Creating an Impactful Succession Plan
March 13, 2024 – CEO succession is a critical process for companies, ensuring that they have the right leadership in place to drive success and growth. The process refers to the strategic process of identifying and developing individuals within an organization to take over key leadership positions when they become vacant. Without well-executed succession plan best practices, organizations can face various challenges such as leadership gaps, talent shortage, and a loss of institutional knowledge, which can significantly hinder growth, according to a report from SGA Talent. The firm outlines the five best practices for creating and executing a successful succession plan within a company.
1. Reduces Disruption.
“Succession planning ensures a smooth transition of leadership by preparing suitable candidates for future roles,” the SGA Talent report said. “This minimizes disruption and allows for a seamless continuation of operations during leadership changes.”
2. Mitigates Talent Shortage.
Talent is a valuable asset for any organization. By identifying and developing high-potential employees, succession planning helps mitigate the risk of talent shortage, ensuring a continuous supply of capable leaders who are well-prepared to guide the company’s growth, according the SGA Talent report.
3. Preserves Institutional Knowledge.
SGA Talent also explains that an effective succession plan not only identifies potential successors but also ensures knowledge transfer from experienced leaders to their successors. The firm says that this preserves institutional knowledge and prevents a significant loss of expertise, ensuring the organization maintains its competitive edge.
Related: CHRO’s Impact on CEO Succession Planning
4. Promotes Employee Engagement and Retention.
“Within a company, the existence of a structured succession plan fosters a culture of growth and development,” the SGA Talent report said. “Employees are more likely to be engaged and motivated when they see opportunities for advancement. This, in turn, increases retention rates, reduces turnover, and boosts overall employee morale.”
5. Enhances Decision-Making.
Succession planning allows for a deliberate and well-thought-out approach to identifying potential leaders, according to SGA Talent. The firms notes that by involving various levels of management in the selection process, a diverse range of perspectives and skills can be considered, leading to better decision-making and improved succession outcomes.
SGA Talent also provides some succession planning best practices to know:
Long-term Vision and Strategy
Start by defining the organization’s long-term goals and strategic objectives. SGA Talent explains that this provides a foundation for identifying the leadership positions critical to achieving these goals and building a pipeline of suitable candidates.
How to Develop Effective Leadership Succession Planning
Poor succession planning processes stemming from a lack of leadership development and assessment can be extremely costly. Harvard Business Review, in fact, has found that this problem costs an estimated $1 trillion across the S&P 1500 annually. When employees feel engaged, valued, and supported through development opportunities, they are more likely to stay with a company for the long term and drive value creation, according to a study from GeniusMesh’s Neerja Bharti. As a result, “organizations will be able to collect data on employee strengths and development opportunities during the leadership development process so they can build comprehensive and objective succession plans,” she said.
Identify Succession Requirements
Identify the key competencies, skills, and qualifications required for each identified position, according to the SGA Talent report. The report notes that this clarity will help in assessing potential successors objectively and aligning their development plans accordingly.
Develop and Nurture Talent
SGA Talent also says that it is important to invest in the development of identified high-potential employees through targeted training, mentoring, and job rotations. This helps groom them for future leadership roles and equips them with the necessary skills and experiences.
Continuous Evaluation and Feedback.
“Regularly review and assess the progress, performance, and potential of potential successors,” the report said. “Provide feedback and guidance to individuals to help them address any skill gaps or areas of improvement, making adjustments to their development plans as necessary.”
Test Succession Plan Effectiveness.
Lastly, SGA Talent says to develop a contingency plan to test the effectiveness of the succession plan. “Conduct simulations or temporary assignments to evaluate the readiness and capability of potential successors,” the firm said. “This allows for adjustments and improvements to ensure a seamless transition when the time comes.”
SGA Talent is a 100 percent women-owned company that utilizes a research-first strategy to secure senior hires in the professional services, hospitality, financial services, insurance, healthcare/pharmaceutical, manufacturing, utilities, and aerospace and defense industries. Some of SGA’s clients include McKinsey & Company, Northrop Grumman, PayPal, New York Life, Compass Group, and a Big Four consulting firm.
SGA Talent offers “recruiting on-demand express” and “research on-demand express” solutions to provide hiring managers, human resources professionals, and talent acquisition leaders with additional options beyond traditional recruiting services. SGA Talent’s recruiting on-demand express delivers a high-quality targeted talent candidate pipeline in three days. This service utilizes SGA Talent’s propriety recruitment methodology and offers the answer to time-constraint recruiting activities. “This service is often used when an internal recruiting team is overextended and needs results quickly,” the firm said. “It is designed for mid-level to junior-level candidates; it is not designed for executive search level candidates.”
Related: Seven Steps to Successful CEO Succession
Contributed by Scott A. Scanlon, Editor-in-Chief; Dale M. Zupsansky, Executive Editor; Lily Fauver, Senior Editor – Hunt Scanlon Media
