Succession planning is important for every business. Why wouldn’t you want to ensure business continuity, reduce risk, promote talent development, and improve investor confidence?
It’s therefore astounding that 36% of HR leaders say their organization doesn’t have a succession plan in place nor has plans to develop one in the future.
Maybe the process seems overwhelming, or they think it’s something they’ll get to eventually…and we all know how that goes.
Below is a list of five succession planning best practices to help you get started (or continue) your planning process and mitigate any hesitations you may have.
Many companies wait until a leadership vacancy arises to think about succession planning. By then, it’s often too late to find the right hire in a short time frame. According to research, “the longer it takes a company to name a new CEO during a succession crisis, the worse it subsequently performs relative to its peers.”
That’s why early succession planning is crucial, as it ensures your business stays stable, even when key leaders leave. Long story short, identifying and developing future leaders well before transitions occur can prevent disruptions and create a seamless shift in responsibilities.
Why It Matters: According to a Deloitte survey, 86% of leaders believe succession planning is an urgent priority, yet only 14% feel confident in their succession plans. Without early preparation, companies risk losing institutional knowledge and facing leadership gaps that could slow down operations.
Forbes reports that over 75% of Gen Z employees believe they should receive a promotion within the first year of a role. Ladders, Inc., a job search firm, decided to create a promotions program that included performance hurdles, title increases, and pay bumps to encourage retention and progression toward expertise. CEO Marc Cenedella says, “We learned that more frequent career feedback, with better chances for getting ahead, and some self-direction were actually very effective tools for building morale and contributing to the success of our company.”
Key Takeaway: Be proactive in identifying the right people for your succession planning needs. It’s never too early, but it can be too late.
If you think succession planning is just about replacing leaders, think again. It’s more about ensuring leadership transitions align with your company’s long-term goals.
Why? The right successors should be able to drive business strategy forward, not just fill an empty seat.
Why It Matters: According to McKinsey & Company, companies that align succession planning with their strategic objectives are 2.2 times more likely to outperform their competitors. When leadership changes aren’t guided by business priorities, companies risk losing momentum, damaging their culture, or failing to adapt to evolving market conditions.
Family-owner supermarket Foy's SuperValu recognized the importance of proactive succession planning to maintain business continuity. John Foy and his daughter, Kelly (who has worked full-time in the family business for over a decade), collaborated for years to develop a comprehensive succession plan that included open communication, legal and tax planning, and clear agreements to prevent future disputes. John believes the extensive preparation was critical not only for managerial purposes but also for the staff and shoppers. He says, “It’s important the foundations are there to protect the employees and make sure that the community is served too.”
Key Takeaway: Successful succession planning is about preparing leaders who can execute the company’s future strategy.
A drag-and-drop org chart lets you see how your succession plans impact various teams and reporting structures to reflect workforce planning and future company goals.
Leadership transitions can have major financial implications. According to SHRM, replacing an employee can be three to four times the positions salary – and that number only grows when financials and hiring plans aren’t solidified beforehand.
Therefore, without a clear budget strategy, companies risk costly hiring mistakes, training inefficiencies, and operational disruptions.
Why It Matters: Without a financial plan in place, companies may struggle to fund leadership transitions while maintaining business stability. Ankit Shah of Columbus State Community College explains, “When all of these professionals are meeting with potential candidates, screening applications, scheduling a few rounds of interviews, and making final decisions, it takes away time from accomplishing organizational goals/outcomes, which then certainly ties to ROI.”
PrimePay uses its own HCM platform to reflect on past budgets and workforce needs to help plan for future scenarios. Suzanne Fohl, CFO, says: “By using our own platform daily, we benefit from its advanced integration capabilities, unifying people and financial data in a single system. This technology enables our HR and Finance teams to collaborate effectively, leveraging real-time insights to drive data-informed, strategic decisions that enhance organizational performance."
Key Takeaway: Budgeting for leadership transitions is a financial necessity and strategic move that protects business continuity and long-term success.
Hiring top talent is critical, but you should also create internal programs that prioritize professional growth and skill-building. As a result, you’ll create a strong leadership pipeline and build a culture of continuous learning. With these assets in place, organizations can upskill and reskill employees to make leadership transitions smoother and more strategic.
It’s also important to remember that even the best-laid succession plans can be disrupted by sudden departures. A culture of continuous learning helps you better build an emergency succession strategy, which ensures your business can quickly adapt when key leaders leave unexpectedly.
Why It Matters: A LinkedIn Workplace Learning Report found that 94% of employees would stay at a company longer if it invested in their learning and development. Additionally, businesses that focus on upskilling and reskilling reduce hiring costs and improve retention rates, making leadership succession more seamless and cost-effective.
Talent management firm CCI Consulting worked with a privately-held family of companies in the residential real estate sector to prepare the next generation of leaders. Recognizing the need for leadership development, CCI designed a High-Potential Leadership Development Program. The initiative led to a robust internal leadership pipeline, reduced the need for external hires, and strengthened the company's culture.
Key Takeaway: Although professional development programs are an employee benefit, they’re also a strategic investment in the future of your company. Businesses that prioritize professional development retain top talent and build stronger leadership teams.
Even the most well-thought-out succession plans need real-world testing. Conducting trial runs, temporary role transitions, or job rotations helps businesses assess leadership readiness and refine their strategy before a critical leadership change occurs.
But that familiarity goes both ways, says Laura Miller, CIO at Macy’s. She believes the leadership team also needs working relationships with potential successors to help build confidence in future transitions. She furthers, “When you’re trying to groom successors for your role, it’s not just about their growth and development. It’s also about giving them that exposure.”
Why It Matters: Actively testing your succession plans more likely ensures a successful leadership transition. Without testing, companies risk placing underprepared employees into key roles, leading to instability and performance declines.
Microsoft’s leadership transition from Steve Ballmer to Satya Nadella in 2014 was a prime example of succession planning best practices in action. Nadella had been with the company for over two decades, working in various leadership roles before being named CEO. His deep understanding of Microsoft’s vision and culture allowed for a smooth transition and an eventual company turnaround.
Key Takeaway: A succession plan is only as strong as its execution. Testing leadership readiness through trial runs and temporary assignments helps businesses identify gaps and refine their approach before making a permanent transition.
Preparing for your organization’s future is hard, and it’s not just because it takes time and resources. “The end of an era” is often a difficult pill for current leaders to swallow. However, it’s clear that companies need plans to set them up for success.
These plans can (and should) be rolled out through intentional programming and succession planning tools to ensure clear communication and alignment with business strategy and finances. In short, by using the succession planning best practices above, you’ll be well on your way to carving a proactive and data-driven path for your company’s future.
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