Key takeaways
- Succession planning is the process of making sure a business’s critical roles are always filled by qualified employees.
- An effective succession plan process takes time to identify and prepare high-potential candidates to backfill roles that could become vacant.
- Formalized training and leadership development support diverse succession planning that draws on a wider range of talent in the organization.
Since employees can leave an organization at any time, companies typically have two weeks to come up with a plan to fill that role, unless they’ve already done some succession planning. Succession planning prepares companies to backfill critical roles to maintain regular business operations. It therefore makes the difference between scrambling to fill an urgent vacancy or tapping into next-in-line talent.
In this article...
What is succession planning?
Succession planning is the process of ensuring that all critical positions in the organization are always staffed by preparing employees to take on those roles in case they become vacant. Succession planning, therefore, involves identifying necessary skills for key positions and training employees in those skills.
The succession planning process is also becoming increasingly predictive and proactive, moving beyond current roles to plan for future roles a company will need to add to its ranks.
Succession planning examples
Among examples of effective succession planning, IBM, Apple, Barneys New York, and others share the ingredients of time, intentionality, and varying degrees of structure.
Yet, they fall into one or both types of succession plans: long-term and formalized. These two succession plan approaches aren’t mutually exclusive. Rather, they should be combined to maximize the effectiveness of a company’s unique succession planning process.
Long-term succession planning
Long-term succession planning entails identifying and preparing someone for a role long before they officially take on that role.
This requires recognizing and nurturing high performers over time to set them and the organization up for success. That way, when the opportunity arises to take on a key role, that individual is well prepared to assume those responsibilities.
As an employee moves up the ranks and acquires a more complex understanding of how all the pieces of the business fit together, they’ll be ready to take on a leadership role when the time is right.
With regard to timing, a long-term succession plan can lead up to a known point in the future when a replacement will be necessary, for example, when a CEO knows they’ll retire in five years. The transition can also happen earlier than expected if, for instance, the CEO resigns.
An example of long-term succession planning: IBM
IBM created a long-term succession plan when promoting Virginia Rometty to CEO to replace Samuel Palmisano in 2011. Rometty had started working in an entry-level position at the company 30 years prior to her promotion and had worked her way up over time before attaining the CEO position.
Rometty was key in this role until her retirement in 2020, and IBM’s succession plan enabled the smooth transition of power to Rometty’s successor, Arvind Krishna. In each situation, the company was able to maintain continuity by:
- Establishing professional development pathways.
- Cultivating a positive company culture.
- Allowing candidates to compete at the same level.
Three decades is an extreme case of long-term succession planning, since employees change jobs an average of 12 times over the course of their career and the median number of years a private-sector employee stays with one company is only 3.7 years.
Perhaps a more realistic example is Barneys New York’s five-year succession plan to prepare Daniella Vitale to become its CEO. The former CEO had already worked with her for many years and intentionally gave her opportunities to grow at Barneys before officially appointing her as successor.
Requirements for long-term succession planning
Recognizing that this strategy takes time—but not necessarily 30 years—companies can recognize and nurture high-performing employees early on and implement career pathways. Long-term succession planning requires a number of ingredients that maximize employee retention:
- A supportive company culture with competitive benefits.
- Performance and talent management tools that help managers identify top internal talent early on.
- Robust learning and development programs that are personalized to employees’ goals and strengths.
Though requiring sustained effort, long-term succession planning is more effective than getting caught off guard with someone leaving and scrambling to train an employee to take their place.
Formalized, educational succession planning
A company’s learning and development or HR team can develop an internal educational academy, complete with a curriculum that trains and develops employees as future leaders in the company. Going through formalized training accelerates employees in their progress toward professional goals. It could even directly get them to their next position once they complete the training.
An example of educational succession planning: Apple
Former Apple CEO Steven Jobs took this type of succession planning upon himself and founded Apple University. Its digital curriculum drew from Jobs’s experiences to teach employees “how to think like Steve Jobs and make decisions that he would make.”
Jobs still wound up choosing a successor who didn’t ultimately attend Apple University, but academy-like training isn’t only meant to train employees to become CEOs. It trains cohorts of employees on how to be effective leaders in order to fill talent pipelines for other management and executive positions at Apple.
To foster creativity and innovation in a succession plan, a company should draw from a range of leadership examples in its training. These can be from within the company or in the industry rather than focusing solely on the lessons from the company’s current leader. This more flexible succession planning strategy inspires employees to find their unique leadership style and voice rather than becoming a replica of the current CEO.
How formalized succession planning supports corporate commitment to DEI
Formalized, training-based succession planning supports a company’s commitment to diversity, equity, and inclusion (DEI). Leaving a succession plan entirely up to interpersonal dynamics in the workplace without formal structure opens up the door for promotions based on relationships rather than skill set. Managers might favor and recommend those in their team and/or those they’ve worked with for a long time whether they’re qualified to take on the new role or not.
Also read: How Performance Bonuses Help Avoid Bias and Increase Productivity
Training employees across teams and tenure provides more employees with a chance to progress in their career trajectory—not just those employees who work most closely with the C-suite.
In addition, forward-thinking succession planning is smart, but as companies strategically train employees for future roles, managers need to ensure that the training maintains work-life balance, lest they fall victim to employee burnout.
Why is succession planning important?
Companies need to take inevitable turnover into account and have a succession plan in place to keep critical roles filled. A succession plan can help maintain growth and stability as well as encourage retention and internal development.
Succession planning prepares the company for the loss of key personnel. The benefits of this preparation include:
- Business resilience no matter the economic climate.
- Continued operations with minimal downtime.
- Equitable workloads, so other employees aren’t overburdened with taking over tasks as a result of a vacancy.
- Potentially mitigated unconscious bias.
- More diverse workforce and leadership.
- Higher employee retention and engagement.
The most important ingredient for any succession plan is time and investment in top talent. Browse our list of top corporate human capital management (HCM) software to start your succession planning process today.
1 Rippling
Rippling is the first way for businesses to manage all of their HR, IT, and Finance — payroll, benefits, computers, apps, corporate cards, expenses, and more — in one unified workforce platform. By connecting every business system to one source of truth for employee data, businesses can automate all of the manual work they normally need to do to make employee changes.
2 Paycor
Paycor’s HR software modernizes every aspect of people management, which saves leaders time and gives them the powerful analytics they need to build winning teams. Paycor provides a full suite of HCM solutions with a single source of truth for employee data, so users never have to switch platforms, log-in to multiple systems, re-key data or open multiple spreadsheets. Everyday processes become simplified, allowing organizations to focus on their most important work.
3 Deel
Deel's full-suite of HR tools allows companies to manage the entire employee lifecycle—from recruitment and onboarding and beyond—in 150 countries. All this from a single, easy to use interface. US and Global Payroll allows you to pay any type of worker in 100+ countries, and all 50 states, in whatever currency you choose. And with 200+ in-house legal experts and entities in 120+ countries, using Deel means you’ll always be compliant with local regulations.
