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Why Succession Planning is More Important Than Ever

Post Author - Julia Masselos Julia Masselos Last Updated:

The numbers aren’t in for 2024 yet, but 2023 was a record-setting year. 1,914 CEOs left their positions, marking a 55% increase from the previous year.

But what would you do if your CEO resigned tomorrow? How would that impact your team’s strategy? Although you’d replace them eventually, the interim might be confusing, demotivating, and blisteringly unproductive.

Succession planning is how teams avoid this blurry interim. It allows organizations to maintain operational success during transition periods, as key employees leave and new leaders step up internally.

TL;DR — Key Takeaways

  • Succession planning is a long-term strategy designed to prepare promising internal talent to fill key positions when senior leaders leave an organization.
  • It is a highly collaborative operation coordinated by HR and senior leadership.
  • Benefits of proper succession planning include business continuity, employee retention, organizational stability, and boosted morale.
  • Build a great succession planning process by identifying key roles, candidates for succession, creating talent development plans, and monitoring program success over time.
  • Toggl Hire can help you build a strong succession plan by hiring top-quality talent from the get-go.

What is succession planning?

Succession planning is the process of preparing people to take over critical roles in your organization so your business doesn’t lose momentum in the case of a planned or unplanned departure.

You know when your phone asks you to back up your data? It wants to ensure you don’t lose your important photos and files if your device crashes.

Businesses also “back up” important roles in the company by preparing people to eventually fill them. That’s succession planning in action. It keeps companies resilient and adaptable and avoids the vulnerabilities that arise from a lack of leadership or power vacuum (you remember Game of Thrones, right?)

Is HR in charge of succession planning?

HR works in collaboration with leadership to outline and execute a succession plan. HR builds the scaffolding, providing the necessary structure and tools. Leadership drives the vision and execution.

HR’s responsibilities may include:

  • Identifying candidates for succession
  • Building and implementing talent plans
  • Measuring progress and providing regular feedback
  • Instilling a culture of career development for all employees

Leadership’s responsibilities may include:

  • Determining the strategic direction and future needs of the organization
  • Identifying the organization’s critical positions and the skills required to succeed in those roles
  • Priming employees to commit to their personal and professional development

The benefits of effective succession planning

49% of businesses consider succession planning a top priority. With all this talk we’ve been hearing of a talent shortage recently, it makes sense to retain top talent wherever you can, and an effective succession plan is a key part of that.

Here are the specific benefits you can expect when you commit to this process.

Ensure business continuity

If your marketing assistant quits, chances are you can replace them pretty quickly and easily. Even if you don’t, it’s probably not going to affect your bottom line immensely. But your Director of Marketing is a different story. Leaving key vacancies open could lead to downtime, inefficient operations, lost opportunities, internal turmoil, confusion, and instability.

Grow and retain high-potential talent

Growth opportunities are one of the most important factors in an employee’s decision to stay with a business. This is even more pronounced in Gen Z workers, who value progression 36% more than other generations.

If you want to retain your high-potential employees, offering talent development programs could be the way to go. They help employees build skills and confidence through mentorship, training, and growth opportunities. They also help managers separate the wheat from the chaff, those who are intrinsically motivated and those who aren’t.

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This proactive approach identifies individuals with the potential to fill leadership roles while strengthening the overall talent pool.

Improve employee engagement and retention

Showcasing long-term opportunities can build trust and motivation among your employees. The second-most common reason for quitting a job (behind pay)? Lack of advancement, development, or career opportunities.

Organizations have picked up on this. With 90% of companies concerned about employee retention, a 2024 LinkedIn report found learning opportunities to be the best retention strategy for talent. Encourage a culture of career reflection and projection among your employees. This will help you understand their aspirations and better position you to support them along their career path.

Benefits of Creating Employee Development Plans

Facilitate knowledge transfer

When you lose someone in your business, you lose the invisible frameworks they created in their heads: the speed with which they can find what they need, the creative solutions they crafted to access different dashboards, and the efficiencies that come with working with the same tool stack day in and day out.

No matter how skilled the next person is, there will be a ramp-up period where they get accustomed to the set-up of the Drive folder or the naming system in Hubspot.

While this kind of knowledge might just be the cost of a role transition, other kinds of knowledge transfer can be systematized. Mentoring relationships or training plans can reduce skills gaps during transitions by systematically documenting knowledge sharing and creating repeatable and scalable plans that ensure employees are equipped with the necessary skill sets to succeed in new roles.

Achieving organizational stability

Failing to prepare is preparing to fail. Being proactive about your succession planning creates a more resilient company — one that doesn’t stumble in the face of crisis or change.

Stability protects operations and also creates a culture of confidence and adaptability. As a result, companies are better positioned to innovate and lead in their industry. After all, how you do one thing is how you do everything. So, companies proactive about succession planning are likely also proactive about jumping on new opportunities as they arise.

The risks of avoiding succession planning

Neglecting succession planning can lead to all sorts of undesirable outcomes:

  • Delayed decision-making: The loss of a leader in key positions can create a leadership vacuum, where it becomes unclear who’s calling the shots. This can delay important decision-making, and result in operational inefficiencies.
  • Loss of top talent: Turbulent times can tank employee morale, leading even your best performers to leave, or at least consider it.
  • Increase in recruitment costs: A hasty recruitment campaign to replace the lost leader can take a lot longer than replacing them internally with a strong succession plan. This increases recruitment costs, time to hire, and can even impact quality of hire if decisions are made rashly.
  • Uncertainty and confusion: Without a clear succession plan, confusion and fear can easily spread among employees. This can cause further conflict, miscommunication, and power struggles.

Let’s take the example of Blackberry. Thorsten Heins stepped down as CEO in 2013 after six years at the company. He passed the baton to John Chen, a veteran Silicon Valley executive. However, a messy succession plan resulted in the termination of 4,500 employees and a net loss of nearly $1 billion.

Don’t be Blackberry. Plan accordingly.

How to build a great succession planning process

Getting started with succession planning can feel overwhelming, which is why we’ve broken it down into a step-by-step process for you. Remember to tailor your succession planning strategy to your business’s needs and developmental goals.

Step 1: Identify critical roles

Not all roles are suitable for succession planning. Focus on leadership positions or roles requiring specialized skills. You’ll need to outline the core competencies of these roles — both hard and soft skills.

It can be useful to standardize the criteria you use to identify these roles, such as operational impact, strategic influence, or urgency to fill.

Step 2: Assess current talent

Next, you’ll want to analyze your current talent pool to identify high-potential employees who could be molded into future senior leaders. Several tools are available here, including skills gap analysis, employee evaluations, or 360-degree feedback from performance reviews.

Step 3: Pinpoint high-potential employees

Not all high-potential employees are made the same, but here are some common-denominator traits to look for in internal talent:

  • Consistently high performing
  • High emotional intelligence and soft skills, indicating leadership potential
  • Adaptability in the face of new challenges
  • Drive and ambition — consistently seeking out learning opportunities, mentorship, and growth
  • Cultural fit — deeply aligned with the company’s vision, values, and mission

You can also use something like a 9-box grid to map out traits and performance.

9-box grid for workforce planning

Draw up a successor profile that includes their strengths, weaknesses, skills, experience, and career goals. This will serve as a baseline for step 4.

Step 4: Develop personalized growth plans

By understanding where your potential successors are now, you’ll effectively chart a path to where you need them to be. Outline an individual development plan to support their growth.

This is the “action plan” of the succession planning process and should clearly specify development activities and milestones designed to bridge any skills gaps identified during the assessment phase.

These activities may include training programs, mentorship, or job rotations, but they should always be tailored to the employee’s needs.

Step 5: Transfer knowledge effectively

By that, we mean systematize everything. Succession planning is such a resource-heavy activity that it doesn’t make sense to repeat actions you can automate. Build in some standard documentation practices and mentoring curricula to keep institutional knowledge flowing smoothly to future leaders. Ideally, they should cover knowledge transfer of both hard and soft skills.

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That might look like negotiation and delegation in a senior sales role, and deep financial analysis, decision-making, and visual communication for a CFO role.

Step 6: Align with corporate strategy

Succession planning should directly reflect the company’s vision for long-term success. When selecting and developing future leadership, keep future market or industry demands in mind. For example, you might equip the next generation with in-depth generative AI training or cultural sensitivity workshops to navigate an increasingly global and remote workforce.

Step 7: Monitor and measure progress

Check in regularly on your succession plan’s performance. Set up some KPIs — like tracking promotions, leadership readiness, number of successors per key roles, and retention rates.

For example, this could look like:

  • Enhance succession readiness: Within six months, identify at least three qualified successors for each critical role, creating a solid talent pipeline.
  • Reduce time-to-fill: Decrease the average time-to-fill by 20% over the next year for key roles.
  • Improve employee engagement scores: Boost employee engagement by 15% in the next annual survey.

Step 8: Reassess and adapt regularly

Make iterative improvements a natural part of your performance management strategy. This will help you account for industry changes and company growth. Staying flexible is the key to remaining relevant to team members, development opportunities, and leadership skills.

Step 9: Get buy-in from leadership

Succession planning without buy-in from senior stakeholders will fall flat. They need to be engaged in the process, offering input and support to maintain the plan once it has launched.

Get leadership involved early on. Hook them by speaking their language — reduced risks, stronger leadership teams, and how streamlining this process will hit their strategic goals. Ask for their input during key stages, like development planning and successor selection, to get their skin in the game.

Step 10: Invest in the right tools

Delegate as much heavy lifting as you can to succession planning tools. Career path templates, performance management tools, or talent development software can take a load of manual, repetitive tasks off your plate. They save time, identify potential leaders, track progress, and provide development opportunities while offering better team insights.

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Built, Cornerstone on Demand, and PageUp all offer purpose-built succession planning tools for enterprise businesses.

Tips for getting succession planning right (and mistakes to avoid)

There’s no such thing as one-size-fits-all succession planning. But there are some best practices you should follow.

Pair succession planning with talent management

Merging succession planning with other talent management initiatives like leadership development can create a cohesive employee experience.

For example, this might look like an ambitious marketing manager who has participated in various leadership development programs over the years, such as communication skills, assertiveness training, and mentorship from the Global VP of Marketing.

When a more senior role opens up, this marketing manager is named as a potential candidate for succession. Preparing them for the role won’t be such a jump since they’ve been “studying” it for years already.

Use a succession planning template

As a human resources leader, a succession plan is a continuous process, so create a template for it as you iterate on it over months or years. This will save you time while standardizing the succession process and ensuring no details are overlooked.

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Templates also have great optics — something about having a process makes everything feel more official. Don’t underestimate how much comfort this can bring in uncertain times.

Think long-term

Don’t just project the next 1-3 years — think 5-10 years ahead. Like a soccer club that replaces outgoing players with their own trainees, invest in employee development, and stay in the loop about any emerging technologies. This prepares your team, ensuring they’re ready to take the field when opportunities arise.

Measure the right succession planning metrics

You can’t improve what you don’t measure. Tracking metrics like retention rates, engagement scores, and promotion readiness can identify strengths and weaknesses in your succession plan. Average employee tenure, voluntary turnover rate, and Employee Net Promoter scores are a good place to start.

Hire top talent for successful workforce planning

A good succession plan starts at the hiring stage. Hire people who add strategic, long-term value to your company. Solid external recruiting efforts will make succession planning easier and smoother. After all, the best leadership pipelines include a balance of external hires and internal promotions.

Toggl Hire helps you identify high-potential candidates who align with long-term objectives. How? Our talent assessment features, including skills tests, video interviews, and rapid candidate screening, mean you don’t have to sacrifice quality of hire for speed ever again.

Follow us on LinkedIn to learn more about these types of strategies!

Julia Masselos

Julia is a freelance writer and fierce remote work advocate. While traveling full-time, she writes about the intersection of technology and productivity, the future of work, and more. Outside work, you can find her hiking, dancing, or reading in a coffee shop.

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