Attracting and selecting the right candidates to replace senior leaders can be challenging – especially when the talent market is tight.
Succession planning is a strategic process that helps organisations to predict leadership change and prepare for it by identifying and developing talent pipelines for key leadership roles. Succession planning supports risk management, improves talent retention and helps to preserve institutional knowledge – but it doesn’t happen by accident.
“Succession planning is a highly intentional and strategic process that requires commitment from the most senior levels of an organisation,” explains Nona Sichinava, a Partner for Gerard Daniels in London. “Far from being optional, CEO succession planning is one of the top priorities for Board Chairs.”
Here we consider some of the factors that shape the approach to succession planning; the value it brings to leadership transitions; and ways to improve the outcome of leadership change when formal succession planning is not practical.
Shaping your approach to succession planning
Succession planning is a key determinant of business continuity, and finding the right approach shapes the effectiveness of the process and the ongoing performance of the organisation.
A range of factors can shape succession planning, including the size, structure and capacity of the organisation – noting that the larger and more complex the organisation, the more layers of succession planning there needs to be. To inform decision making, a rigorous succession planning process typically involves the ongoing assessment of:
- Current executive leadership capability
- Board skills and composition
- Leadership alignment with the organisation’s strategic plan
- Current and future diversity requirements
- Planned retirements and other planned leadership departures
- Emergency plans for unexpected departures
“Regardless of the approach, for succession planning to be effective it requires a commitment at Board and Executive levels to maintain regular, honest and open discussions about the leadership needs of the organisation,” says Nona.
“It’s important not to look for candidates that meet all of the requirements for the role, as these individuals are likely to have left the organisation by the time it becomes available. Instead, look for people with the right leadership attributes and the capacity to develop and grow,” Nona continues. “When planning 2-3 years ahead, businesses should also avoid overly narrow briefs, as the leadership requirement can quickly change.”
Why should you prioritise succession planning?
At some stage, most leaders will move on – by choice or in response to changing business needs or market conditions. While the timing of a leadership change can’t always be anticipated, even a basic level of succession planning can help to mitigate the risk and reduce the impact of any unforeseen departures.
Smoother leadership transitions
Succession planning ensures smoother leadership transitions, by helping businesses to:
- Develop an understanding of future leadership needs
- Determine key leadership roles where succession planning is required
- Identify individuals with executive potential for succession pipelines
- Implement targeted development plans to prepare individuals for succession
- Recognise when there is the need source talent from outside of the organisation
- Ensure transparency around who the likely internal and/or external successors will be.
Retaining top talent
People are more inclined to work hard and to want to stay with an organisation with the assurance of career progression, which makes succession planning an important tool for retaining leadership talent.
“When people think they’ve reached their growth limit within an organisation they often start to look around for new opportunities,” says Nona. “Communicating succession plans provides assurance and instills confidence in the individuals being considered for succession, allowing them to plan a future with the organisation.”
Succession planning also helps current leaders to understand and adapt to the changing requirements of their role; and give them the opportunity to contribute to planning for their replacement when it’s time to move on.
Maintaining brand and continuity of culture
Succession planning creates a sense of certainty that aids in customer and employee retention; supports smoother leadership transitions; and helps to maintain relationships with key stakeholders, such as: financial institutions; shareholders and other investors; project partners and collaborators.
“When successors are chosen for specific traits and values, it also sends a clear message to the market on cultural continuity – although the ability to develop and promote internal talent will depend on future leadership needs and whether significant cultural change is required,” says Nona.
Navigating leadership change without formal succession planning
While there are many benefits to formal succession planning, not all organisations can deliver or prioritise this process. “For example, succession planning allows time to develop internal talent for future succession, but many smaller organisations lack the means, and/or human capital to build internal talent pipelines,” says Nona. “The need for significant cultural change can also challenge the suitability and viability of planning for internal succession.”
When formal succession planning isn’t practical or possible, there are still some activities that can improve the outcome of leadership change.
“Organisations should at very least be thinking about the skills and attributes that leaders need to foster the right culture and deliver on future strategy. Annual talent mapping can help businesses to understand the changing talent landscape; and job descriptions should regularly be updated to reflect the changing requirement of key leadership roles,” says Nona. “For smaller organisations, the annual performance review is another very useful tool. When done properly, in a formal structured manner, it is especially important for personal development.”
All organisations can benefit from succession planning, within their means and capacity to do so. For help developing talent and future-proofing your Board and Executive leadership team, connect with Nona or reach out to your local Gerard Daniels team.
