Succession Planning – Definition

Cite this article as:"Succession Planning – Definition," in The Business Professor, updated April 5, 2019, last accessed August 15, 2020, https://thebusinessprofessor.com/lesson/succession-planning-definition/.

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Operational Succession Plan Definition

In business, Succession planning means the process whereby an organization identifies key in-house personnel with a potential to take up a top leadership position and developing them with the hope that they will undertake such roles as they become available. The idea behind any succession plan is to make leadership transition as the business grows, changes and develops to be very smooth.

The process is important because, with business growth, new leadership positions are created while other positions are left vacant due to talent loss or management turnover. Succession planning focuses on identifying and promoting retention of experienced and skillful employees, and not just any available person, who are poised to fill management position when the opportunity arises.

Succession planning should is often confused with Replacement planning. In contrast, Replacement planning is whereby an organization prepares one specific person to take over a specific role. Succession planning, on the other hand, relies on a large pool of skilled personnel and not individuals, who are being developed in terms of skills, expertise, and knowledge; so that they are prepared to take on leadership roles that will benefit the company across a spectrum of senior departmental position.

A Little More on What is a Succession Plan

Succession planning in operating businesses is sometimes referred to as talent management and starts from the onset of recruiting to hiring individuals with potential for future growth in the organization. Also, what used to be a highly guarded procedure in identifying a potential candidate for senior management, has over the years changed to be more transparent providing equal opportunity or a chance to all potential candidates within the enterprise.

In addition, effective succession planning should aim to achieve skill retention within the organization by encouraging career development which in turn paints a promising future to a large pool of skilled and experienced employees. Succession planning is not limited to internal staffing but can also integrate internal staffing to ensure that only the right people are taking up top managerial roles.

Furthermore, the key reason behind succession planning is to avoid the costly dilemma that comes with filling a position. A role can become vacant due to many factors such as termination of an employee, death, resignation, health reasons and retirements among others. A clearly written succession plan will identify the right in-house personnel who are ready and can fill up the position within the shortest time.

History

Succession planning started to be incorporated as part of an organization core strategy in the early 1970s. Renowned author of ‘Executive Continuity’ Walter Mahler is credited with shaping the idea behind succession planning for corporates. Succeeding authors have over the years expanded on Mahler’s work and his relations with famous business leader Jack Welch who started working for General Electric in 1960.

For every position that Mr. Welch held he always developed his subordinate to take over from him whenever he was offered a promotion. He became CEO of General Electric in 1981 and held the position for twenty years till his retirement in 2000. It is Mr. Welch’s passion for developing talent within the organization that drove growth in the company from $13 billion to $410 billion dollars during his tenure.

Succession Planning Today

Many fortune 500 corporations are known for having an effective succession plan in place and rarely advertise for a top leadership position.

One notable multinational includes Apple inc., when the late Steve Jobs stepped down at the height of deteriorating health due to cancer, Tim Cook the current CEO was already poised for the role and took over in a smooth transition. It should be noted that Steve Jobs had earlier founded Apple University to support succession planning within the organization. The program still remains highly secretive to the outside world.

Currently, succession planning targets millennials or Generation Y in talent management. According to a report by Gallup, it is estimated more than thirty-eight percent of the current workforce in the United States are millennials. As baby boomers start to retire, millennials are the ones poised for key leadership roles.

Preceding generations to millennials, that is persons born within the 20 years running from the year 1960 to early 1980 were referred to as Generation X. Consequently, Millennials are also known as Generation Y. Admittedly, the reports notes that Generation Y portrays different work ethics and interest from Generation X and it’s important such traits are factored in skills development in order to keep them motivated and fully engaged in the business. Understanding millennials will make it easier to develop their talent in the modern workplace in preparation for future leadership roles.

Generally, Millennials are more concerned about having a purpose within the organization, working with mentors in developing their skills and cultivating a balance between work and social life. The report further states that if corporates fail to meet the above needs millennials could operate as free agents always hopping from one job to another, unlike the preceding generation that kept one job for a long period.

Succession planning process

Succession planning must be approached with the objectives that in-house personnel talent development will benefit the management as a valuable asset and should, therefore, be strategized with the same vigor an organization would do with budgeting. Of course, the process will be unique within different organizations; some general guidelines to help in the process are listed below:

  •         Management to identify possible skills, personality traits, and competencies needed to occupy their roles in case of management turnover.
  •         Identify the key roles that need quick replacement in case of a vacancy.
  •         Also, forecast future roles that might be created following growth by the organization.
  •         It is important to identify anticipated vacancies due to factors such as the retirement of personnel.
  •         When recruiting and hiring consider an individual with diverse skills that might benefit the organization in the future such as people skills.
  •         The management needs to involve the board of directors to support the succession plan from as early as when one is newly-placed employees that include coaching, mentoring, and defining job-related goals and responsibilities.
  •         Identify high performing employees who portray leadership traits and match them with prospective key leadership roles and related training requirements.
  •         Ensure that succession planning is part of an integrated HR process that includes training, development and employee performance appraisal.
  •         Prospective leaders need to be developed by continuous training and valuable work experience through job rotation in anticipation to take up senior management.
  •         The training of employees should consider current challenges and possible solutions.
  •         Continuous monitoring and reviewing the background information on potential successors, such as education, experience, skills, appraisals.
  •         The management should have a clear system of succession planning communication and for providing feedback and encouragement to potential successors.
  •         There should be in place an emergency leadership plan as part of succession planning for unexpected transitions making replacement smooth.
  •         The whole organization must be willing to support the spirit of succession planning by providing equal opportunity to all hardworking employees to assume leadership roles when they become available.

Overview of Basic steps

The preparation-the first procedure is to formulate a succession planning committee tasked with determining management levels training needed.

Commitment-Top executives, managers, supervisors, and employees must clearly understand their role in succession planning.

Assess the organization- The committee should asses the entire organization job skill and analyze the strength, weakness, opportunity, and threat (SWOT) to get a clear overview.

Identify key positions- The committee needs to identify all leadership roles or whether a new role needs to be created to improve on efficiency.

Match skills with key positions- A growing company presents challenging leadership roles, the committee needs to match high performers with organization future requirement.

Identify and assess candidates – The HR recruits personnel based on available position but the management identifies individuals poised for potential leadership roles and continuously assesses their performance.

Create development plans-To carry out this step successfully, managers should establish an individual development plan for each employee to narrow gaps between what the individual does now and what he or she must do successfully in the future to function at higher levels of responsibility.

Evaluate succession plan-The results of a succession program can be evaluated by listening to employee feedback, surveys from customers as well as colleagues and assessing employee response to organizational change.

Whenever a vacancy in top management is created the company president will appoint one of the potential candidates on interim capacity. The position is to ensure business continuity and minimal disruptions in management.

Later, the president would notify the company’s board of directors who will confirm the appointment and anticipated length and follow up with the same communication to staff. Also, press releases might follow to appropriately inform shareholders as well as the general public and key government agency.

The succession committee is then tasked to do a search to identify the ideal candidates to take up the position on a fulltime basis with consideration of the person holding the position in an acting capacity. The committee will also determine whether the management needs to be realigned or a complete turnover in the process.

Succession planning tools and software

There are many programs and developed specifically to help an organization embrace succession planning by making the process easier to formulate goals and track the same. Below are some popular successions planning tools and software:

  •         EmployeeConnect
  •         Workday Succession
  •         MentorcliQ Employee Mentoring
  •         Talent Guard
  •         HRToolBench
  •         UltiPro
  •         SABA and;
  •         Bullseye Engagement Performance Management System;
  •         And many others.

Succession planning training and certification

If management needs to get a better understanding of succession planning and how it will fit into the enterprise long term strategies they can opt for professional training. Below are some training institutions providing certification programs that managers can choose from:

  •         EDUCBA
  •         ASPE Training
  •         Human Capital Institute
  •         Institute of Organization Development
  •         MRA
  •         The American College and;
  •         Many others.

Succession planning has some disadvantage too:

  •         Companies that don’t implement succession planning effectively may end up promoting personnel based on experience rather than business value in terms of growth.
  •         Succession planning has been criticized by business leaders as to promoting group thinking by personnel due to lack of fresh ideas which could be brought by an outsider.
  •         Provides no guarantee of promotion as there is a wide pool of competition compared to replacement planning which guarantees promotion when a position is available.

In conclusion, it is a well set out idea that succession planning is crucial to both large and small enterprises as it inhibits disruption, minimize recruitment costs. Organizations should, therefore, strive to adopt a formal succession plan to avoid the dilemma and chaos of filling up vacancy by promoting in house talent management and job retention.

References for Operational Succession Planning

Academic Research on Operational Succession Plan

The succession conspiracy, Lansberg, I. (1988). Family business review, 1(2), 119-143. The paper looks at how the lack of a clearly written succession plan is the number one reason behind the failure of many familiy –owned businesses.

Factors influencing family business succession, Morris, M. H., Williams, R. W., & Nel, D. (1996). International Journal of Entrepreneurial Behavior & Research, 2(3), 68-81. The articles look at how factors such as the preparation level of the heirs, family relationships, and planning and control activities influence family-owned enterprises succession transition. The article further presents suggestions on the best practice to improve on transition.

Succession management: The next generation of succession planning, Leibman, M., Bruer, R. A., & Maki, B. R. (1996). People and Strategy, 19(3), 16.

The paper discusses and gives an overview of millennials as the generation that is currently being targeted by organization succession plans in the United States.

Organizational complexity and succession planning, Naveen, L. (2006). Journal of Financial and Quantitative Analysis, 41(3), 661-683. The study asserts that succession planning by the organization is in anticipation of filling up key leadership roles within the enterprise and is often voluntary.

Who’s up next? Most companies fail to plan for leadership succession, Cairns, T. D. (2011). Employment Relations Today, 38(2), 27-34. The paper looks at how many organizations have failed to plan for leadership succession and presents benefits that such schemes present to all levels of personnel.

Succession planning: The key to ensuring leadership, Calareso, J. P. (2013). Planning for Higher Education, 41(3), 27. The paper discusses the importance of succession planning as a holistic program that ensures leadership continuity within the organization.

Research note: succession management in family firms in northeast England, Kirby, D. A., & Lee, T. J. (1996). Family business review, 9(1), 75-85. The research looks at a study of about thirty-five family-owned firms in North East of England with an average operational age of sixty years that are being run by CEOs from the second or subsequent generations of family members without a written succession plan.

Serious gaps revealed in CEO succession plans, Heffes, E. M. (2010). Financial Executive, 26(6), 10-11. The paper discusses the drawbacks to succession plans and presents a possible solution to an effective succession strategy to medium sized organizations.

Rough family justice: Equity in family business succession planning, Ayres, G. R. (1990). Family Business Review, 3(1), 3-22. The paper discusses how approaching the succession plan for family-owned businesses with a rough family justice may work best to ensure business continuity.

Three keys to CEO succession: expectations, choices, and integration, Dierickx, C., & Veneziano, J. (2008). People and Strategy, 31(2), 36. The paper asserts that the keys to top management succession include expectations, choices, and integration and discusses each factor in a broader sense and their impact on identifying potential future CEOs.

Business succession planning: a review of the evidence, Ip, B., & Jacobs, G. (2006). Journal of Small Business and Enterprise Development, 13(3), 326-350. The article make a review of evidence supporting succession planning in family owned business and tries to provide a simplified understanding of the process as a whole.

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