Succession planning is a vital strategy for organizations of all types, ensuring continuity and stability as leadership roles transition. Although you can’t predict when a serious illness, accident, disaster, or significant life event will occur, you can prepare for what will need to be addressed should a big change in leadership come.
Only 35% of organizations have a formalized succession planning process for critical roles – don’t let that be you! (source) This article unpacks the many facets of succession planning, some unique considerations with nonprofit organizations and family businesses, and best practices for successful implementation.
What is Succession Planning?
Succession planning is a proactive process where organizations identify and develop potential leaders to fill key positions when they become vacant. This strategic approach ensures that businesses can seamlessly continue their operations despite unexpected changes in leadership. Gartner’s research indicated that 75% of organizations view succession planning as crucial for maintaining competitive advantage.
Who Needs to Be Thinking About Succession Planning?
Succession planning is not just for large corporations; it’s essential for any organization, including small businesses, nonprofits, and family-owned enterprises. Leaders and board members across sectors should prioritize succession planning to safeguard their organization’s future.
Which Roles in the Organization Need a Succession Plan?
Depending on the size and scope of your organization, you may identify a variety of positions that should have a clear succession plan. Here are some roles to consider:
- Executive Leadership
- CEO/Executive Director
- CFO
- COO
- Board of Directors
- Board Chair/President
- Key Committee Chairs
- Department Heads and Senior Management
- Head of HR
- Head of Marketing and Communications
- Head of Development/Fundraising
- Head of Programs/Services
- Specialized Roles
- IT Director
- Compliance Officer
- Key Project Managers
- Subject Matter Experts
Having succession plans for these key roles helps ensure that the organization can maintain continuity and stability, even in the event of unexpected departures or transitions.
Best Practices for Succession Planning
There is no cookie-cutter approach to succession planning because of the unique needs of each organization; however, here are 6 areas we recommend that you incorporate as best practices into your plan:
- Align with Strategic Goals – Ensure that the succession plan supports the organization’s long-term objectives. That may involve maintaining the current goals or it may involve growth and expansion.
- Be Transparent – Maintain open communication with employees about succession plans to build trust and engagement. Communication is a key element to manage change effectively.
- Develop Successors – Constantly invest in the training and development of individuals who possess the potential for filling vacant leadership positions. The companies who are the most successful with succession plans view the process as a development process versus a replacement process. “When critical openings occur, these companies are ready to fill the position with skills, experience internal candidates because they have planned for such a transition – by ensuring that the individuals selected have been exposed to the proper training and career development opportunities” according to PwC.
- Document the Plan – Create a written plan outlining the steps and processes for leadership transitions. Having it written down will provide accountability and add a document to return to for review.
- Review Regularly – Continuously assess and update the succession plan to reflect changes in the organization and industry. Put it on the calendar and be sure the plan gets reviewed and adjusted routinely.
- Consider Diversity – Promote diversity in succession planning to bring varied perspectives and strengths to leadership roles. If everyone looks and behaves the same in your leadership team, you will miss out on the benefits of diverse leadership.
Succession Planning in a Nonprofit
For nonprofit organizations, succession planning is crucial to maintaining mission continuity and donor confidence. Nonprofits often rely on strong relationships and community trust, which can be jeopardized by sudden leadership changes. By planning ahead, nonprofits can ensure that their mission and programs continue uninterrupted, regardless of leadership transitions.
A communication plan should be tied to the succession plan. This is especially important with a nonprofit because of all the stakeholders who share an interest. The community, donors, the clients, the staff and volunteers will all want to be aware of upcoming changes. A documented plan, outlining how the communication will be rolled out, will help guide a nonprofit when it comes time to implement the succession plan.
Succession Planning in a Family Business
Family businesses face unique challenges when it comes to succession planning, including emotional dynamics and the need to balance family and business interests. A well-thought-out succession plan can help navigate these challenges and ensure the business remains sustainable, whether it’s a family member at the helm or a non-family member.
A unique consideration in family business succession is the need to involve all interested family members. This may include people who are not involved in the daily activities, but still want to stay in the know about plans that affect the future of the business. Additionally, it’s worth stating that family businesses should not assume the best candidate to lead the company will come from within the family. That assumption can lead to unpleasant results. This article can help navigate this sticky area.
Who Should Own the Responsibility of Developing Succession Plans?
Spearheading a succession plan requires a coordinated effort involving multiple stakeholders to ensure its success. Typically, the responsibility falls on a combination of the following key individuals and groups within an organization:
- Board of Directors
- Role: In organizations with a formal board of directors, the board plays a critical role in overseeing and guiding the succession planning process.
- Responsibilities:
- Approve and support the succession plan.
- Monitor the progress and ensure alignment with organizational goals.
- Engage in evaluating and selecting potential successors for executive positions, particularly the CEO.
- Chief Executive Officer
- Role: The CEO is often directly involved in succession planning, particularly in identifying and developing potential successors for other executive roles.
- Responsibilities:
- Collaborate with the board and HR to create and implement the succession plan.
- Mentor and develop high-potential leaders within the organization.
- Ensure that succession planning aligns with the company’s strategic vision and long-term goals.
- Human Resources Department
- Role: HR is crucial in managing the operational aspects of succession planning.
- Responsibilities:
- Design and administer the succession planning process.
- Identify key positions and potential internal candidates.
- Develop training and development programs to prepare successors.
- Facilitate assessments and provide feedback to potential successors.
- Maintain documentation and ensure regular review and updates of the succession plan.
- Senior Leadership Team
- Role: Senior leaders, including department heads and other executives, play an important role in identifying and developing talent within their areas.
- Responsibilities:
- Provide input on potential successors within their teams.
- Support and mentor high-potential employees.
- Ensure that the succession planning process is integrated into the organization’s culture.
- External Consultants (if applicable)
- Role: In some cases, organizations may hire external consultants to provide expertise and guidance in the succession planning process.
- Responsibilities:
- Offer objective insights and recommendations.
- Assist in designing and implementing the succession plan.
- Provide training and development programs for potential successors.
- Internal Talent Review Committees
- Role: These committees, often comprising a mix of senior leaders and HR professionals, focus on regularly reviewing and assessing internal talent.
- Responsibilities:
- Conduct talent assessments and identify high-potential employees.
- Ensure a diverse and inclusive succession planning process.
- Provide recommendations for training and development opportunities.
By involving these key individuals and groups, organizations can create a robust and effective succession plan that ensures leadership continuity and supports long-term success. However, it’s important to note that when multiple people are involved in the creation and ongoing review of succession planning, it’s critical to ensure that there is clear accountability. Assign specific roles and responsibilities to each stakeholder to avoid confusion and ensure accountability.
Are You Ready to Tackle Succession Planning?
In conclusion, succession planning is an indispensable strategy for ensuring the continuity and stability of any organization. Whether you’re a large corporation, a nonprofit, or a family business, having a well-developed and regularly reviewed succession plan is essential. By preparing for unexpected changes in leadership, aligning the plan with strategic goals, investing in successor development, and promoting transparency and diversity, you can safeguard your organization’s future.
We know it can be overwhelming but that is how we can help. Centennial has been a key partner in numerous succession planning processes. In addition to helping others, we’ve experienced a change in leadership in our own company. This broad range of experience provides us with the expertise you need. Let us help you.
Don’t be among the 65% of organizations lacking a formalized succession plan — start planning today to ensure your leadership transitions are smooth and your organization remains resilient in the face of change.