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Knowledge Base » Business » What is Succession Planning?

What is Succession Planning?

Last updated on 27th April 2023

When businesses fail to make plans about how to fill vacancies for key roles within their organisations, unnecessary disruption can be caused for their clients, the rest of the workforce and the business as a whole.

Despite knowing the importance of planning for the inevitable, a study by Norrie Johnson Recruitment (NJR) of 127 senior directors of UK companies found that only 14% of companies had a comprehensive succession plan in place. This research, conducted in 2018, also found that almost half (46%) had no succession plan at all.

At the beginning of the financial year 2019/20, the results of a survey of HR professionals suggested that reducing recruitment costs was a top priority (39%), with creating a strong succession plan a very close second (34%).

It seems that despite acknowledging the importance of succession planning and why they should have one in place, many UK businesses are still not joining the dots between intention, planning and implementation.

What is succession planning?

Succession planning is a process that allows key positions within a company to be filled by existing employees, should the need arise.

The business world is highly competitive and having a period of disruption, a lack of continuity or a loss of productivity could allow your competitors to get ahead of you. It could also cause you to lose important clients, members of staff and vital revenue.

A strong succession plan reduces the chances of having a significant period of disruption in the company when the time comes that crucial roles need to be filled.

Business team discussing succession planning process

How does succession planning work?

Management and key players within succession planning should:

  • Identify critical roles within the company.
  • Know the skills, strengths and weaknesses of their current talent pool.
  • Be able to identify any gaps in knowledge or skills.
  • Provide continuous training.
  • Be effective communicators (both amongst themselves when planning and with other staff).

To develop a successful plan, you need to be able to confidently identify who has the key roles within a business and decide what you would do if these roles became vacant due to a worker:

  • Moving on to a new company.
  • Getting promoted.
  • Retiring.
  • Passing away.

Succession planning is sometimes used, especially in large organisations, to fill short-term gaps in the workplace, such as when a key employee has to travel abroad on business or temporarily steps into a different role.

Succession planning works best when those responsible for it:

1. Can confidently identify critical roles that will require filling one day.

2. Know what attributes the ideal candidate would need to take over this role.

3. Know who their skilled workers are and decide which one most closely resembles their ideal candidate.

4. Involve all interested parties in the discussion and ensure all are invested and engaged.

5. Commence a programme of any further education, training, mentoring or support that is required.

Succession planning is not simply about matching people to roles. It is about offering continuous support, training and an open line of communication to ensure that key roles in the workplace have a suitable successor in place, should they become vacant.

What are the benefits of succession planning?

Succession planning is becoming increasingly important in the workplace, especially when some industries are being increasingly faced with a shortage of skilled workers.

Succession planning can help a business to stay on track. It forces key decision-makers to evaluate their workforce and make preparations for the future as well as to invest in developing the skills and talents of their employees.

Succession planning:

  • Saves time (in the long term) as the focus is on training and upskilling rather than outsourcing or finding new talent.
  • Reduces stress (as it streamlines the hiring process).
  • Helps to ensure the correct people will be in the right role for them.
  • Can inform a training plan / identify gaps in the skillsets of workers.
  • Helps with team cohesion (as new candidates are not sourced from outside the company) and to an extent workers are prepared in advance for changes in management.
  • Can improve staff retention – skilled workers feel reassured that there is a future for them within a company.
  • Cost-effective as it is more expensive to recruit new talent externally or get short-term help (especially from expensive agencies or independent contractors) than to recruit from your existing talent pool.

A successful succession plan means that a business can adjust better to changes, whether they are planned for or unexpected, internal or external.

Why is succession planning important?

Succession planning is important to businesses because it helps to provide consistency and continuity for workers when management roles become vacant. It removes pressure from hiring managers who already have competent, skilled workers ready to step up and take over management jobs.

In the long term it can also save time, as succession planning is usually discussed long before a role becomes vacant, meaning that once a position becomes available, the need for a lengthy recruitment and interview process is negated.

Businesses that have routinely offered key positions to those from the same generation leave themselves somewhat vulnerable if they do not have an effective succession plan in place. It is logical to assume these workers will be of similar ages, therefore may want to retire (or leave due to ill health or other reasons) around the same time. This would leave a huge gap in the leadership of the company.

Who would use succession planning?

Businesses of any size might benefit from succession planning. Essentially, if you can foresee having management roles to fill in the future, it might help to think about what succession planning might look like for you.

A strong approach to succession planning is especially beneficial in industries where the relationship between partners / those in leadership roles and clients is close, or is based on a significant amount of trust such as:

  • Law firms.
  • Accountants.
  • Financial advisers.

Retaining clients and maintaining close relationships with them is key within some businesses. It is important for those at the top to rationalise that, at some point, new talent might need to step into the role of managing these clients.

This is where succession planning will allow for a smooth transition once the time comes. It also gives some continuity for the client and they can get to know their new adviser in advance and gives the person leaving the company peace of mind that their client will be in safe hands.

Succession planning might also be extremely useful for organisations where a sudden gap in leadership could be particularly catastrophic such as within social care or the NHS.

Strong leadership skills are required for all businesses to be successful. Identifying, managing and retaining talented individuals that can fill business-critical roles is important for the survival of any business, the continuation of its reputation and the ability to deliver consistent service.

Law firm ensuring consistency to business by succession planning

What is succession planning in a family business?

Succession planning in a family business is unique as the key players in the business are often related which might mean family dynamics and/or politics need to be taken into consideration.

Despite succession planning being important to ensure continuity in business, research by PwC found that almost half (43%) of family businesses had no succession plan in place.

In any small business, it may be down to one person (usually the head of the company) to deal with succession planning. This means it is especially important to take the time to think about the future of the business and what your own plans are.

When you think about developing a succession plan in your family business you would have to consider:

  • Is it too early to be thinking about a succession plan? (The answer here is always no. Early planning and preparation are essential).
  • What are the key roles that will require a successor and what skills would an ideal successor need?
  • Are there suitable family members for the role? How can you help to train or prepare them?
  • Are you willing to consider sourcing non-family members to fill the role?
  • What does the future of the business look like and do your family/employees share this vision?
  • Once your succession plan has been implemented, how involved will you be? Will you be able to make that transition and take a step back? How can you make sure everyone is ready for this?
  • Have you engaged family members in the business and given them adequate experience? Do they show an interest? Can you improve on this?

You would have to consider who you would ideally want to take over the business. This might include the ownership or the day-to-day running of operations. Taking over management and taking over ownership are two separate issues and they do not have to be done at the same time.

It is perfectly legal and acceptable for the owner of a family business to continue to own it but take a step back (due to age, ill health or having other priorities) and appoint a successor to take over the general running of the business.

When discussing the succession plan for a family business, communication is key.

This might mean:

  • Speaking with other direct family members about what their plans are.
  • Asking about their career goals.
  • Asking what their view for the future of the business is.
  • Seeing how their vision aligns with yours.
  • Deciding if there is any room for collaboration or compromise.

As a business owner, it can be difficult to hand over key decision-making to someone else, or to even consider the possibility that you might have to one day. This is especially true when you have built a successful business up from nothing.

If your succession plan involves your children or the younger generation taking over the family business:

  • Get them involved from a young age.
  • Encourage them to align their studies with the needs of the business (such as taking a course in Business Management or Accountancy).
  • Make sure they are engaged with the business and have a vested interest in its success (not only a financial one).
  • Have open and honest communication – it is possible that family members have their own career goals and have no interest in ever joining the family business.
  • Be willing to engage with your potential successors and provide training and hands-on experience.
  • Be aware that the world is changing and younger, digital natives might have a much firmer grasp on where the business is going than the older generations.

What is succession planning in human resource management?

Succession planning in HR is not to be confused with Human Resource Planning (HRP) which is about supply and demand and making projections for the future. Rather than identifying and training candidates to take over leadership roles as the need arises, HRP is about making sure that a business has a steady supply of skilled workers to avoid shortages or surpluses.

There are similarities between HRP and succession planning, such as they both:

  • Require planning and forecasting about potential business changes.
  • Can be used to identify candidates suitable for promotion.
  • Have a core idea that roles need to be performed by the candidate who is the ‘best fit’.

The main differences include that HRP looks at the business as a whole and succession planning focuses on management roles. HRP also involves a lot of forecasting and looking at how to maximise profit margins – this could include considering which staff to let go of.

Succession planning in HR is more about planning for the inevitable and pre-empting vacancies that will arise in the workplace and who, amongst the existing workforce, will best fill them; succession planning is more closely related to preparation, whereas HRP is more closely linked to control.

The role of HR managers in succession planning starts right from the beginning of the recruitment process. HR professionals are responsible for interviewing, hiring and training up talented individuals and making sure that they are offered continuous learning opportunities and sufficient incentives to remain with the company.

A skilled and diverse talent pool helps to ensure that there are always suitable successors for critical roles within the business.

What is succession planning in the workplace?

The way succession planning looks in a particular business will depend on the way the business is structured. It may be something that the HR department is largely responsible for or it may be down to a team of executive managers.

In a law firm, it might be down to the partners to organise succession planning amongst themselves which, especially in smaller firms, might mean them having some input into finding their own successor.

For succession planning in the workplace to be successful, it requires open and clear communication. Workers need to feel comfortable discussing their plans and career goals with management and managers should be able to broach challenging subjects with their workers.

Successors may be identified through:

  • Formal means – Such as a performance review, or aptitude or competency assessments.
  • Informal means – Such as through conversations between workers and management, or via observation.

Succession planning processes in the workplace should be open, transparent and fair. It is also important to keep in mind inclusion and diversity in the workplace when thinking about succession planning.

For succession planning to be possible, a business needs to be able to attract and retain talented workers. This is where it is helpful to try to ensure that staff have an acceptable work/life balance and flexible working opportunities, part-time contracts for management roles are available (especially for those who have caring responsibilities) and the working environment is supportive and positive.

Succession planning is impossible if potential, talented successors lack interest or engagement in the process. It is important to match the requirements of the roles and the needs of the business with the circumstances and goals of the employee, or the process will not be successful.

Communicating well with staff about new roles

What to avoid in succession planning

Succession planning needs to be done properly in order to be effective.

Common mistakes businesses may make during succession planning include:

  • Trying to rush the process and not thinking decisions through properly.
  • Failure to draw up formal agreements or make definite arrangements.
  • Communicating plans poorly with staff and making them feel like they are being pushed out or forced into roles they do not want.
  • Making assumptions about the capabilities of their staff rather than focussing on training.
  • Fostering a work culture that lacks transparency; succession planning relies on open and honest communication and workers feeling that they can be honest about their plans/ career goals.
  • Allowing members of management to have ‘total control’; this can make them reluctant to engage with succession planning as they might refuse to envision a future for the company without them in it.
  • Not keeping up with changes in the modern business world, lacking diversity or inclusivity.
  • Not planning for unforeseen circumstances or emergencies.
  • Failure to consider all of the important variables or only thinking about best/worst-case scenarios.

Businesses that run in a disorganised way or that do not have clearly defined roles for existing staff, as well as those that fail to identify that they need to diversify their talent pool, will often struggle with succession planning.

If implemented correctly, succession planning should be about preparing for the inevitable and providing continuity for workers and clients when those in key positions within a company leave, for whatever reason.

Succession planning helps to make transitions smooth and avoids additional disruption within companies, at what could potentially be a very difficult time when valuable talent has been lost.

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About the author

Vicky Miller

Vicky Miller

Vicky has a BA Hons Degree in Professional Writing. She has spent several years creating B2B content and writing informative articles and online guides for clients within the fields of sustainability, corporate social responsibility, recruitment, education and training. Outside of work she enjoys yoga, world cinema and listening to fiction podcasts.

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