A succession plan should do far more than simply determine the path to replace just one person. It should create a talent pipeline dedicated to developing the capabilities of potential leaders as well as the people who will fill in behind them.

Additionally, an organisation needs to identify what positions will require successors and how the positions themselves will evolve to advance the business. Rather than simply replacing the people lost "like for like", a succession plan can help the business structure its personnel in a way that moves the organisation – no matter its size – strategically toward the future.

There are different types of succession planning, from the obvious, such as replacing a managing partner and other senior managers in time, to planning who will be the successor for key client relationships or for technical specialists in the event of a departure, whether planned or otherwise.

The success of a business will largely rest on the strength and stability of its people, and the senior leadership who set strategy and then guide the business towards the strategic goals it has set itself. Sudden and unforeseen gaps in key positions can cause serious issues without proper succession plans in place. If critical leadership positions remain vacant or key contacts for clients absent, the strategic plans for those areas can be allowed to stagnate. Worse still, perhaps, if those key positions are filled by people unsuited or unprepared for them.

Succession is inevitable but planning for it can be uncomfortable as it can imply the end of something for the incumbent. However, the current leaders should find the risks faced by not preparing for succession far more unsettling than proper discussions and planning. The risks of doing nothing are clear: internal uncertainty and even strife can lead to poor business performance, client attrition, and loss of reputation in the market.

Identifiable risks and possible solutions

Vacancy risk – key positions being vacant over a long period of time.

  • Put in place a robust structure behind business leaders, to ensure that people are ready to fill critical positions on multiple timelines.
  • This could involve having named successors, which is now considered a more traditional way of managing succession planning risks (sometimes known as replacement planning).
  • A slightly more proactive and “modern” approach is to build a pool of people with the potential to fill a leadership role or roles within the business. This will involve evaluating potential successors ahead of time, based on the requirements of the position both now and in the future.
  • These risk management exercises should often also include consideration of specified "emergency" successors (or deputies) in the event of unforeseen circumstances.

Readiness risk – risk of unprepared successors.

  • Benjamin Franklin's famous line, "Fail to prepare, prepare to fail", is very relevant in mitigating the readiness risk. Having transparent frameworks, strategic plans and development programmes aimed at identifying and accelerating the readiness of successors for their roles is key. This can be through training and mentoring for potential successors, and possibly even a lead-in period for adjustment.
  • Transparency in succession management is also a key part of ensuring that the process is smooth, and successors are prepared. Having a transparent review process and discussion with potential successors (and in fact colleagues at all levels) about where their progression might be and how they can achieve that, will allow for better succession planning.
  • Proper readiness planning also allows businesses to better understand their talent pipeline, and highlights areas for development to get ahead of the potential risks.
  • Formal performance review processes and evidence-based discussions against a framework can also assist with ensuring that technical and general competencies are met and can stream the participants into focusing on areas for growth.

Transition risk – risk of failure of an external successor. It could be because of various factors, for example role-person mismatch, poor selection, or insufficient induction.

  • There is generally a higher success rate through promotion or redeployment of internal candidates when the fit is right, so focusing on the readiness of those individuals should always be at the forefront of thinking.
  • However, if external (perhaps market leading) successors are required to fill a skill gap within the business, or there are no suitable internal candidates, having a robust process for identifying and attracting the correct person is key.
  • That process should involve looking at the requirements of the business at the time and in the future, identifying the skills, knowledge and personal attributes required for the firm and role and then finding candidates to fit into those.

Portfolio risk – risk of poor deployment of talent against business goals.

  • Have the right talent at the right time and in the right positions to continue pushing towards goals and objectives where goals are often (and ideally) dynamic.
  • Proper consideration of the business goals and future business needs is required. Focusing on unchanging goals can lead to stagnation, so development and succession decisions should be made against perhaps new future goals and needs, the desired next destination and how best to reach it.
  • Encouraging inclusion and diversity is vital to avoiding confirmation bias from a homogenous group, while bringing new perspectives to achieving the best outcomes. Encouraging inclusion, diversity and transparency of the development/framework processes helps colleagues feel valued and empowered and ensures that a wide range of voices can be heard.
  • Having suitable successors to manage the most important client relationships is also vital in both the short and long term, otherwise even an unexpected temporary absence from the business could weaken an existing relationship, and a departure could fracture a relationship entirely if not planned for and managed appropriately.

When organisations conduct regular and effective succession planning, the benefits are self-evident: security and stability in the present, as well as fresh vision and development for the future.

Read part two of this blog: setting out some case-studies showing where these risks can arise and how they might be mitigated.