Guide to Succession Planning

30 October 2019
13 minute
Succession planning is critical to ensuring your business can continue to thrive when key people leave. Here's how to plan for seamless succession throughout your organisation.


Introduction 

If a member of your senior team left today, what would you do?  

Without a well-thought-out succession plan in place, resignations – especially at more senior levels – can catch you off-guard and cause significant disruption.  

And that’s before you even consider the cost implications for hiring and onboarding, which can easily go into the thousands for each role.  

In an increasingly competitive landscape, you need a dedicated strategy to help you identify tomorrow’s leaders, today. Get this right and your business can thrive long-term. Get it wrong and you risk facing workforce disharmony and rising costs.   

At Thomas International, we use psychometric tools and solutions to help organisations like yours identify natural leadership qualities, understand the effect of personality traits on a team, and gain a 360-degree view of your people development needs. We’ve been doing this since 1981 – and we’ve brought together some of our knowledge to share with you. 

This guide will help you understand the rationale for succession planning and how to get it right, how to tailor your planning for internal and external hiring, best practices for finding successors, and top tips for better succession planning.  

Contents 

Part 1: Succession planning – how to do it right 

Part 2: Internal development vs external recruitment 

Part 3: Best practices for finding a successor 

Part 4: 12 quick tips for better succession planning 

Part 5: Your succession planning questions answered 

Conclusion: Succession planning is planning to succeed 

Part 1: Succession planning – how to do it right  

Employees leaving your business can have a significant impact, both in terms of cost to the business, and the psychological impact on other members of staff.  

Succession planning isn’t just about reacting to a senior person leaving. It should also be a continuous investment and process that reaps rewards for your existing employees and prospective hires.  

That’s why organisations are seeing the value from embedding succession planning in their overall talent management process. 

What’s the biggest impact when an employee leaves a business? 

When someone leaves, they take knowledge and expertise with them. In some ways, it’s a good sign that you’ve developed them in the right way. But when it happens, it can leave a gap that takes time to repair.  

The leaver is an individual in a very complicated ecosystem, and often, the true significance of their contributions only becomes apparent after the fact.  

Rather than replacing key people, organisations are taking a more proactive approach – it’s why there’s been a huge sea-change in succession planning, with strong links to talent management.  

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There are advantages to hiring externally 

Measuring and nurturing internal leadership potential has its advantages, but bringing in external knowledge and skills can add significant value. 

Hiring externally can: 

  • Give you a larger candidate pool – with more options to choose from 

  • Help you expand into a new market or industry – especially where specific experience or expertise is needed 

  • Offer a new perspective on your business – if it’s underperforming or culture change is necessary 

What steps can you take to make the right hiring decisions? 

When making hiring decisions, it’s important to have a game plan so you get it right first time.  

Before making decisions, it’s useful to:  

  • Be specific about role requirements – has the old role changed or will the new role likely change in the future?  

  • Consider applicant characteristics – which competencies and skills are needed? 

  • Select the right assessment measurements – how will you assess candidates against your chosen characteristics? 

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Part 2: Internal development vs external recruitment 

The importance of a solid succession plan is clear: to avoid potential risk caused by business-critical employees exiting the company. The next question is often around whether you should hire a successor externally, or nurture one internally.  

That decision will depend on a variety of factors, ranging from the cost of an external hire versus internal, to the time spent with a vacant role, the necessary training, or whether the candidate is the right fit. 

The cost of hiring 

According to Accounts and Legal, SMEs spend £12,000 on average hiring a new employee.  

This of course depends on several factors such as the sector you operate in and the type or seniority of employee you’re looking for. But it does mean that there will always be a cost of bringing in someone fresh to fill a role, whereas a promotion from within your organisation may save you money.  

Another factor is the number of people you employ. Companies with fewer than nine employees spend on average £2,902 on recruitment logistics, whereas firms with 250 or more employees can spend over £7,000.  

The difference in these costs comes down to the extra expense of using temporary workers or recruitment agencies. 

If you have a succession plan in place to nurture a promising employee, then your investment in training and preparation will pay off, downtime will be reduced, and you’ll increase employee loyalty with the prospect of a promotion. 

Roles like Financial Director or CEO may require the life experience and acumen of someone outside the industry – making a succession plan invaluable.  

Getting the “right fit” 

People rarely stay with the same company for their entire career anymore, making employee churn a significant cost. One way to help reduce this is by ensuring prospective hires are the right cultural fit. 

For an internal successor who knows your business’s goals, values, employees, and best practices, this isn’t an issue. But for external hires, it’s vital to hire someone who’s not only the right fit for the role, but also the right fit for the business.   

This is where behavioural profiling can help. It can give a more in-depth understanding of a prospective employee than an interview alone can provide.  

A well-developed psychometric assessment – completed as part of the hiring process – not only gives a broader view of the candidate, their abilities and their personality, but also provides an individual benchmark that can be monitored and assessed as they progress through the talent management programme, and indeed, their career. 

It takes time to train the right people…  

No matter how perfect your succession plan, you’ll rarely achieve a smooth transition, regardless of where you choose to hire from.  

According to a study by the Centre for American Progress (CAP), the average cost to a business between a mission-critical employee leaving – such as a top executive – and their successor being up to speed in their new role can be up to 213% of annual salary.   

Getting to optimal productivity will depend on the new employee’s background and the sector they’ve come from. But if they’ve moved firms in the same sector, the time spent on training will be far less significant compared to taking on a recent graduate, for example.  

…and that also goes for training internal talent 

Preparing internal talent for business-critical positions can still be expensive and time-consuming. Whether you send them on courses or hire an internal trainer, you’ll likely incur significant costs.  

And even while a great internal, semi-autonomous training course can have organisation-wide benefits, it’s important to calculate the cost implications and return on investment (ROI) for every option.  

Talent management programmes drive business value 

Talent management programmes – that are linked to clear business strategies – ensure that the right quality and quantity of people are in place for an organisation’s current and future requirements. 

Studies show that businesses with talent management programmes earn 15% higher revenues than competitors. So even though employee development is the first priority, there are clear benefits to the business as well.  

Personality profiling gives quantifiable data that can be measured and analysed to assess how an employee progresses through the programme – including how well the programme provides value to employees. 

And while talent management programmes develop individuals, no amount of development can make up for a poor fit for a role. It’s why hiring the right person for the right role is vitally important right from the start. 

Succession_Planning

Employee engagement matters  

Employee engagement is vital to avoiding churn.  

The ability to chart employee progression and gather input and ideas not only means that employees feel valued and involved in your organisation, but you also reap the benefits of unique insight on how your people feel.  

Good employee engagement can also mitigate the impacts of an ageing workforce, particularly those in more senior roles. Involving both older and younger employees in succession planning conversations can help them to have a greater appreciation of the bigger picture.  

There’s no “right way” to approach recruitment  

The fact is, employees who feel nurtured are more likely to be loyal and engaged. So, it’s vital your succession plan has an emphasis on training to help your most promising employees move to more senior positions.  

At the same time, it’s always a good idea to have a plan of action to externally recruit a candidate for business-critical roles – especially important if you struggle to identify an appropriate internal candidate.  

Every job role and situation is different, so while there’s no one-size-fits-all approach to hiring, there are important factors to consider before you make the decision to hire internally or externally.  

When to internally recruit: 

  • Promising employees already exist in the company who could do the job 

  • Plenty of notice has been given by the outgoing employee  

  • Your company is thriving, and you have the capacity for people to move roles  

  • You have an abundance of skills and experience  

  • Minimal on-boarding and training is required  

When to externally recruit: 

  • You already have a great candidate in mind who can quickly fill the role 

  • You have a tight deadline to fill the position 

  • When the stability of the internal structure is delicate and shifting employees may cause trouble 

  • There isn’t a strong succession plan in place yet, and time constraints make it difficult to create one quickly 

  • The required skills and experience aren’t available  

  • You want a fresh perspective in the role  

  • You have a good training plan in place to onboard the new hire 


Part 3: Best practices for finding a successor  

Finding the right individuals to lead your organisation is critical to business success and competitiveness.  

But with the average tenure of a C-suite leader ranging from 3-8 years, effective succession planning can be the difference between continued success or potential failure.  

Succession planning isn’t a one-time activity, rather it’s an ongoing process that provides a safeguard in the event of an unexpected departure, a transition plan for a managed handover, and a method for developing a pipeline of leadership talent. 

What makes a successful executive leader?  

We expect very high standards from our leaders. They should come across as themselves, but should also adapt their characteristics to individuals and situations, be emotionally as well as cognitively intelligent, and provide clarity in a chaotic landscape. 

Given this, how do we define success? 

Academic achievement as a measurement of success has taken more of a back seat recently, in favour of using general intelligence and conscientious personality traits as predictors of job success.  

The role of emotional intelligence as a critical leadership skill has also received considerable attention over the past few years.  

You can measure these characteristics using psychological tests and assessments: 

  • GIA – measures the ability to hold and reason with new information, and solve problems with instructions 

  • TEIQue – helps understand personalities and how best to interact with others to achieve goals 

  • HPTI – benchmarks against six key traits, analysing approaches to leadership and where there may be room for improvement 


Planning for the future: the challenge of succession 

The cost of getting an executive hire wrong can cause significant damage. It can also be further compounded by the complexities around succession planning where extreme personalities, potential biases, and politically-adept stakeholders must be navigated.  

It’s impossible to plan for every eventuality, but you can prepare for general scenarios by expecting the unexpected and planning for disruptive scenarios. 

For example, your senior team and HR department should discuss how they would respond to a sudden departure, identifying failsafe processes along the way to safeguard critical business operations. 

Building a leadership pipeline across your organisation is crucial. As we saw in the previous section, there will be circumstances where you want to seek external talent, although this approach may bring challenges around cultural fit and a lack of existing relationships and networks. 

But internal talent for executive leadership can be developed in several ways: 

Stretch projects 

These are an opportunity for existing leaders to demonstrate additional capabilities. For example, by developing a new market entry plan, leading a new technology platform roll-out, and expanding their remit across territories.  

Formal training  

Academic qualifications aren’t necessarily the best predictors of future success, but formal training can help develop senior leaders. This can range from an academic programme such as an MBA, through to support for chartered status if part of a profession. It not only helps upskills your current leaders, but also demonstrates an investment in your people’s future.  

Executive coaching 

An experienced coach can help an individual prepare for the demands of a more senior role, especially if the coach is able to utilise the recipient’s psychological profiles.  

Accelerated leadership programmes 

A successful senior leader needs to understand and operate across operational, interpersonal, and strategic domains. By measuring and examining senior leadership characteristics and applying the insight to an accelerated leadership programme, you can fast-track those identified as having the potential for senior leadership. 

In fact, we used this process to help Johnsons Workwear deliver an award-winning talent management programme. 

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Succession planning shouldn’t be a coronation 

Executive succession planning shouldn’t automatically focus on the next most senior individual in the hierarchy, or indeed an external candidate similar to the incumbent. 

Instead, your decisions should be based on quantitative and objective measurements that reduce bias and the influence of organisational politics.  

Ask your senior HR professionals to conduct in-depth competency interviews with potential candidates – both internally and externally. And remember: executive role competencies may have changed substantially since they were conceived, so don’t try to replace the departing individual like-for-like. 

Senior leaders have a disproportionate effect on an organisation’s culture and employee engagement. So wherever possible, look to implement a robust 360-degree appraisal process. 

Psychometric assessment and interviewing is crucial. Even the most successful individuals have blind spots and characteristics that can derail them. It’s why understanding the behavioural, cognitive, personal, and emotional characteristics of succession candidates can be invaluable.  

You may also consider using an occupational psychologist to conduct psychometric interviews and form part of a review panel. 

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Nurture your talent today, for success tomorrow 

The combination of increasing expectations and the pace of change in the world means the stakes have never been higher to get the right people into C-suite roles. 

Succession planning should be viewed as a strategic opportunity rather than an inherent risk to be managed. What’s more, objective, quantifiable metrics are crucial when evaluating the current performance of senior executives and assessing candidates for future succession. 

Individuals can be prepared for succession opportunities through numerous means, ranging from stretching and experiential projects, to formal training programmes. 

In addition, psychological profiling is becoming increasingly important and provides measurement tools proven to select the right people. Using psychometric profiles and executive competency frameworks can reduce the influence of bias and organisational politics.  

Part 4: 12 quick tips for better succession planning 

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Part 5: Your succession planning questions answered 

At Thomas International we help organisations like yours update and refine their succession planning processes all the time. We’ve based this section on questions you may be asking right now, and we’ve provided some guidance below.  

1. How do you carry out succession planning? 

Create a strategy for identifying and developing future leaders at your company – at all levels. Make sure you have plans in place to address the inevitable changes that occur when employees leave – by training high-potential workers for advancement into key roles. 

2. What are the seven steps to succession planning?   

  • Be proactive – even if you don’t think you’ll need a replacement in the near future, make sure you are training and developing others to potentially take over key roles. 

  • Keep an open mind – look for people who best display the skills necessary to thrive in higher positions, even if they aren’t the most obvious choice. 

  • Share the plan – include potential managers in strategy conversations to help them identify potential successors with good potential. Make the plan available to Human Resources and senior leadership. 

  • Provide and take note of successes – when someone outperforms, make a note of it. Keep track of these achievements so you have something to reference the next time a management position opens. Keeping track will also come in handy during performance reviews. 

  • Provide development opportunities – offer mentoring relationships, job shadowing and training to top performers to help both retain and develop them. This will also help them to learn new skills and refine existing ones. 

  • Trial the succession plan – annual leave is a great time to have a potential successor step in to assume some responsibilities. The employee will gain invaluable experience and you will be able to gauge how ready the person is for a bigger role. 

  • Use your succession plan in conjunction with your hiring strategy – once you have identified internal successors, take note of any talent gaps. This will help you identify where to focus your recruitment efforts. 

3. Why do you need a succession plan?   

Succession plans are there to address changes that occur when employees leave or get promoted. It is smart to have someone who knows the business and the role ready to move up into a position that becomes available. The alternative is a huge gap or someone doing two roles instead of the one they have been promoted into. 

4. What are the benefits of succession planning?   

  • Think of it as business insurance – any top talent can be lured away to another company or can just leave – it is smart to have a plan in place to ensure there are other candidates who can take on that role. 

  • Identifies future leaders – find the positions that are most critical to the future success of the company and the internal candidates with the values, skills and desire to take on those positions.  

  • Structure for development and training – by finding potential successors early, you will have time to develop a training and development program to ensure that they have the skills required to take on certain roles, in advance. This will also motivate other employees to work hard, as they will want the opportunity to develop. 

  • Brand identity – by creating an internal succession plan, you get people from within your business moving up and maintaining the brand identity, the company culture and its core values.  

  • Cuts recruitment and onboarding costs – by promoting internally, there is less need for onboarding and the high costs of recruitment. 

5. Is succession planning part of talent management?  

Absolutely. A big part of succession planning is training and developing high-potential candidates for future roles. By having a clear talent management scheme in place, your employees are more motivated and you can identify key people for key roles early. 

6. What is the first step in succession planning?   

The first step is to make a clear outline of your succession planning aims. Make sure that you look at your entire organisation, your key managers and ways that as a company you can develop key talent once they are identified. The most important part of this first step is that you keep the momentum going, do not look into a succession plan and leave it there – it needs to be monitored and to evolve. 

7. What is the goal of succession planning?   

Succession planning aims to attract and retain top talent in your organisation and develop them through well-targeted development efforts. It also increases the availability of experienced employees with the potential to assume certain roles should they become available.  

8. Why is succession planning used by an HR manager?  

HR needs to be working with senior leadership of an organisation to make sure that a succession plan is in place and talent is being nurtured. Human resources, on the whole, will be the team that puts an organised and structured plan into place, and will be able to give a more objective view about potential candidates, than possibly some managers could. An HR manager or leader will need to ensure that all candidates are being treated equally, and that it is a case of “top talent” rather than “teachers pet”. Also, assessments can be used when trying to identify employees with high potential, and it will usually be an HR manager who will be sending these and reading the results. 


Conclusion: Succession planning is planning to succeed 

Succession planning won’t look this way forever. But if you take a proactive approach to making sure you can replace vital knowledge and skills when someone leaves your organisation, your business stands to gain a real advantage.  

At Thomas International we use scientifically proven processes to help organisations like yours tackle the challenges of succession planning – both today and tomorrow.   

To see how we can help you be prepared for key people leaving, visit https://thomas.co/. And if you have any questions that aren’t covered here, get in touch with one of our experts.