Is Succession Planning Still Needed?

Generally speaking, succession planning involves identifying and developing people with the potential to fill critical roles when current leaders leave the organization. It is a focused effort on keeping talent in the pipeline.

Succession planning can be either formal or informal. If it is formal, it entails an organization-wide effort for developing the candidates to increase their potential for successful advancement. If it is informal, it typically involves senior executives who identify and groom their replacements. Succession planning differs from career planning in that the former equips successors with skills so that they are prepared for many different potential roles; the latter moves employees through a linear path of jobs.

Management scholars have recognized the value of succession planning for decades. For example, in his 1993 book, Concept of the Corporation, Peter Druker, known as the “Father of Management,” wrote that a company’s very survival depends on the ability to “develop independent leaders below the top who are capable of taking top command themselves, and to devise a system under which succession will be rational and by recognized merit rather than the result of a civil war within the institution and of force, fraud, or favoritism.”

Regardless of your company’s size, a succession plan can yield multiple benefits, including:

• Succession planning facilitates change. It ensures successful business operation and smooth leadership transition in the midst of inevitable change when a leader resigns, retires, is fired, gets sick, or even dies. With a succession plan, a company can fill leadership gaps without too much interruption.
• Succession planning builds a talent pipeline. This is especially the case when talented employees are scarce and in high demand. One of the most relevant trends for distribution companies may be the shortage of highly skilled manufacturing workers and trade workers, as well as a shortage of people with skills required by technological changes. Succession planning can help mitigate these talent shortages.
• Succession planning helps identify skill gaps and training needs. Articulating skill sets and competences essential to key positions will yield an added benefit of helping your company gain clarity about your skill gaps and training needs. With such enhanced understanding, you are in a better position to develop effective training programs to meet the specific learning needs of your employees.
• Succession planning captures institutional knowledge. Today, a greater number of employees are hired and paid for their thinking rather than for their labor. This means that what we know is likely more important than what we do, which makes knowledge management an increasingly important task within an organization. With effective knowledge management systems, explicit knowledge and tacit knowledge (gained by experience) can be identified, diffused, archived, and retrieved first, and then shared between leaders and their potential successors. This process helps reduce the on-the-job learning curve for critical positions.
• Succession planning boosts morale and retention. A company’s investment in its human capital can be a tremendous boost to employee engagement and morale. Ample research evidence shows that meeting the personal growth, achievements, and recognition needs of employees motivates them. As a result, employees are more likely to stay with their organization (increased retention).

Because of its multiple benefits, succession planning is important for all organizations, and this is particularly true post pandemic. According to Society for Human Resource Management (SHRM), almost 48 million U.S. workers quit their jobs in 2021, the highest number on record, followed by a near-record 4.35 million more in 2022.  Meanwhile, CEOs also left their posts with an increase of 1.8% from 2020 to 2022.

As the world struggles to deal with unprecedented new challenges presented by COVID-19, companies without a long-term strategy risk business continuity and talent management. The global crisis we have experienced in the past few years has forced many businesses to constantly pivot, which highlights the importance of agility, resilience, and future-readiness in organizations. Many businesses that survived faced or are still facing supply chain disruptions and the ongoing talent crunch. In addition, the pandemic-related changes have redefined the meaning of work for many people, leading to unfamiliar issues such as the Great Resignation or the Turnover Tsunami and the Quiet Quitting.

Despite the proven benefits to both organizations and individuals, succession planning is an often-overlooked process in talent management and development. In a 2021 survey of 580 SHRM members who were actively working as HR professionals, 56 percent said their organization did not have a succession plan in place. Additionally, only 21 percent  reported having a formal plan, and 24 percent having an informal plan. Lacking succession planning puts the company in a crisis mode, with little or no time to make sound decisions. In addition, many business leaders believe succession plans are needed only for executives.

I would argue that in the post-pandemic world, organizations should start to develop a succession plan for every position.

The question that is worth further discussion is no longer if a succession plan is needed, but how succession planning can be optimized. If you want to learn more about succession planning and evidence-based best practices, I welcome you to join me for a webinar dedicated to this topic on Oct. 3, 2024 at 11 a.m. CT. Register here.

Jia Wang is a professor in the Department of Educational Administration and Human Resource Development at Texas A&M University. Her research focuses on international and national human resource development, organization crisis management, and learning within organizations.