorbing their knowledge and skills.
Identify & Fill Competency Gaps
The final benefit of succession planning is recognizing and addressing competency gaps in your company. A competency gap occurs when the current competency level of your employees does not meet the required competency level. Examples include:
- Skill gaps
- Necessary executive positions
- Potential future competencies
As you create a succession plan, you can consider these areas and formulate training and talent management programs.
6 Steps for Seamless Succession Planning
1. Create a Succession Plan Policy
Start by developing a policy noting which positions require succession plans and which non-required roles could benefit from a plan. This guides your team in managing a transition and when a new plan is necessary.
Include in the guidelines a request for as much advanced notice as possible from senior employees to facilitate the succession plan and transition. You should also communicate this to new leaders as they step into their roles.
2. Prepare for Multiple Scenarios
Plan for both expected and unexpected departures in your succession plan. You can’t always predict personnel changes and could experience more than one surprise exit at once. Your plan should include:
- Long-term plans for the replacement
- Short-term strategies to reduce the effects of staffing changes
3. Focus on Specialized Roles
Prioritize succession planning for roles requiring specialized skills and knowledge, which will be the most difficult to find a replacement for during a transition. Identify employees in your business who will be best suited to take over these positions to avoid major disturbances.
4. Offer Employee Development Resources
On a related note, you can ensure you have existing employees ready to move up by providing a range of development opportunities. These might include:
- Continued education (e.g., classes, certifications, seminars, etc.)
- Bringing in outside experts
- Mentorships with current leaders
- Partnering with career and leadership coaches
Training and mentorships should encompass hard and soft skills to develop well-rounded, productive leaders and ease these transitions.
5. Identify Top Potential
An essential part of succession planning is listing employees who have the potential to advance into leadership positions. Once you create this list, you can focus on specific development strategies to foster their growth.
You might use multiple methods to identify future leaders, such as gathering feedback from other senior employees, analyzing performance review data, and various assessment tools for succession planning (e.g., simulation and personality testing).
6. Establish a Transition Process
While this may look different for each role, establishing a steady transition process is key to a successful succession plan! You can mitigate disorganization and disruption when the:
- Incoming employee trains and works with the departing leader
- Exiting employee progressively hands over responsibilities to the replacement employee
This gives the new leader hands-on experience and plenty of room for questions and learning.
Plan Your Team’s Path to Success
Succession planning will vary based on your company’s needs, goals, and roles. But it’s never too early to begin this process and implement a policy. Preparing for various personnel changes will set your business and team up for future success by:
- Improving performance management
- Boosting employee retention
- Maintaining stability and productivity
- Reducing recruiting costs
- Identifying and filling competency gaps
Do you need an outside perspective as you develop succession plans for key leadership positions? Check out our outsourced HR solutions or contact us at 603-818-4131 or info@bluelionllc.com to learn how we can assist your team!
The information on this website, including its newsletters, is not, nor is it intended to be legal advice. You should contact an attorney or HR specialist for advice on your individual situation.
