Why you need a succession plan now, not just in the future
Anyone who watched the dysfunctional and despicable power struggles of the Roy family in Succession can attest that the lack of a clearly defined succession plan can cause chaos and turmoil. Most businesses don’t quite go through the same dramas that Waystar, but it’s nevertheless important for all businesses to have a future leadership plan in place. It was therefore interesting to note in our recent **CFO Viewpoint report** how few organisations actually had a succession plan in place. These plans aren’t just something that is potentially important for the future, but something that brings benefits to the business immediately and can cause ambiguity and impact morale if it’s lacking.
What is a succession plan?
Succession planning is the strategic process of identifying and developing future leaders within an organisation. The objective is to ensure a smooth transition when key positions become vacant. This involves recognising potential talent within the company and preparing them through targeted training, mentorship and hands-on experience, so they can step into leadership roles when needed. Succession planning should not be limited to top executives but should include all key positions across various departments to maintain business continuity.
Effective succession planning helps mitigate risks related to turnover, retirement, or sudden absences, ensuring the organisation remains stable and resilient. It also allows businesses to nurture a pipeline of skilled leaders who are aligned with the company’s values and goals. Beyond just filling vacancies, succession planning fosters employee development, increases retention, and strengthens the company’s long-term strategy. In essence, it is a proactive approach to leadership continuity, ensuring an organisation’s future success.
Why is a succession plan important?
Having a succession plan in place is crucial for businesses to ensure long-term stability and continued growth. It provides a roadmap for leadership continuity, reducing the risk of disruption when key employees, such as executives or department heads, leave unexpectedly. Succession planning helps organisations quickly fill critical roles, ensuring that operations run smoothly, and decisions are not delayed.
It also minimises the impact of talent gaps by identifying and developing internal candidates who are prepared to take on leadership responsibilities. This promotes a sense of security and loyalty among employees, knowing there is a clear pathway for advancement within the company. Furthermore, succession planning boosts confidence among stakeholders, investors, and clients, demonstrating that the business is well-managed and future focused.
Ultimately, a strong succession plan helps businesses maintain operational resilience, preserve organisational culture, and safeguard their competitive advantage, even during periods of leadership change or uncertainty.
What are the risks of not having a succession plan?
Conversely, not having a succession plan in place exposes a business to several risks that can jeopardise its long-term stability and growth. Without a clear plan for leadership transition, the company may struggle to identify a capable successor in the event of key personnel departures due to retirement, illness, or unexpected resignation. This uncertainty can lead to a lack of direction, confusion among employees, and diminished confidence from clients and stakeholders.
Moreover, the absence of a succession plan can create disruption in day-to-day operations. Critical decisions may be delayed or poorly made during the transition period, which can result in missed opportunities or costly mistakes. In some cases, a lack of leadership continuity can even lead to the loss of business relationships, as partners and clients may seek more stable, well-managed organisations.
From a financial perspective, businesses without a succession plan may face difficulties securing financing, as investors and lenders often view leadership instability as a red flag. Additionally, the process of finding and training a new leader on short notice can be time-consuming and expensive.
In the long run, failure to plan for succession can undermine employee morale, as high-performing staff may seek more secure positions elsewhere, ultimately stalling the company’s ability to grow and adapt to changing market conditions.
What are the immediate benefits of a succession plan?
A well-developed succession plan offers several key benefits for businesses. First, it ensures continuity and stability by preparing the organisation for leadership changes, whether due to retirement, resignation, or unforeseen circumstances. This reduces the risk of disruption, allowing operations to continue without interruption.
Succession planning also strengthens talent retention and morale. Employees who see a clear pathway for advancement are more likely to stay with the company, reducing turnover and the costs associated with recruiting and training new hires. Additionally, it fosters a culture of development, as employees are encouraged to build skills and take on new responsibilities, aligning their growth with the company’s long-term goals.
Moreover, succession planning boosts investor and stakeholder confidence, as it demonstrates foresight and strong governance. By having a pipeline of trained leaders, businesses can adapt more effectively to changes, ensuring their competitive edge and future success in a rapidly evolving market.
How do you develop a succession plan?
Developing a succession plan is a thoughtful, strategic process that ensures a business is prepared for future leadership changes. It involves identifying key roles, assessing potential internal candidates, and creating a development plan for those individuals. Here's a step-by-step guide on how to develop an effective succession plan:
- Identify key roles: Determine which positions are critical to the business, such as senior leadership, department heads, or any role that is vital for day-to-day operations.
- Assess current talent: Evaluate existing employees based on performance, leadership potential, and alignment with company values. This helps identify internal candidates who could step into these roles in the future.
- Develop internal talent: Create tailored development plans for promising employees. This may include training, mentoring, job shadowing, and offering them opportunities to lead projects to gain hands-on experience.
- Set clear criteria: Define the skills, experience, and qualities needed for each key role, ensuring a clear understanding of what constitutes a successful successor.
- Create a timeline: Establish a realistic timeline for each succession, considering the readiness of potential candidates and the anticipated timing of leadership transitions.
- Communicate and monitor progress: Regularly review and update the plan, ensuring transparency with key stakeholders and adjusting the development plan as needed.
A solid succession plan ensures leadership continuity, fosters talent growth, and protects the business from unforeseen disruptions.
How often do you need to update a succession plan?
A succession plan should be revisited regularly, at least once a year, to ensure it remains relevant and effective. Business needs, market conditions, and leadership roles can change over time, so it's important to update the plan accordingly. Regular reviews allow you to assess the progress of potential successors, adjust development plans, and account for any shifts in business strategy or key personnel. Additionally, life events such as retirements, promotions, or unexpected departures may require immediate adjustments. By revisiting the succession plan frequently, businesses can ensure leadership continuity and readiness for any transition that arises.