Why Succession Planning is Critical for Organizational Success

Succession planning is the process of identifying and developing internal candidates to fill key leadership roles within an organization. While often treated as an afterthought, succession planning is hugely important for ensuring the ongoing success and continuity of businesses and nonprofits.

Here are the key reasons why actively planning for future leadership transitions should be a priority

Maintains continuity

Succession planning provides stability and consistency when key leaders inevitably move on. Candidates are given time to properly onboard and get up to speed. Without proper preparation, organizations may experience disruptive turnover:

• 40% of organizations lack an adequate pipeline of leaders.

• 25% of new CEOs last less than 3 years due to poor fit.

Proper succession planning minimizes disruption from resignations or retirements. Operations continue smoothly with qualified internal successors ready to take the reins.

Retains institutional knowledge

Veteran leaders often have years or decades of experience and expertise. But when they leave without passing the torch, that knowledge walks out the door with them.

A Harvard study found:

• 136% higher profits from insider successors versus external hires.

Clear transition plans ensure their wisdom and know-how is transferred to rising leaders and preserved within the organization. Knowledge retention helps sustain a competitive advantage.

Provides development opportunities

Succession planning identifies high-potential employees and gives them opportunities to gain skills and experience for advancement such as:

• Stretch assignments – Projects that build capabilities.

• Mentorships – Gaining insights from experienced leaders.

• Cross-training – Learning other disciplines.

• Leadership programs – Formal training and cohort bonding.

This accelerates the growth of talented leaders ready to take on broader roles when the need arises.

Boosts engagement and retention

68% of employees are more likely to stay at companies with opportunities for advancement. Preparing leaders for more responsibilities shows them they have a future and career path.

Succession planning also boosts engagement as rising leaders:

• Feel invested in the organization.

• Understand their potential impact.

• Gain new skills and motivations.

Lower turnover saves significant replacement and training costs.

Facilitates diversity

Succession planning expands the pool of candidates beyond the usual suspects. It enables organizations to build a diverse bench by:

• Identifying high-potentials from underrepresented groups who may otherwise fly under the radar.

• Providing support to mitigate biases that disadvantage women and minorities from traditional advancement paths.

• Embedding diversity as a criterion in the talent review process.

More inclusive succession planning is key to elevating diverse leaders into influential roles.

Provides oversight into talent pipelines

The succession planning process gives leadership greater visibility into the talent pipeline across the organization. Key insights include:

• Considering capabilities needed for the future based on strategy and trends.

• Identifying skill gaps that need development.

• Auditing diversity within leadership levels.

• Assessing health of the candidate pool at all levels.

This big-picture view enables better workforce planning and talent management overall.

Drives better leadership decisions

Thoughtful succession planning positions boards and executives to make smarter leadership choices. How? By:

• Exploring options and scenarios in advance versus reacting in crisis mode.

• Benchmarking internal and external candidates using structured assessments.

• Embedding criteria beyond just experience, like culture fit.

• Enabling fact-based comparisons versus being swayed by politics, personalities or hasty choices.

Robust succession processes lead to leadership selections closely aligned with organizational needs.

Provides continuity in crisis

Crises like executive departures, mergers, or acquisitions can leave organizations vulnerable. 73% of businesses without a succession plan experience negative impacts during major disruptions.

Solid succession planning mitigates risks by:

• Ensuring readily available replacements rather than leadership gaps.

• Providing successors already versed in the culture and strategy.

• Empowering teams to continue driving critical work amid changes.

Thoughtful planning reduces the likelihood of chaotic transitions putting the organization in jeopardy.

Offers smoother leadership transitions

Succession planning enables smoother transitions by:

• Giving incoming leaders ramp-up time to assimilate versus struggling through steep learning curves.

• Allowing outgoing executives to pass along context and counsel versus abrupt departures.

• Structuring the handoff process with clear timetables, knowledge transfer plans, and communication plans.

• Defining the roles and decision authorities of leaders during the transition.

With robust succession plans, organizations experience seamless leadership changes rather than extended turbulence putting progress at risk.

Boosts investor confidence

48% of shareholders have less confidence in companies without strong succession plans. They see poor planning as a failure of the board and indicative of broader mismanagement issues.

Transparent succession processes reassure investors that:

• Oversight exists to ensure qualified leadership.

• Operations won’t materially change with personnel shifts.

• Their capital is in steady hands.

This stability retains investors, maintains share prices, and protects the organization’s financial health.

Ensures stronger leadership

Good succession planning ultimately leads to better leadership. Leaders nurtured as part of a rigorous succession program tend to:

• Have greater engagement after being invested in by the organization.

• Receive more mentorship and experiential learning.

• Better fit the culture versus outside perspectives that can derail progress.

• Have relationships and credibility to rally resources around their vision.

Thoughtful planning results in qualified leaders ascending into roles and equipped to take the organization to new heights.

How Organizations Can Improve Succession Planning

While clearly critical, only 32% of organizations do succession planning well. Here are tips for improving the process:

• Gain buy-in – Educate executives and managers on the many benefits to secure their commitment.

• Centralize ownership – Appoint dedicated leadership to drive the process rather than ad hoc efforts.

• Formalize program – Outline consistent procedures for identifying, assessing, and developing high-potentials.

• Build competency models – Define the capabilities needed now and in the future to inform development.

• Assess candidates – Use 360 reviews, skill assessments, strengths finder tools and interviews.

• Map development plans – Create IDPs, job rotations, courses, mentors and stretch assignments tailored to gaps.

• Report on metrics – Track program metrics like diversity, readiness, and retention to gauge effectiveness.

• Review regularly – Set annual talent reviews to re-evaluate slates and progress.

• Communicate – Share program updates and value stories with stakeholders for transparency.

With strategic succession planning, companies gain a major competitive advantage through leadership continuity, knowledge retention, and elevating top talent. Following best practices ensures organizations have qualified leaders ready to tackle challenges, champion excellence and drive enduring success.