What is succession planning and why does it matter?

"You are not serious people".

Such an iconic line made for great TV during the final season of HBO's Succession, but it's absolutely not what any CEO wants to say to their employees, especially ones they hope will take over the business one day.

Top tip: when it comes to succession planning, ignore everything you watched on Succession. Our second tip is to read on because we're looking at succession planning best practices, so you can replace any C-suite position with confidence. 

What is succession planning in simple words?

Succession planning is corporate future-proofing that establishes a pipeline of leadership to tap into when key senior-level roles open up.

It's about hedge fund-style risk management, ensuring your company has the talent to successfully carry the torch despite inevitable departures, retirements or even poaching.

Also dubbed “succession building” or “succession management,” it’s the process of continuously identifying and conditioning high-potential standouts in middle and upper management and getting them ready to step up when those prime C-Suite seats empty out.

If you're running a family business, those talented individuals may very well be loved ones.

Regardless, when done right, you'll have worthy successors for every critical role mapped out years ahead of any sudden resignations and can ease transitions with qualified in-house, ready-to-go employees.

It’s about establishing continuity even when long-standing execs leave big shoes to fill.

The takeaway? Always be succession planning. It lets you strategically shape your leadership pipeline on your terms, not during company turmoil, where people desperately seek to fill the void left by a sudden departure.

Do I need to worry about succession planning already?

You’re crushing goals, hitting growth targets ahead of schedule and just clinched a game-changing round of Series B funding. Perhaps your company even made a splashy 30 Under 30 list and snagged some rockstars.

Succession planning can take a back seat, right? Why worry about succession when your star execs are just getting started?

Here’s why: as much as we all like to think we’ve got it all figured out, chaos is usually just around the corner (hello, OpenAI). And the scramble to fill sudden leadership gaps when inevitable churn strikes can stop growth plans right in their ambitious tracks.

But companies that plan ahead are better equipped to sustain momentum despite surprise departures. So unless you want to leave innovation and long-term vision up to chance emergency appointments, make succession planning a priority now.

Some business owners choose to pass part or all shares in the business to a trust. This allows them to take a step back and let the trust steer the ship.

However you choose to do it, it's wise to get ahead now. Shape your executive lineup to avoid facing the pressure of keeping pace and performing during times of transition.

How does succession planning work?

So how does this whole succession planning thing actually, you know, work? What’s the game plan for developing your company’s next chief disruptors and barrier breakers?

Here are three steps to get started:

1. Identify critical positions
2. Get a list of talent in the business
3. Gap analysis: capabilities and training opportunities

The first step involves determining those essential power positions that are most vulnerable to surprise exits. We’re talking mission-critical C-suite spots along with department leadership driving major initiatives. Identify roles where vacancies could completely derail momentum.

Next, map out your existing talent. Analyse their capabilities and track records to find rising stars with skills tailored to one day occupy those all-important seats. Think less Roman Roy and more Ginni Rometty – emerging execs already excelling in key feeder roles with high ceilings still untapped.

Now comes the individualised nurturing of standout potential successors to address those all-important development gaps. Think strategic project appointments, tailored training, accelerated responsibilities - basically whatever readies your chosen protégés to thrive when fresh opportunities arise.

Follow this three-step framework, even modifying it to suit your structure, and you've got a machine for churning out leadership that advances your mission despite inevitable transitions. Having the strength in depth for fast breakouts, even when star talent gets poached, will put you on good footing. 

Succession planning best practices

When it comes to mastering the art of succession planning, adapt the practices used by the best of them.

Get out in front

Don’t wait for leaders to have one foot out the door before identifying and cultivating their potential replacements. Spot talent early and give promising players incremental steps to advance their readiness.

Always scout new talent

Make identifying rising stars an ongoing focus, not a crisis reaction to vacancies. Regular reviews will help uncover newcomers with untapped potential while monitoring existing standouts.

Custom-tailor training

Cookie-cutter programs often fail to build role-specific capabilities that successors need to shine. Customise training to address individual development gaps relative to future leadership demands.

Test-drive prospects

Assess readiness by giving top prospects targeted assignments that emulate the pressures and responsibilities of roles they could fill. Observe their leadership aptitude first-hand.

Distribute authority

Rather than centralising big decisions with solo shot callers, ingrain shared ownership across cross-functional senior teams ready to synchronise priorities amid transitions.

Make succession planning habitual, not reactionary. Following these fundamentals will give you a better chance of sustaining greatness despite inevitable churn on top somewhere down the line.

Which companies nailed their succession planning?

If you want inspiration for who did it best when it comes to succession planning, you only need to look at the big hitters. 

• Apple: The tech titan set the succession gold standard with Tim Cook's smooth step-in as CEO after years as Steve Jobs' heir apparent in waiting. Talk about planning ahead!
• Microsoft: Microsoft stuck the succession landing, tapping cloud pioneer Satya Nadella to succeed Steve Ballmer despite over 20 years with the company.
• IBM: Big Blue showed unflinching stability, with 30-year veteran Ginni Rometty taking the CEO reins from Sam Palmisano after methodical leadership preparation.
• Tata Group: India’s venerable multi-conglomerate executed cross-border succession with aplomb, as Ratan Tata hand-picked his successors years in advance to steer sprawling business lines. That’s how you do it, Logan!
• General Electric: GE wrote the book on rigorous succession planning, landing Jeffrey Immelt after Jack Welch’s iconic run thanks to a detailed years-long selection process.
• JPMorgan Chase: The banking powerhouse set up future leaders for success, with Jamie Dimon mentoring next-gen bankers behind the scenes.
• Unilever: The consumer goods juggernaut focused on continuity, elevating lifer Alan Jope to the global CEO seat after Paul Polman’s successful tenure.
• Walmart: The world’s top retailer showed the fruits of succession done right, with Doug McMillon rising from a summer intern to the corner office.

Succession planning and company ownership

Daily operations aside, there's another dimension to succession planning to consider.

In terms of transferring ownership to employees, not just managerial or strategic responsibility, there are a few routes you can go down depending on your future plans.

• Direct employee ownership (e.g. issuing shares to employees) 

• In-direct employee ownership (e.g. EOTs)

• Hybrid (a combination of direct and in-direct ownership)

• A co-operative (like The Co-operative Group)

Employee ownership is becoming increasingly popular among startups and established businesses alike as a means to motivate teams and improve retention. We can support you in this arena. 

Time to start planning

Succession planning is about envisioning your company's next era of greatness and constructing the leadership pipeline to match those ambitions. Follow the guidance above and you'll have a better chance of finding worthy successors already equipped to ace those pivotal transitions when the time comes. Best of luck!