Succession Planning Best Practices
Succession planning is the ongoing process of identifying your most business-critical roles, assessing who could fill them, and developing those people before a vacancy occurs. Done well, it protects your organization from disruption, helps you retain key talent, and ensures your leadership pipeline is ready for the future. At PCI, we help clients implement succession planning best practices built around three core areas: Preparation, People, and Process. Address all three, and succession stops being a scramble and starts being a plan.
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Succession Planning PREPARATION Best Practices
Identify Business Impacts
Avoid disruptions caused by the sudden loss of key talent. Identify operational, tactical, and strategic risks you want to prevent, and define which outcomes would cause the greatest harm. Build a business case for why you need succession plans because you'll need the support of a variety of internal stakeholders.
Prioritize Critical Roles
Use your org chart to identify the roles that pose serious risks if left vacant. Drawing on a sports analogy, you couldn’t play a baseball game without a pitcher. Those are the mission critical roles. Circle these in red ink. Next, identify the “feeder positions” that lead into those roles. If any potential successors to the mission critical roles occupy those positions, you should have succession plans for those as well. Finally, think about future roles that don't exist today but will in the next 3 to 5 years. Think about what current positions could feed into those. You'll need a pool of potential successors at different levels of readiness for each of these priority roles.
Define Success Factors
"Start with the what, not the who." - strategy+business
This succession planning best practice is often overlooked by Boards because their attention is often drawn to who will replace the current CEO. And this is a big mistake. Instead, this conversation should be geared toward what the next CEO needs to be able to do well to succeed.
Hold meetings with key leaders to define success factors in 4 buckets. Core Values apply to all employees. Leadership Competencies apply to leaders at all levels. Future-ready Competencies are skills and abilities that will be required for leaders as your business evolves in response to macro-level demands. Finally, define the functional KSAs for each role on your succession plan. Read more about building a competency model.
Establish Metrics
Succession planning is easier to sustain when you can show it's working. These five metrics give you a balanced view. Two warn you about risk, and three tell you whether your pipeline is actually producing.
- Executive turnover rate. The percentage of senior roles that change hands in a year. Track voluntary and involuntary departures separately, and flag which voluntary exits were regretted. A rising regretted-loss rate tells you your pipeline is about to be tested.
- High-potential attrition. The percentage of your identified high-potentials who leave voluntarily. This is your earliest warning signal, because the people with the most options leave first. Compare it against your overall voluntary turnover rate to see whether you're losing your best people faster than everyone else.
- Key roles filled internally. The share of business-critical openings filled by an internal candidate rather than an external hire. This is the clearest outcome measure of whether succession planning is working. Pair it with time-to-fill and with how those internal placements performed a year in.
- Bench strength. The percentage of business-critical roles with at least one successor assessed as ready now. This is the metric boards ask about most often, because it answers the question behind every succession conversation. If this seat opened tomorrow, do we have someone?
- Successors with a written development plan. The number of identified successors who have a documented plan with specific actions and an accountable owner. Readiness rarely happens by accident. This tells you whether leadership development is actually underway or your slate exists only on paper.
Succession Planning PEOPLE Best Practices
Assemble Diverse Committees
Bring together cross-functional leaders from HR and the business. Look for leaders who have taken the initiative to groom their successors, develop their direct reports, and mentor others. Also, invite stakeholders who think differently from each other to encourage the exchange of diverse perspectives.
Never Rely on a Single Successor
As the saying goes, don't put all your eggs in one basket! If a sole successor leaves, you are back to square one. Have at least 2, and possibly 3 people in the pipeline for each critical role. Keep in mind that they can be at different levels of readiness (e.g., less than 1 year, 1-2 years, and 3-5 years), so you should be looking 2 (or even 3) levels down.
Don't Make Assumptions
One of the most common mistakes we see people make is assuming that everyone wants to be successor to a higher level role. While most people will see being nominated as a compliment, it may not be the right time for some. And, some may not want the additional pressure, responsibility, or work involvement required at the next level. Before putting someone on a succession list, ask them about their career goals. Make sure they know that saying no won't have negative consequences. For those who aren’t interested, find ways to enrich their work so they can continue to learn, grow, and add value.
Proactively Recruit
When the bench is shallow, you'll need to consider external talent. So, hire with advancement potential in mind. Also, promote your succession planning process during recruiting, as this will attract ambitious leaders. Finally, consider if you can make a business case for creating a new feeder role into a mission-critical role that has a thin internal pipeline.
Succession Planning PROCESS Best Practices
Conduct Talent Reviews
If you already have a talent review process in place, you are one step ahead. If you don’t, there’s no time like the present to start them. This annual process puts structure around discussing talent. It ensures that everyone is given “air time” (not just those who are favored by their supervisor). The cornerstone of this process is that it brings multiple people together who have observed the individual and can offer their input, insights, and ideas. And, discussions center around not only what the person has done, but what they could likely do in the future, with proper development. So, your list of potential successors will be a natural outcome of your talent reviews.
Communicate Transparently
There's a lot of discussion around this succession planning best practice. But there shouldn't be a debate. Failure to talk about it openly breeds distrust. Also, ambitious people want to know that there is a path to advancement. Not surprisingly, research shows that being open and honest about succession plans results in increased retention of high-potential talent. And, it's easier to communicate transparently if you intertwine succession planning with talent reviews.
Use Objective Assessments
Past performance is not the best predictor of success in a higher-level role. It is common for top performers to struggle after a promotion, because performance is what leaders can see and potential is not. When the two cannot be separated, performance becomes the proxy for potential. That substitution is where most promotion mistakes begin.
There are reliable ways to measure potential directly. The strongest is objective leadership assessments grounded in psychometric testing and interpreted by psychologists. These assessments measure the qualities that become more important as roles grow larger, including cognitive horsepower, curiosity, industriousness, resilience, proactivity, and engagement.
Objective assessment data then does three things for your succession plan.
- It surfaces potential that performance reviews cannot. A person's current role may not test the capabilities their next role will demand. Assessment measures those capabilities directly, so you find talent you would otherwise overlook and avoid promoting someone on the strength of a job that never asked them to do what the next one will.
- It turns readiness into a rating you can defend. "Ready now" means something only when it reflects a consistent standard rather than one manager's impression. Assessment applies the same yardstick to every successor, which is what makes bench strength a metric your board can trust.
- It tells each person what to work on next. The same data that informs your decision gives the participant specific, prioritized development targets. Plans built this way target the gaps that stand between someone and the next role. Without data, development goals default to whatever is easiest to describe, like "improve executive presence."
Debrief
Communicate outcomes of talent reviews and succession planning committee discussions in 1-on-1 debriefs. Be candid and compassionate with those who aren't put on a succession plan. Explain why they were not identified as a potential successor at this time and how you will continue to support their growth. And, for those that are put on a succession plan, do not promise that the role is theirs. Convey confidence in them, but also be clear that progress toward their developmental goals will be a key factor when the seat needs to be filled.
Develop All
Your goal should be to have development plans in place for all leaders at the levels you decide to start with. Invest more deeply in high-potential individuals and those on succession plans through mentoring, coaching, and executive education.
These are best practices, not minimum requirements. No organization does all of them at once. The question is not whether your plan is complete. It is whether you know which gap puts you most at risk.
A short conversation with one of our psychologists will tell you where your succession plan is strongest and where it is exposed. Contact us to speak with a succession planning expert.