A Comprehensive Guide To Succession Planning: Tips, Trends, And Strategies

Clear and effective succession planning is vital for business success

If your organization is like most, it is likely ignoring the need for succession planning. According to a survey by the Society for Human Resource Management (SHRM), only 21 percent of organizations have a formal succession plan in place. The top reason cited for not having a plan in place was a lack of time and resources needed for developing one.

While succession planning may not be common, it is critical and must be prioritized. Organizations that fail to secure the time and resources for succession planning will find themselves struggling with a number of key tasks in the coming year, including increasing leader effectiveness, improving the employee experience, and planning for the future of work. 

Leading as an HR executive demands that you see succession planning as more than one of many tasks on the company’s agenda. It needs to be understood as an operating philosophy that ensures organizations can attract, retain, and empower their employees for the current season and those to come.

Here are some key ideas that CHROs and other HR professionals can use to formulate and implement an effective succession planning strategy.

Let Succession Planning Flow from Talent Analytics

What internal developments promise to impact your business the most in the coming year? For most companies, those developments will involve the failure to provide talent where it is needed. Achieving your goals requires having talent in key positions. If you have too many open successor slots in R&D, for example, then you should expect that products will not be delivered on time.

Effective succession planning flows from the data gathered as part of your talent analytics. As you identify where talent and what type of talent will be needed, you will quickly come to appreciate how critical succession planning is for your organization. You will also uncover insights that can serve as a guide for shaping your strategy.

Future of work planning, which 42 percent of HR leaders say is a top priority for them in 2023, depends heavily on anticipating and providing for future talent needs. Assuming that you will be able to access sufficient talent when needed is not a safe strategy, especially in a labor market that is experiencing a historic talent shortage. A succession strategy must focus on filling roles that are vacated, as well as new roles that are being created.

It is also critical to acknowledge the costs associated with not getting succession right. Talent you do not build is talent you must buy. Some estimate the cost of hiring a new employee is three to four times the salary for that role. As such, organizations that build a plan focused on preparing and promoting internal employees can experience significant cost savings.

Consider Non-Traditional Candidates

One emerging trend in the area of succession planning involves strategies that target non-traditional candidates. Most succession strategies draw candidates from within the same department. However, as needs evolve and the talent pool shrinks, strategies may need to take a fresh approach and look beyond the most obvious candidates.

CEO succession provides an example of this trend. Studies show that COOs and CFOs have traditionally been the most likely positions to succeed a vacant CEO position. In today’s organizations, however, CHROs have come to be seen as desirable prospects for CEO succession.

Today’s CEOs must cast a vision and motivate people to get behind that vision. They are responsible for creating a sustainable and resilient organization that leverages talent and culture. They must be comfortable dealing with the complexities that are associated with leading people, which is something that is second nature to CHROs. Just like CEOs, CHROs are enablers of business strategy and culture champions.

Succession plans that look at non-traditional candidates must also anticipate providing time and resources for additional training. An internal candidate that is brought from another department based on their proven performance with problem-solving or people management, may need to be trained on unfamiliar operational processes or platforms used in the new department. Providing resources for upskilling can be an important component of succession planning.

Leverage Succession Planning as a Retention Strategy

Succession planning is also employed to address the problem of employee retention. When done optimally, however, it can also be quite successful. In order to prepare someone to step into a new role, you must invest in that person. Identifying someone as a potential successor identifies them as someone who has a bright future with the company. Communicating that to the potential successor, then training them in the skills they would need to move their career forward, can be a powerful element of a retention program.

Overall, HR professionals must acknowledge that every employee will eventually move on. Failing to create resiliency by developing and deploying an effective succession strategy is ignoring that reality. HR teams that drive succession planning as an ongoing process will ensure that their organizations are well positioned to thrive in any talent market.  

Naveen Bhateja is EVP and Chief People Officer at Medidata Solutions. As a member of the company's leadership team and a trusted business advisor, he leads an ecosystem of Strategic People Partners across Learning and Development, People Operations, Talent Acquisition, Diversity, Equity and Inclusion, Workplace Benefits and Resources, and Corporate Social Responsibility. Naveen is an industry thought leader and board advisor certified by the National Association of Corporate Directors (NACD) who believes that people strategies empower successful business outcomes.