examples of succession planning in companies

7 Examples Of Succession Planning To Maintain Growth And Stability

Understanding succession planning, importance of succession planning, 5 examples of succession planning, real-life examples of succession planning at apple and ibm.

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  • Leadership Continuity:  Succession planning helps organizations prepare for inevitable leadership changes, such as retirements, promotions, or unexpected departures. Organizations can ensure a seamless transition by identifying and developing potential successors in advance, minimizing disruptions, and maintaining stability.
  • Talent Development:  Succession planning catalyzes talent development and employee growth. By identifying high-potential individuals within the organization, organizations can provide them with targeted training, mentoring, and leadership development opportunities. This prepares them for future leadership roles and enhances their skills, engagement, and job satisfaction.
  • Knowledge Transfer:  Effective succession planning facilitates the transfer of critical knowledge, skills, and expertise from experienced leaders to potential successors. This ensures the preservation of institutional knowledge, promotes learning and reduces the impact of knowledge gaps during leadership transitions.
  • Organizational Agility:  Succession planning enables organizations to adapt to changing business landscapes. Organizations can adapt quickly, make informed decisions, and capitalize on emerging opportunities by cultivating a pipeline of talented individuals. It also promotes diversity in leadership, bringing fresh perspectives and innovative thinking to the organization.
  • Retention and Engagement:  Implementing succession planning demonstrates a commitment to employee development and growth. It signals employees that their contributions are recognized and valued, increasing job satisfaction and fostering loyalty. Engaged employees are more likely to stay with the organization, reducing turnover and retaining institutional knowledge.
  • Mitigating Risks:  Succession planning helps organizations mitigate risks associated with leadership gaps. Organizations can ensure business continuity, maintain stakeholder confidence, and minimize the negative impact of sudden leadership vacancies by identifying and preparing successors in advance.
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  • Identifying high-potential employees and grooming them through leadership development programs, mentorship, and exposure to senior leadership.
  • Providing opportunities for potential successors to gain experience in different departments and functions to develop a well-rounded skill set.
  • Conducting regular performance assessments and assessments of leadership potential to track the progress of potential successors.
  • Implementing a mentoring program where experienced managers guide and coach potential successors, sharing knowledge and insights.
  • Offering managerial training programs to enhance the skills and capabilities of individuals with potential for future leadership positions.
  • Rotating employees through different managerial roles or projects to broaden their experience and prepare them for higher-level responsibilities.
  • Identifying employees with exceptional technical skills and providing specialized training and development opportunities.
  • Creating a knowledge-sharing culture where experienced technical experts mentor and transfer their expertise to potential successors.
  • Encouraging continuous learning and professional development in technical fields through certifications, workshops, and conferences.
  • Implementing a structured sales training program to develop potential successors’ sales skills and business acumen.
  • Assigning potential successors to work closely with experienced sales professionals to learn from their strategies and techniques.
  • Offering opportunities for potential successors to take on increasing sales responsibilities, such as managing key accounts or leading new market initiatives.
  • Identifying HR professionals who exhibit leadership potential and providing them with opportunities to work on strategic HR projects or initiatives.
  • Offering specialized training in HR management, such as employee relations, talent acquisition, and performance management.
  • Developing a talent pipeline within the HR department , nurturing high-performing HR professionals for future HR leadership roles.

Examples of succession planning

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Key takeaways

  • Succession planning is the process of making sure a business’s critical roles are always filled by qualified employees.
  • An effective succession plan process takes time to identify and prepare high-potential candidates to backfill roles that could become vacant.
  • Formalized training and leadership development support diverse succession planning that draws on a wider range of talent in the organization.

Since employees can leave an organization at any time, companies typically have two weeks to come up with a plan to fill that role, unless they’ve already done some succession planning. Succession planning prepares companies to backfill critical roles to maintain regular business operations. It therefore makes the difference between scrambling to fill an urgent vacancy or tapping into next-in-line talent.

In this article...

What is succession planning?

Succession planning is the process of ensuring that all critical positions in the organization are always staffed by preparing employees to take on those roles in case they become vacant. Succession planning, therefore, involves identifying necessary skills for key positions and training employees in those skills.

The succession planning process is also becoming increasingly predictive and proactive, moving beyond current roles to plan for future roles a company will need to add to its ranks.

Succession planning examples

Among examples of effective succession planning, IBM, Apple, Barneys New York, and others share the ingredients of time, intentionality, and varying degrees of structure.

Yet, they fall into one or both types of succession plans: long-term and formalized. These two succession plan approaches aren’t mutually exclusive. Rather, they should be combined to maximize the effectiveness of a company’s unique succession planning process.

Long-term succession planning

Long-term succession planning entails identifying and preparing someone for a role long before they officially take on that role.

This requires recognizing and nurturing high performers over time to set them and the organization up for success. That way, when the opportunity arises to take on a key role, that individual is well prepared to assume those responsibilities.

As an employee moves up the ranks and acquires a more complex understanding of how all the pieces of the business fit together, they’ll be ready to take on a leadership role when the time is right. 

With regard to timing, a long-term succession plan can lead up to a known point in the future when a replacement will be necessary, for example, when a CEO knows they’ll retire in five years. The transition can also happen earlier than expected if, for instance, the CEO resigns.

An example of long-term succession planning: IBM

A building with the IBM logo.

IBM created a long-term succession plan when promoting Virginia Rometty to CEO to replace Samuel Palmisano in 2011. Rometty had started working in an entry-level position at the company 30 years prior to her promotion and had worked her way up over time before attaining the CEO position. 

Rometty was key in this role until her retirement in 2020, and IBM’s succession plan enabled the smooth transition of power to Rometty’s successor, Arvind Krishna. In each situation, the company was able to maintain continuity by:

  • Establishing professional development pathways.
  • Cultivating a positive company culture.
  • Allowing candidates to compete at the same level.

Three decades is an extreme case of long-term succession planning, since employees change jobs an average of 12 times over the course of their career and the median number of years a private-sector employee stays with one company is only 3.7 years . 

Perhaps a more realistic example is Barneys New York’s five-year succession plan to prepare Daniella Vitale to become its CEO. The former CEO had already worked with her for many years and intentionally gave her opportunities to grow at Barneys before officially appointing her as successor.

Requirements for long-term succession planning

Recognizing that this strategy takes time—but not necessarily 30 years—companies can recognize and nurture high-performing employees early on and implement career pathways. Long-term succession planning requires a number of ingredients that maximize employee retention :

  • A supportive company culture with competitive benefits.
  • Performance and talent management tools that help managers identify top internal talent early on.
  • Robust learning and development programs that are personalized to employees’ goals and strengths.

Though requiring sustained effort, long-term succession planning is more effective than getting caught off guard with someone leaving and scrambling to train an employee to take their place.

Formalized, educational succession planning

A company’s learning and development or HR team can develop an internal educational academy, complete with a curriculum that trains and develops employees as future leaders in the company. Going through formalized training accelerates employees in their progress toward professional goals. It could even directly get them to their next position once they complete the training. 

An example of educational succession planning: Apple

A building with the Apple logo.

Former Apple CEO Steven Jobs took this type of succession planning upon himself and founded Apple University. Its digital curriculum drew from Jobs’s experiences to teach employees “how to think like Steve Jobs and make decisions that he would make.” 

Jobs still wound up choosing a successor who didn’t ultimately attend Apple University, but academy-like training isn’t only meant to train employees to become CEOs. It trains cohorts of employees on how to be effective leaders in order to fill talent pipelines for other management and executive positions at Apple.

To foster creativity and innovation in a succession plan, a company should draw from a range of leadership examples in its training. These can be from within the company or in the industry rather than focusing solely on the lessons from the company’s current leader. This more flexible succession planning strategy inspires employees to find their unique leadership style and voice rather than becoming a replica of the current CEO. 

How formalized succession planning supports corporate commitment to DEI

Formalized, training-based succession planning supports a company’s commitment to diversity, equity, and inclusion (DEI). Leaving a succession plan entirely up to interpersonal dynamics in the workplace without formal structure opens up the door for promotions based on relationships rather than skill set. Managers might favor and recommend those in their team and/or those they’ve worked with for a long time whether they’re qualified to take on the new role or not.

Also read: How Performance Bonuses Help Avoid Bias and Increase Productivity

Training employees across teams and tenure provides more employees with a chance to progress in their career trajectory—not just those employees who work most closely with the C-suite.

In addition, forward-thinking succession planning is smart, but as companies strategically train employees for future roles, managers need to ensure that the training maintains work-life balance, lest they fall victim to employee burnout .

Why is succession planning important?

Companies need to take inevitable turnover into account and have a succession plan in place to keep critical roles filled. A succession plan can help maintain growth and stability as well as encourage retention and internal development.

Succession planning prepares the company for the loss of key personnel. The benefits of this preparation include:

  • Business resilience no matter the economic climate.
  • Continued operations with minimal downtime.
  • Equitable workloads, so other employees aren’t overburdened with taking over tasks as a result of a vacancy.
  • Potentially mitigated unconscious bias.
  • More diverse workforce and leadership.
  • Higher employee retention and engagement.

The most important ingredient for any succession plan is time and investment in top talent. Browse our list of top corporate human capital management (HCM) software to start your succession planning process today.

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Top 10 Succession Plan Example Templates with Samples

Top 10 Succession Plan Example Templates with Samples

Kavesh Malhotra


The  succession planning process   involves identifying critical positions within your company and developing processes and action plans to fill those positions. By adopting a comprehensive approach to both present and future objectives, this type of planning ensures you have the right people doing the right jobs, both now, and in the foreseeable future (at least five years or more).

By engaging in long-term succession planning, organizations can increase their competence and market relevance. The uncertainty of business environment or political vacuums are not unduly worrying for firms that have a firm succession planning process in place. This happens as there is no time lag in continuity at the top; such businesses have already documented and developed ways to map personnel with the necessary skills and knowledge to the critical job positions and roles to ensure business continuity.

An analogy to business succession planning is observed in the field of sports or even in politics (to a degree).

If a star player or a captain retires, the team cannot be allowed to fall off the cliff of high-performance; the wins have to keep rolling in, hence the need for an equally competent successor, without delay or hesitation. This is why organizations use succession planning to ensure they are prepared for the future.

Succession planning emphasizes leadership development, which can take time and money, but it is always wise to develop bench players, as well, to step up and take on a more critical role in the future.

There should be a succession strategy in place for every firm. Succession planning is a must for three scenarios. These are:

1. Technical leadership roles

If you must fill a leadership role requiring technical abilities, replacing a technician with years of experience in specialized software can be challenging. To plug this eventuality, include a buffer in the recruiting process to ensure the right candidate can be trained and developed.

2. Senior executive roles

As senior executives approach retirement, succession planning is critical. The earliest possible start to this process is necessary to find and train the ideal applicant for the job, again a process that takes years.

3. Family-owned businesses

It is essential to have a documented succession plan for your family-owned company rather than relying on informal or verbal succession arrangements.

With this primer on how to ensure you have no business uncertainty as to the future in terms of the top guys, here’s SlideTeam’s top 10 succession plan example templates to help you ensure you can offer the best solutions to your clients, the top management if you work as HR head, or a business owner.

These templates are 100% editable and customizable, but the given framework is an apt fit for all your needs. Just key in your own data and the job is half-done. Now, just find the right guy and add to the template.

Let’s explore these best-in-class now.

Template 1: Business Succession Planning PowerPoint Presentation Slides

This PPT Template allows you to incorporate and understand aspects, such as critical position, planning metrics, employee competency, risk of loss, and many more. Use this talent and career planning presentation template to ensure stakeholders realize the importance of succession planning. Also, brand yourself as a clear leader in resolving obstacles to succession and career planning with the deployment of this template.

Business Succession Planning

Download Now!

Template 2: Succession Planning PowerPoint Presentation Slides

Use this template to plan your talent needs, budget, and the potential to develop new skills. Make strong and purposeful succession planning to identify management needs of your business and lead it to success. Download this impactful template to understand the areas where you need to step in to ensure smoother succession planning and clear impediments to it.

Succession Planning

Template 3: High Potential Employee Succession Planning PPT Presentation Slides

Create a report for every working individual to analyze their performance using this high-potential succession planning template. Incorporate visuals to demonstrate ways to create career opportunities and raise your company's productivity. Download this template now and get an outstanding succession planning PPT, complete in all respects. Alongside, for planning best talent management, click on our SlideTeam’s blog featuring the best talent management templates .

High Potential Employees Succession Planning

Template 4: Customer Success Playbook Succession Planning Grid to assess employees

Use this outstanding succession planning PPT presentation template to assess your employees’ performance. The aim is to see who can fit in the bill for that steep move up the ladder, when needed.  A sit-in through this presentation helps employers understand which employees need improvements and in what areas. Download it now to generate better performance and motivate employees.

Succession Planning Grid to Assess Employee Potential and Performance

Template 5: Succession Planning Process PPT Sample Presentation

Want to create a perfect succession plan? Download this Succession planning Process PPT Sample Template to generate a step-by-step plan. Demonstrate the level of competition and success at levels such as business platforms and strategy consulting. The aim is to ensure that the mapping of the personnel to the job role is perfect, and is akin to a round peg in a round hole, and so on.

Succession Planning Process PPT Sample Presentations

Template 6: Succession Planning Template PPT Sample Download

If you plan to pass the leadership to another employee or a group of employees, you need to have a well-defined, clear structural guideline manual in place. Using this template, you can provide details on what job roles or responsibilities a particular employee will take over, when, and how much time the transition will take. Download this template now and create that perfect and strategic succession planning. Use this template to also showcase your preparedness for succession planning, as this actionable presentation divides potential candidates into UP-NEXT, ON-DECK and HI-POTENTIALS.

Succession Planning Template

Template 7: Succession Planning Process PPT Model

With this Succession Planning Process PPT Model, you can aim at creating continued smooth leadership for your organization, and it includes key aspects of replacement planning. Download now to help your company stay ahead, with crystal-clear processes on the leadership issue.

Succession Planning Process PPT Model

Template 8: Succession Planning PPT Presentation Examples

Use this Succession Planning PPT Presentation to improve your business model. This template allows you to identify the ideal leader for your organization to meet target goals. The USP here is the team-wise segmentation that this design provides. Download and get going with this extraordinary template.

Succession Planning Template 1

Template 9: Integrated Talent Management Process with Succession Planning

Create the perfect succession plan using this PPT Template, which gives you the design to do this, completely and successfully, in seven process stages. Using this presentation template, highlight talent strategy & planning, leadership development, performance management, and other vital aspects. Download now and take full advantage of this template.

Integrated Talent Management Process with Succession Planning

Template 10: Key Best-Practices For Succession Planning Model

Our PPT Template will help you demonstrate the four key elements: planning, developing, monitoring, and reviewing in succession planning. Evaluate your employee’s performance and build strategic organizational planning and management. Assessment of key talent is one rea where this listing of best-practices will make you a star, as you present this template before your audience.

Key Best Practices for Succession Planning Model

Bottom Line

Succession planning is an essential process for any organization. This ensures that businesses can continue their mission and operation without disruption. It involves creating a plan for identifying, training, and designing potential successors to key leadership positions over time and assessing and developing current employees, for future leadership roles.

These customizable templates provide you the structure, the format and even offer the flexibility to present this powerful idea into a simple PowerPoint format. Just to reiterate, the customizable nature of the templates is a bonus, which is what makes these really yours. Your savings in time and money are humungous, if you give these templates a chance to augment your already-rich knowledge base.

FAQs on Succession Plans

What is the purpose of succession planning.

Succession planning aims to prepare for any staffing and leadership needs that may arise due to retirement or other events. This process is broken down into steps such as creating a succession planning model chart and selecting one or more successors for critical roles. Once successors are identified, they should be trained for their next-level roles.

What are the five steps in succession planning?

STEP 1: Identify Key Positions and Areas

STEP 2: Determine Capabilities for Important Positions and Areas

STEP 3: Determine each chosen employee’s competency and assessment grid  and evaluate them against the needed competencies.

STEP 4: Create and implement plans for transferring knowledge

STEP 5: Design the effectiveness and  succession plant flowchart.

What is succession planning as an example?

The best example of succession planning is:

●       IBM

An example of internal succession planning is Virginia Rometty's appointment as the CEO of IBM in 2012. Because Rometty fit in with the company's culture and had access to professional development programs, she was able to develop and ultimately become IBM’s first female CEO, after having risen through the ranks.

What are the four stages of succession planning?

  • Establishing Goals and Objectives: This involves identifying the organization’s current and future needs and developing a plan to meet them.
  • Identification of Potential Successors: This stage involves researching potential successors and assessing their skills and abilities to meet the organization’s needs.
  • Preparation and Development: This stage involves providing training and development opportunities for potential successors, such as mentoring and coaching, to prepare them for the additional responsibilities.
  • Transition and Implementation: This stage involves the actual operationalization of the succession plan, including the selection of the successor, the communication of the change to the organization, and the integration of the new person into the organization.

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The term replacement planning is often thrown into conversations about succession planning . A replacement plan identifies “backups” for positions. But replacement planning doesn’t have to be defined as a subset of succession planning . Developing a replacement plan doesn’t have to be a daunting task.

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The Ultimate Guide to Succession Planning: Building a Strong Talent Pipeline for Smooth Leadership Transitions 

JULY 5, 2023

Succession planning is critical for organisations to ensure smooth leadership transi tions and long-term success . In our comprehensive guide, we explore why succession planning is important , the challenges of succession planning , and the strategies requ ired to overcome them. Let’s dive in!

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Organizational Talent Pools: 4 Steps to Developing Employees

HR Bartender

JUNE 14, 2018

This allows a talent pool to address the biggest challenge with succession planning , which is telling individuals they’re part of the plan . That unpredictability can make traditional succession planning efforts difficult and talent pools an ideal tool. However, creating a talent pool takes some planning .

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3 Critical Elements of a High Impact Succession Plan

MARCH 29, 2023

One of the first places HR leaders can be proactive is through succession planning . According to Deloitte, only Succession planning is typically thought of as a C-suite only endeavor. But succession planning should be more than risk mitigation for your top executives exiting.

Replacement Planning: 3 Steps to Develop Your Organization’s Strategy

MAY 31, 2018

If there’s one activity that has more of an impact than succession planning , it’s replacement planning . A replacement plan identifies “backups” for positions. But replacement planning doesn’t have to be defined as a subset of succession planning .

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Choosing the Right Succession Planning Solution: Finding the Perfect Fit for Your Organisation (Top 5 Tools in 2023) 

JULY 30, 2023

Succession planning is essential for organisations to ensure smooth leadership transitions and continuity. Table of Contents Introduction Why Succession Planning is Important How to Choose the Right Succession Planning Solution? How would your company cope?

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Transform how you think about succession planning with a skills-focused approach

DECEMBER 13, 2022

Identifying potential — and nurturing future leaders along their journey — is modern succession planning at its core. HR has always played a key role in succession planning for top organizational roles. There are a lot of organizations out there that manage succession planning on a spreadsheet.

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Succession Planning Success: The Golden Rules for Future-Proofing Your Business

DECEMBER 1, 2014

Succession planning is about managing the risk associated with any type of critical skills gap. Unfortunately, despite the important nature of succession planning , decisions about which positions are the most critical and who should be in the running for these types of positions are often left up to gut feel.

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Webinar: What Government Leaders Need to Know About Succession Planning

Cornerstone On Demand

APRIL 30, 2015

For government HR leaders, it's never been more important to have an effective succession planning strategy in place. They will also discuss what steps government leaders can take to improve existing succession management strategies, and how this can result in better performing teams across organizations. Sign up today !

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Top 5 New Year’s Resolutions for the HR Generalist

JANUARY 5, 2022

Do you have a succession plan in line if your key talent and leadership leaves? Lead by example – HR is the go-to for the majority of items. Often, HR receives complaints and concerns but not always positive feedback on the successes of others or wins across departments.

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5 Common Mistakes Of Succession Planning


SEPTEMBER 25, 2018

5 Common Mistakes Of Succession Planning . The absence of an effective succession plan in your business can have unforeseen consequences. A recent article in Forbes highlights the unexpected departure of Intel’s Chief Executive in June as an example of the impact on a business when succession plans aren’t in place.

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4 Must-Have Elements for Succession Planning

JUNE 17, 2020

The name of the game is succession planning —nurturing your existing pipeline of talent for roles your organization may need in the future. First, you have to draft your overall plan . For example , ask yourself : What’s the day-to-day impact of X position on our organization? Identify prospects.

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A Simple Guide to Succession Planning

Oracle HCM - Modern HR in the Cloud

JULY 30, 2019

Historically, succession planning has been focused on key leadership roles. For example , when Jack Welch was the CEO of GE, the rule of thumb was three replacements for his role. Today, organizations are likely to have a more expanded perspective on succession planning . There is no one correct approach.

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How HR Can Create a Comprehensive Talent Strategy

MARCH 16, 2023

For example , Google’s 20% work talent management initiative consistently helps them attract better talent. Succession planning Succession planning is another important component of any talent strategy. For example , digitization, innovation, operational excellence, etc.

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How to capture institutional knowledge

MARCH 9, 2021

For example , think about your own job tasks: What do you know that only a few coworkers or subordinates might grasp? The crucial combination strategy that prevents institutional knowledge loss includes: Succession planning Maintaining updated standard operating procedures. Succession planning .

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Business Wire

Can Des Moines workers expect raises in 2024? Here's what an annual salary guide says

A space in downtown Des Moines' Wellmark Blue Cross/Blue Shield headquarters building, remodeled as a cafe-like setting in an effort to lure more workers back to the office.

Employees in Des Moines are likely to get raises in 2024 although maybe not as much as they received this year, according to the annual salary guide released Wednesday by the Palmer Group employment agency and Greater Des Moines Partnership.

Among business surveyed, 95% anticipated giving raises in 2024, the same proportion as in 2023. But 18% expected to increase salaries by 5% or more in 2024, down from 28% in 2023 and 22% in 2022.

The survey also found 65% planned raises in the 3%-4% range in 2024. The survey found 53% of businesses in that range in 2023 and 54% at that level in 2022.

Just 5% of businesses anticipated making no pay raises in 2024, down from 7% in 2023 and 6% in 2022.

The report did not specify the number of businesses surveyed and their response rate.

Companies looking more at retention, succession planning

One trend from the survey that stuck out for Palmer Groups President and CEO David Leto was that more companies are putting greater emphasis on retention efforts and succession planning ― identifying and preparing employees to step up to new positions.

The survey shows that 15% of the companies will be focusing on succession planning in 2024 as opposed to 4% in 2023.

"More companies are looking at succession planning because the quit rate has been so high they didn't have people immediately available to fill those positions," said Leto. "Companies are putting more into training and development and are willing to hire someone a grade or two below what they normally would have. More businesses are also open to hiring non-college employees who have the experience and work ethics they are looking for."

More hiring, but also more cutbacks

When it comes to hiring, half of businesses surveyed anticipated increasing staff in 2024, up slightly from 49% in 2023. The proportion expecting to reduce their staffs in the coming year was 6%, up from 2% in 2023. The survey also noted that 93% of companies expected to hire permanent staff rather than contract employees.

The survey indicated greater flexibility for workers, with 41% of employers saying they take an "all of the above" approach of full-time, in-office work, hybrid in-office and remote work and fully remote work, compared to 25% who said they offered the full range of options in 2022. The percentage of companies requiring full-time remote work fell from 2% to 1%. Companies requiring workers to be in the office full-time dropped to 33% from 39% and those using a full-time hybrid model dropped to 25% from 34%.

More: Des Moines workers, employers join national 'great compromise' on hybrid return to office

One of the notes in the survey observed that while employees are concerned about salaries and hourly wages, they also are paying close attention to other factors including benefits, paid time off and flexibility options.

More: What are return-to-office rules at Wells Fargo, Principal, other major Des Moines employers?

CFOs lead in salary

As for salaries, the management and executive leadership category topped the list, as could be expected. The highest median compensation was for chief financial officers, at $446,800. The lowest was bank teller, with a median annual salary of $34,700.

A study released the last week of October by the Economic Policy Institute noted that while the Midwest enjoys the lowest unemployment rate in the country, its wages have lagged behind those in other regions of the country.

The EPI study found the Midwest's real median wage growth rising only 0.4% from 2019 to 2022, far below the 3.1% national average during the same period. Wage growth over that period was 5.7% in the Northeast and 4.7% in the West, with the South coming in at 0.9%.

While federal funding through COVID-related aid packages helped, the EPI report found the Midwest has "has endured years of slow wage growth, slow job growth, public-sector employment shortfalls, and declines in unionization."

More: Pepsi workers at Urbandale plant ratify new contract, avoid strike

It said the Midwest's wage growth lag was due to policy decisions that kept the minimum wage stagnant in six states, laws preventing some local governments from passing minimum wage increases, and legislation weakening unions, whose members earn about 13.5% more in wages than their nonunionized peers.

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examples of succession planning in companies

Want more great resources on people development?

3 succession planning examples and best practices.

Every organization can expect to deal with leadership changes, especially given that we’re seeing a record number of CEO turnovers this year. 

But, without the right approach in place, leadership transitions can put companies in a vulnerable position – from stock prices taking roller-coaster rides to employees feeling anxious about the ongoing changes. 

That’s why it’s critical to have a thoughtful succession plan in place. 

In this post, we’ll provide best practices to keep in mind for succession planning and share examples of successful leadership transitions. 

3 best practices for developing a succession plan

A seamless leadership transition doesn’t happen overnight. That’s why a key part of succession planning is being able to think ahead at least three to five years. Here are four best practices to help you stay ahead of the curve. 

1. Cultivate a pipeline of talent 

Building a high-quality talent pipeline is a challenging and time-consuming process. In fact, 74% of public and 52% of private companies reported that maintaining a robust talent pipeline is the most difficult aspect of CEO succession planning. 

Unfortunately, the pipeline is something that many HR teams tend to neglect. 40% of companies report not having a single internal candidate to replace the CEO should he or she exit the position. This puts the company in a vulnerable position and will ultimately cost the company in several ways, from paying for executive search costs to seeing turnover amongst high-potential employees (HiPos) who feel overlooked when they’re not considered for leadership positions.

That’s why, even though you might not have any open positions now, it’s important to start cultivating that pipeline today. This means accurately identifying who your HiPos are and making sure you’re constantly adding new candidates into the mix. 

Want to learn how to identify, retain, and develop the HiPos in your organization?

Check out our ebook . 

examples of succession planning in companies

2. Invest in the ongoing development of leaders 

Simply having a pipeline isn’t enough for succession planning. Companies also need to invest in the leaders they’ve identified and make sure they’re prepared for executive roles when they become available. In practice, this means helping HiPos develop relevant leadership skills, align with the company culture, and have opportunities to be exposed to various roles and responsibilities.  

On the surface, companies invest a lot of resources in training their leaders. A Training Industry study found that organizations around the world spend $370 billion per year on leadership development . Yet 74% of executives were not prepared for the challenges they faced in senior leadership roles. This indicates a gap between the type of training that’s being provided and the intended effectiveness. 

We’ve found that one of the best ways to invest in the growth and development of these leaders is to offer mentoring and leadership coaching programs. Not only are mentoring and coaching the two most unmet needs of HiPos , but we’ve also found within our own dataset that 92% of mentees report improved confidence in handling challenges and increased skills for the job . Similarly, the International Coach Federation also reports that 86% of companies report that they recouped their investment in coaching and more .

3. Regularly monitor and assess your leadership bench 

Organizations and people are constantly evolving. That’s why it’s necessary to regularly monitor and assess your leaders. This process ensures the HiPos leaders in your pipeline are still aligned with the needs of your company. It can also help you identify any new or rising HiPo leaders you may have missed in your initial assessment. 

For example, you may have identified a promising HiPo leader in your talent pipeline. But, after a few years at your organization, it’s evident that they’re not growing in the direction that you anticipated. Without regularly assessing this individual’s performance, you wouldn’t be able to identify that they’re no longer a good fit for the executive position they were originally being considered for. And you may be passing up a better fit for the role in the process. 

3 succession planning examples 

Given the public nature of leadership transitions, we’ve seen many succession plans in action. While not all of them go as smoothly as anticipated, some companies do an excellent job of putting the best practices we outlined above into practice. 

McCormick & Co.

In 2008, spice and flavorings giant McCormick & Co. transitioned its CEO position from Robert Lawless to his successor Alan Wilson using a succession model that was praised for being thoughtful, comprehensive, and well-executed. Lawless made a point of establishing a transparent timeline of five years, planning his transition to a non-executive chairman of the board role. He also tied part of his discretionary compensation to succession planning, proving his investment in finding and preparing the right person. 

What McCormick & Co. did right:

  • Developed its own robust succession planning over the course of many years, taking its time to intentionally identify and create thorough development strategies for all senior executives
  • Monitored the progress of its potential candidates over several years before settling on Wilson, who demonstrated a strong fit with the company culture and a deep understanding of front-line issues

Virginia Rometty’s succession as CEO of IBM in 2012 is also a case of internal succession planning done well. Rometty’s advancement worked well because of her cultural fit, and because of the professional development systems that allowed her to succeed based on merit and become IBM’s first female CEO. HR analyst Josh Bersin said of Rometty’s appointment: “IBM’s talent management process is very mature, integrated, and global. At the executive level, the company takes development planning and succession very seriously.” 

What IBM did right:

  • Rometty started at IBM as a systems engineer , eventually climbing the ranks upward to SVP and Group Executive for Sales, Marketing, and Strategy before being offered the CEO role
  • She’s a prime example of an incoming CEO who was well-entrenched in the company culture, known to the board, and had a sterling track record

Barneys New York 

Luxury retailer Barneys New York went through a long-planned change as Daniella Vitale stepped into the CEO role in 2017, replacing her predecessor and mentor Mark Lee. With her long tenure in the high-end fashion retail industry, Vitale was considered “uniquely qualified” to run Barneys. She worked as an assistant buyer while still in school at LIM College and moved her way up through lateral moves between major brands, including Ferragamo, Armani, and Gucci, before joining Barneys in 2010 as a Chief Merchant.

What Barneys New York did right:

  • Vitale was given substantial leadership opportunities and had experience running nearly every facet of the organization by the time she was offered the CEO position 
  • Lee spent a long time investing in Vitale’s success, and he was instrumental in putting together a formal five-year succession plan specifically for her

Succession planning is a long and laborious process. But done right – by cultivating a high-quality talent pipeline, developing your HiPo leaders, and regularly assessing fit – it can make an otherwise stressful transition much smoother. Want to learn more about how to identify and develop the HiPos in your organization? Download our ebook here . 

examples of succession planning in companies

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Identifying and retaining your high-potential employees ebook, why the 70:20:10 learning model works, and how to implement it, 4 ways coaching and mentoring benefits high-potential employees.

  • Contributors

The Compensation Committee’s Evolving Role in Human Capital Management

examples of succession planning in companies

Blair Jones is a Managing Director, Rachel Ki is an Associate, and Jennifer Teefey is a Senior Associate Consultant at Semler Brossy LLC. This post is based on a NACD Directorship magazine publication.

Many leaders delved into human capital management (HCM) when the economy was booming, just before the Great Resignation. Boards and compensation committees worked to understand talent issues and make their companies more attractive, inclusive, and engaging.

Now that the labor market is shifting, HCM has become even more critical as companies navigate new market-related challenges. The issues are not abating, just evolving, as stakeholders press for more attention on employees. While many companies worked diligently on the symptoms, they may have missed some underlying nuances driving core HCM issues. Compensation committees now have an opportunity, if not an imperative, to step up oversight and partner with management on these complex talent issues.

Compensation committees partnering with management is important for companies that are still settling on an HCM strategy. In the technology industry, for example, many companies are shifting from a “growth at all costs” mind-set to a focus on profitability. They hired aggressively in 2020 and 2021 to ensure they had the resources to pursue new product development and customer groups. It seemed the COVID-19 pandemic had permanently accelerated demand for their products, so they paid heavily to recruit and retain people at all levels of the organization.

When demand receded in 2022, investors raised concerns about profitability, and stock prices fell. Tech companies lost an important part of their employee value proposition and a retention hook. Many also found themselves with bloated organizations and carried out layoffs as well as restructuring efforts. They now require thoughtful consideration to develop an HCM approach so that they have the people to thrive during the transition ahead.

The opposite dynamic happened in the medical devices industry, where some companies dried up as hospitals stopped elective surgeries during the pandemic. As restrictions lifted, surgeries came back slowly, but now business is booming as hospitals address pent-up demand on the way to normalcy. These companies must expand their workforces to ensure products are available and doctors have support—without over-hiring.

Almost all companies find themselves in a new world of post-pandemic work. HCM strategies must address the balance of office-based work and people working from home. How can companies maintain engagement and collaborative cultures with a dispersed workforce that is increasingly concerned about work-life balance?

Boards, and especially compensation committees, represent investors in overseeing management on issues relevant to overall performance. In the past, boards focused on executives, but the rising importance of nonmanagerial talent has broadened directors’ responsibilities regarding HCM generally.

In a review of fiscal year 2022 proxies, we found that half of Fortune 100 company boards and 40 percent of S&P 500 boards have altered the title of their compensation committees to include HCM topics (e.g., compensation and leadership and management development). Even more have broadened their charters to include HCM issues (see Figure 1). Many of them now explicitly oversee broad-based pay and total rewards programs. As with most governance trends, large companies are likely to be first movers here.

Expanding the compensation committee’s charter to include HCM is not a stretch. Executive hiring, promotions, and terminations, with associated changes to compensation, give the committee a way to promote diversity, build inclusive cultures, encourage engagement, and foster collaboration and creativity. As executives plan for promotions, compensation committees can encourage them to reward high-potential managers—especially those that foster HCM in their own teams—with faster pay trajectories and appropriate retention bonuses. They can oversee changes to organizational structures that expand career opportunities while following strategic priorities. Executive compensation and benefits packages should complement the broader strategy, with learning and development rounding out a robust employee value proposition. HCM involves treating employees as scarce assets worthy of investment for strategic returns to the company.

Boards and committees can work with chief human resources officers to raise their game in HCM. Whether dealing with layoffs in the technology industry, a surge of growth in the medical devices industry, or simply determining talent priorities and practices post-pandemic, HCM is now front and center for compensation committees. In this guide, we sketch out key areas where directors can make discussions with management more substantive. Following an extensive internal diagnostic, companies can focus on key HCM areas including, but not limited to, performance management; succession planning; diversity, equity, and inclusion (DE&I); and culture.

examples of succession planning in companies

A Road Map to Elevating HCM

As HCM gains momentum, committees can lead robust discussions with executives on current and future talent priorities. Unlike those for executive compensation, HCM discussions require fewer approvals. Instead, directors can work with management as thought partners while fulfilling their fiduciary responsibility for oversight of a key business risk. This work involves multiple steps:

  • Clarify the HCM connection. Directors need to understand how HCM practices support the strategy. That clarity should in turn determine the critical facets of HCM that management must tackle. Talent planning and culture will likely take priority for companies undergoing a strategic change. Automobile original equipment manufacturers, for example, need people with different skill sets as they transition to electric vehicles. Their cultures must evolve to build for the future while acknowledging current practices. To support these moves, committees must elevate performance management and leadership development among executives. In contrast, consumer products companies expanding to local markets across the world need to build an understanding of their broadened customer base. Their talent planning must involve developing a pipeline of diverse leaders.
  • Understand the current state. Take an inventory of current publicly disclosed measures and internally communicated HCM goals, as applicable. Robust discussions require reliable data on what’s happening now. Many companies still have rudimentary or fragmented ways of collecting data on the broad organization; committees should work with human resources to boost this data collection. Even companies that have focused on HCM for years may discover gaps in the collected data.

Directors are not responsible for carrying out the data-gathering process; however, they can ask challenging questions to ensure the data are meaningful and tied to company priorities. They can make sure the objectives support a serious exploration, rather than decisions already made. Meanwhile, directors should assess what information they need at the committee or board level to carry out effective oversight. How will they gain the familiarity or background expertise to provide that oversight? What information should human resources (HR) provide, and how often? Along with the data, the committee can ask how well these goals align with the current strategy, messaging, and external comparisons—including the employer brand. If unaligned, how should the company adjust its efforts?

3. Define success. Working with management, directors should decide what metrics matter the most for strategic alignment, rather than simply taking what’s already tracked. A separate, perhaps sensitive, matter is deciding whether management has the proper talent in place to drive progress. Once the overall goals and metrics are in place, HR can draw on HCM best practices and lay out realistic near-, mid-, and long-term milestones. What are the company’s strengths and weaknesses, and how well do the strengths align with the critical milestones? If alignment is poor, is HR moving aggressively enough to drive results?

It may be helpful to compare these efforts with those of peers or close competitors. HCM policies should match the company’s efforts to attract and retain the talent needed to thrive. More broadly, HR should assess the external influences on HCM, from investors to local communities to regulators to news media. What are their expectations? Directors also need to determine whether to bring in relevant executives, such as the chief diversity officer or business unit heads, to provide context for the data. Directors should use this as an opportunity to demonstrate that accountability and progress are priorities. Many companies are developing HCM dashboards to share regularly with the compensation committee. The dashboards reinforce priorities and focus management and directors on the crucial progress over time.

4. Determine responsibilities. The next step for the board, in consultation with management, is to determine responsibilities for overseeing HCM. What are the compensation committee’s decision rights vis-à-vis the executives’?

Committees set their responsibilities across a spectrum, from simply monitoring progress to directly approving the key elements of HCM (see Figure 2). There’s no right answer to what level of engagement committees should have on particular topics, but it’s essential that they clarify their involvement in advance and prepare to follow through. For example, a compensation committee might ask for periodic updates to monitor pay equity while others might want to directly oversee management’s actions for pay equity improvement. When considering adding environmental, social, and governance (ESG) metrics to executive incentives, management may recommend a design, and the committee would have approval rights.

Multiple committees can share an HCM challenge; boards should determine whether some facets of HCM belong to committees other than the compensation committee. Some boards assign all compliance matters to the audit committee, including leadership violations of codes of conduct such as sexual harassment and discrimination. The nominating and governance committee will sometimes oversee all DE&I efforts, not just board diversity.

Many boards have elected to set up a sustainability committee, which may share DE&I and ESG oversight with the compensation and audit committees. What matters is the upfront clarity on decision rights. Clear alignment brings greater transparency, along with better communication and oversight. The board’s responsibilities can grow over time, adding value as directors gain experience and connections in this area.

5. Update the calendar and expand the charter. To reinforce the importance of HCM, committee agendas should carve out time for relevant discussions. Each compensation committee meeting could start with an update from the CEO (or the chief human resources officer) on the state of talent, perhaps walking through highlights from the dashboard. As the committee adds HCM responsibilities, directors will likely have valid concerns about lengthening the meetings. In most cases, committees will need to extend their meetings by 30 minutes to an hour to provide sufficient time for discussion. Committee chairs can also evaluate their standard agendas and use approaches such as consent approvals to review more transactional items on an as-read basis, allowing for questions and clarifications but combining this with approvals, thereby minimizing time spent.Management and committee chairs often find it helpful to have an annual discussion that provides a high-level overview of HCM and then dive deeper into identified HCM focus areas at subsequent meetings. For deep dives to be meaningful, it is important to ensure that the discussion does not compete with denser agenda items, such as annual approval of executive pay decisions.

Committees new to HCM may prefer a “crawl, walk, run” orientation. Early discussions would involve report-outs and establishing the baseline (crawl). Then, committees would move on to having HR teams update the progress of initiatives underway (walk). Once they grasp the fundamentals, directors could hear from business unit leaders about how they are developing diverse organizations and inclusive cultures (run). At that point, the committee would be ready to ask challenging questions to drive HCM forward.

As for the charter, compensation committees can add HCM discussions to their agendas without added authority, but as seen in the expanded charters above, boards are preferring to be explicit about accountability. Charters are also beginning to incorporate purpose statements with the addition of HCM oversight, as well as specific responsibilities as mentioned in Figure 1.

6. Share oversight and metrics with investors. Investors are increasingly interested in what boards are doing to oversee and support HCM initiatives. Most companies already provide an overview of their HCM practices, objectives, and priorities that are material to understanding the company’s business in the 10-K, but some also describe HCM goals in their sustainability reports, on their websites, or in their proxy statements.

Boards can start with the 10-K requirements and then consider expanding based on industry norms and shareholder questions in outreach discussions. It’s important to understand the risks of disclosure, especially the pressure to reduce disclosure when progress isn’t made. Are directors comfortable disclosing when the numbers aren’t to the company’s advantage?

Figure 2: The Compensation Committee’s Responsibilities for Oversight of HCM


Figure 3: Committee Agenda with HCM

Key HCM Areas

Committees and boards also need to consider the following four key HCM areas: performance management, succession planning, DE&I, and culture.

Performance Management

This is where the company translates corporate objectives into employee goals, monitors individual progress, gives feedback, evaluates results, and adjusts compensation accordingly. Performance management sets expectations between managers and employees so everyone works toward the same goals and understands how their contributions align with the strategic priorities. It doesn’t just motivate actions and decisions; it also differentiates high-performers. As companies make strategic decisions about staffing and need to differentiate rewards to manage costs, strong performance management enables the appropriate decision-making.

Compensation committees have direct influence only over executives—but this work sends a message about HCM generally. Diligence here not only reinforces accountability, but also conveys the seriousness with which directors take HCM and models what managers should be doing regularly with all employees.

The committee starts by reviewing and adjusting the CEO’s goals. The purpose here is to ensure alignment with corporate objectives and agree on priorities, including areas of special interest to investors, such as investor day commitments. Once those goals are in place, the committee can discuss how the CEO might translate them into goals for the leadership team. From there, the committee should review progress against goals at mid-year, and in some cases quarterly, to give time for providing feedback and to consider any adjustments or additions.

On top of the usual concerns about executive oversight, committees need to see the performance management process influence HCM broadly. For example, at a hospital management company, the compensation committee wanted to understand how quality goals cascaded throughout the organization, including to the managers of facilities. Directors also sought end-of-year analyses that showed goal attainment variation at different levels of the organization, in different organizational units, and across gender and ethnic diversity. Where the distribution is skewed or inconsistent, directors can discuss with management how to strengthen the underlying processes.

Finally, boards can ask management teams to analyze performance management outcomes for high-potentials versus others, particularly whether pay outcomes are differentiated for those individuals over time. HR may need to adjust pay guidelines to make this differentiation visible without alienating the broader organization.

Succession Planning

Performance management feeds directly into succession planning, as it spotlights strong performers with high potential who might be considered in the future for promotions. Boards already “own” the planning for CEO succession, but they can expand this effort to clarify overall strategic priorities (tied to the actual CEO in place), assess succession planning for the rest of the C-suite, and thereby influence HCM throughout the organization. Directors are increasingly assessing whether the company has a strong bench for growth and expansion, including strategic pivots. They can also identify emergency successors and emergency succession protocols for key roles.

Boards need a robust process with clear oversight of transition timelines across the executive team. Directors must regularly review the slate of internal candidates to understand the strength of upcoming talent and at the right times test the waters on external talent. Sometimes this work starts in the compensation committee, which acts as a working group before sharing the conclusions with the full board. Other times, the board oversees CEO succession and succession for other C-suite executives, with the compensation committee focusing on future high-potential talent.

In carrying out their responsibilities here, directors can influence HCM by asking the following:

  • What’s needed now? Extending the work in performance management, directors can identify skills that the likely strategy direction will require in future leaders. They can also review pending hires, promotions, and departures, and validate retirement horizons.
  • What’s the bench? Aside from looking at a slate of candidates, committees can go a level down and ensure that management supports, retains, and develops future high-potential candidates. The most common tool here is the nine-box matrix, which assesses an employee on current performance and future potential. The matrix catalyzes conversations with executives on the organization’s talent prospects, while improving the consistency of talent criteria and expectations (see Figure 4).
  • How are we reassuring the losers? Promotions always risk disenfranchising those not selected. Committees must not saddle a new leader with out-of-sync or disengaged colleagues, but some talented people are worth retaining somewhere.

examples of succession planning in companies

Diversity, Equity, and Inclusion

Research continues to show a payoff from DE&I at most companies. These efforts benefit companies directly by expanding both the outside pool and the internal pipeline for talent, with better recruitment and retention. While DE&I has gained momentum since 2020, many companies are still early in their journeys. Committees can help keep those journeys on track with diligent oversight, best carried out by asking challenging questions:

  • Where does DE&I matter most for the company? As with other efforts, directors need to define what DE&I means for their company and identify goals. These goals can come not just from the strategy and the needs of current employees, but also from outside stakeholders including investors, customers, and the wider society. Committees can take an inventory of these goals and brainstorm new goals with management. For any goal, boards must make sure the organization has a clear baseline or current state against which to measure progress. But with finite resources, companies should concentrate on the areas that matter most.
  • How well are we doing so far? Here, directors can learn about the data that is currently tracked and available, review other common DE&I metrics, and determine whether management should be tracking anything else. Management can also make the committee aware of ongoing initiatives such as employee resource groups, expanding sources of talent (e.g., to historically Black colleges and universities), and unconscious bias trainings. At some companies, investors are asking boards to consider external civil rights or racial equity audits in order to take a deep dive into the current state and potential areas of improvement.
  • What’s our progress over time? Boards should have an annual review of pay equity to ensure that pay outcomes are equitable for individuals with comparable skills conducting comparable work.

In addition, directors can rely on HR data to monitor changes, but they should also take the time to understand the reasons for progress, stasis, or decline. As with the other areas, a dashboard of statistics against goals can help directors regularly engage with management on trends and discuss improvements. These statistics could focus on the following:

  • Representation of new hires, those who are promoted, and those who are terminated
  • Diverse candidate slates for roles across the company
  • Representation by organizational unit, function, and employee level
  • Participation in key initiatives and their impact
  • Community participation with diverse organizations

4. What should we disclose? Investors and other stakeholders are increasingly asking for more disclosure of DE&I metrics and goals. Investors have already influenced companies’ disclosure of EEO-1 data, and the US Securities and Exchange Commission is likely to require HCM reporting that highlights employee diversity, among other topics. At a minimum, directors should understand what the analyses might show in order to prepare for future disclosure, but they might also work with management on voluntary disclosures to build investor goodwill.

As companies rely increasingly on autonomous knowledge workers, often operating remotely, organizational culture rises in importance. The culture sets expectations for how employees interact with each other away from supervisors, and can drive or discourage engagement. Employees often cite the culture in deciding whether to join or stay at a company. More than other areas of HCM, culture is subtle and hard to change. Committees need patience and perspective as they learn the prevailing culture or cultures. Yet even here, directors can ask management tough questions:

  • How does the culture touch employees?  Depending on the answers, follow-up questions might include, Who are the key cultural leaders? How well are they articulating and communicating that culture throughout the organization? Is the messaging specific to the company and authentic or generic to many organizations? What visible signs exist to promote and reinforce the culture? And how does the culture spread?
  • What are the potential challenges with the culture?  A culture that supported the company’s initial strategy may now hold it back from a new strategic direction. How is the culture evolving to fit the future strategy?
  • What do the employee engagement surveys say?  These surveys usually include questions about culture and the strength of leadership messaging and employee belonging. (Some management teams go further with periodic organizational culture assessments, which fuel good conversations with directors.) Directors can engage with management to analyze where the company is falling short, and whether the culture is either weak or no longer aligned with the strategy. What does the company require for long-term success? Some areas of the culture might need only reinforcement, while other areas may require active adjustment.

One of the strongest actions that executives take is hiring and firing managers, who are central to any cultural implementation. Cultural discussions are thus intertwined with the talent pipelines in succession planning.

Aside from tracking progress through regular surveys, directors can visit company sites in coordination with management, attend major company meetings or town halls, and meet with small groups of employees in sessions arranged by management. For large, multinational organizations, directors should expect cultural differences by region. Subcultures may be appropriate as long as these don’t hamper working across regions. And for all companies, organizational cultures will need to change with the wider society.

Boards, and especially compensation committees, have more influence than they think over HCM. We’ve written this article as a guide for directors looking to raise their company’s game. What matters is not the specific choices that any committee makes, but the seriousness with which it takes oversight of this increasingly vital corporate activity.

In any scenario, directors and executives need to work together to build a strong employee value proposition that attracts and retains the talent most needed to carry out the current strategy. A company can establish a smart strategy, with appropriate structures and resources, and still fall short because it lacks the relevant human capital. With prodding from directors, companies can develop people to move the strategy forward and gain traction in the marketplace.

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Business succession planning examples.

Succession planning examples

Succession planning and the Peter principle

Have you ever come across a manager or a key position employee and wondered how they reached that position? Yet, when speaking to them, you realize they’re just not the right fit for the job. If you’re nodding your head vigorously in agreement, then you’ve just been introduced to the Peter Principle.

Succession planning examples

The Peter principle, a concept by Laurence J Peter, states that “People in a hierarchy tend to rise to their “level of incompetence.”

The further explanation of the principle is that an organization often promotes or prepares people for higher or key positions based on their past performance. This goes on until the employee is no longer competent in their position. Are you wondering how the Peter principle is connected to examples of succession planning? Well, it is one of the most critical factors.

Let’s take an example to make it clearer.

A sales manager at Company X has suddenly resigned due to health issues. The company needs to fill this key position immediately so as not to disrupt the operations. They promote the salesperson within the team that has the best sales track record. That’s only fair, right? However, it so happens that although this newly promoted employee has an outstanding sales record, they might find it extremely difficult to execute their role as a manager. A good sales manager needs a different set of skills and competencies than a salesperson. They could lack necessary skills, like being able to motivate their colleagues, distributing tasks and responsibilities, communicating with different management levels, conflict management skills, etc.

This may lead to underperformance and feelings of demotivation, frustration, and anxiety. On the other hand, the succession planning model involves building core strategies so that you do not fall prey to the Peter Principle and can fill in a key position with the right employees at the right time. It includes:

  •  Identifying the requirements for key roles

Developing a succession planning model with correct assessment and training tools

  • Investing in the talent management processes

The three points above can help prevent organizations from falling prey to mediocre succession planning management and assist them in taking effective leadership decisions based on the value they will bring in the future.

Succession planning model with examples

Succession planning means an organization is prepare d to replace key employees who leave their positions , suddenly or otherwise . Each step in this process is critically important to ensure that your successors will add to the company’s future success. Below are examples for each step to help you better understand the sample succession plan document . 

Identifying requirements for key roles

It’s often only after someone leaves an organization that a gap in knowledge and expertise is felt. This gap can take a while to fill and could complicate business operations. Therefore, succession planning examples emphasize identifying the key roles, skills, and competencies needed for the organization to constantly be operating at peak efficiency. There are generally two levels of management that need to be a part of identifying the requirements of key roles and positions. Below are the examples of responsibilities of each department in succession planning.

The managers of each department should actively recognize the key areas and positions that could disrupt operations if left vacant. They must identify the knowledge, skills, and abilities needed for key positions. If they notice any critical gaps, they should tailor the learning and development plans accordingly. Below are some responsibilities that managers must perform to implement a successful succession planning model.

  • Discuss career development with members of their teams
  • Create opportunities for employee development
  • Organize performance review meetings to understand if there is a need for further development.

Human resources department

The HR department plays a crucial role in succession planning. They advise managers to identify vulnerable positions that may soon fall vacant. For example, the employee in question could be retiring, moving to another city, or taking up a job in another company. This oversight allows managers to be alert and provide ample time to prepare a successor for a key position on time. Their responsibilities include:

  • Engaging in ongoing discussions with new/old prospects
  • Organizing performance management exercises and talent review meetings
  • Consulting with different departments to understand the current and future human resources
  • Evaluating succession planning initiatives
  • Helping to communicate key areas and positions to employees.

Once the people who are part of the succession planning process are recognized, the next step is to equip them with the right tools. These tools can help to match the right employees that will fit the future needs of the organization and help it achieve greater and consistent success. Below are some succession planning tools that can help walk you through the process.

Outlining the succession plan

Start with ensuring that you have a clear outline of the aim of the succession plan. A successful succession plan must include the below criteria:

  • A focus on progression and movement as well as on promotions for development purposes.
  • Guides for individual development
  • The ability to empower employees to self-nominate.
  • Ensuring that people on the plan are very well-versed with how it works.
  • Providing rewards and recognizing employees that support the plan.
  • An element to “retain” and improve individual performers.
  • External candidates to spur competition

Establish a board of key decision-makers

All the key decision-makers must be on the same page so that the plan is effective and can be enacted when the need arises. These key decision-makers constitute a board composed of managers, HR, stakeholders, C-suite, and the owner or stockholders.  Together they can plan to grow and develop internal prospective candidates; note down the succession timetable, and create a contingency plan in case of emergency.

Selecting potential candidates

Selecting and analyzing suitable candidates can ensure that the employees do not feel forced into a position they may not wish to obtain or that is appropriate for them. It’s possible that, when introducing a range of evaluation methods for prospective candidates in your succession planning model, a sense of favoritism may seem to come into play. However, it’s necessary to make clear that decisions are based on quantitative and objective measurements that reduce bias, and the influence of organizational politics. A good way to achieve this is to practice transparency in the evaluation process.

Recording technical skills

Listing down the technical skills, educational background, and work experience required for the key position can help select candidates that have the right capabilities to perform the job. These include requirements like:

  • Education and certifications
  • Work experience
  • Strengths and weaknesses
  • Promotion readiness
  • Reference checks

Psychological profiling

Psychological profiling has become a top-rated tool to select suitable candidates. This is done through psychometric assessments and interviewing, to identify any blind spots or characteristics that can derail the prospective candidate.

Selecting a training plan and activities

Now that the prospective candidates are identified, it’s time to develop a training program to support their growth. There are numerous succession planning models designed to develop the current employee into future leaders as the elected successors within the organization.

Stretch assignments

This method provides an opportunity for the selected candidate to demonstrate additional capabilities. Examples of stretch assignments include developing a new market entry plan, leading a new technology platform, or any tasks that are currently beyond their level of knowledge or skill and that will challenge them to learn and grow.

Formal training

This includes investment in academic programs such as higher education or enrolling them in any formal programs that can help them to upskill. Take a look at the most sought-after skills of 2022 here.

Motivate your employees to take charge of their career

The success of succession planning depends on fostering and promoting the continual development of employees. When you encourage a learning culture within your organization, your employees will be prepared and motivated to tackle bigger challenges. In our guide, you can understand the concept of upskilling, reskilling, and cross-skilling that can be detrimental to future-proof your workforce. 

People collaboration

Leadership coaching

In this method, an experienced senior employee coaches and prepares the selected candidate for the demands of a more leadership-based role. The importance of this type of coaching is evident through leadership development statistics that show that 71% of companies do not feel their current leaders can carry their organization into the future.

Measure and evaluate the progress

To ensure that the succession plan is working, you should review and evaluate the model and its effectiveness.

Here are some useful metrics to measure and evaluate the success or failure of the succession planning model.

  • The percentage of positions filled internally as compared to external hires: as external hires are more expensive; a high rate of internal placement indicates that the plan has been successful.
  • The percentage of employee promotions without taking tenure into account: while generally, promotions often go to candidates with the longest tenure, an effective succession plan selects the candidates most aligned with the key position.
  • The percentage of promoted employees that are promoted again within 3 years: this is a clear indication that the first succession strategy was successful as the employee has been able to exceed their job requirements.
  • The percentage of quick fill-in when a sudden job opening occurs wherein preselected employees can immediately fill a sudden “unplanned” opening without a loss in productivity.

Investing in the talent management processes 

Effective succession planning includes making judgments and predictions to identify high performers who can succeed in meaningfully more significant or more challenging roles. Thus, the question arises, “What certainty do you have that you are investing in the right people? What if you are a victim of the Peter principle?”

Take a look at statistics that show how catastrophic things can be when businesses fail to invest appropriately in future employees.

  • 24% of employees worldwide are “actively disengaged.”
  • 75% of companies agreed that it was more time-consuming this year than last year to find the right talent to fill positions.
  • The cost increased to replace employees have increased to 30% of an annual salary .

These numbers can affect both employee happiness and your company’s overall productivity. The solution to this nerve-wracking dilemma lies in investing in a talent management process that relies on scientifically proven processes to help organizations tackle the challenges of succession planning.

To understand how HRForecast can help you prepare for key people leaving or any questions that aren’t covered here, get in touch with one of our experts.

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Examples of Succession Planning: Strategies for a Smooth Transition

Disclaimer : We sometimes use affiliate links in our content. For more information, visit our Disclaimer Page . 

Succession planning is an essential aspect of any business strategy. It involves identifying and developing internal employees who can fill key business leadership positions. Succession planning aims to ensure a smooth transition in leadership, guaranteeing that the business runs efficiently and effectively even after a change in leadership.

This article will explore the concept and highlight the different examples of succession planning organizations can use to ensure success.

Key Takeaways

  • Succession planning is crucial for the success of any business transition
  • It involves identifying and training potential leaders within the organization
  • Successful succession planning requires effective strategies and best practices
  • Real-life examples of successful succession planning can provide valuable insights

Examples of Succession Planning

Understanding Succession Planning

Succession planning is identifying and preparing potential successors for key positions in a company to ensure a smooth transition when a current leader leaves their role. It is an essential strategy for maintaining the continuity of a business and ensuring that it continues to thrive.

The first step in succession planning is identifying the positions that need to be filled in the future and the skills and characteristics necessary for success in those roles. This involves assessing the current workforce and identifying potential candidates with these skills and characteristics.

Once potential candidates have been identified, the next step is to create a development plan to help them acquire the necessary skills and experience for the role. This may involve offering training, mentoring, or coaching to help them prepare for their future role.

Factors to Consider in Succession Planning

There are several factors to consider when developing a succession plan. These include:

  • The company’s short- and long-term goals
  • The current skills and experience of the workforce
  • The future skills and experience required for key positions
  • The potential career paths for current employees
  • The availability of external candidates

Companies can develop a succession plan tailored to their specific needs and objectives by considering these factors.

Successful succession planning requires a long-term view and careful preparation. By investing in developing current employees and identifying potential candidates for key positions, companies can ensure a smooth transition when key leaders leave their roles, maintaining the continuity of the business and positioning it for future success.

Best Practices in Succession Planning

Succession planning is a complex process that requires careful consideration and execution of various best practices. Below are some of the critical steps and actions organizations can take to ensure a successful leadership transition:

Examples of successful implementation of these best practices can be seen in companies like McDonald’s and PepsiCo. McDonald’s, for example, has a well-established leadership development program that identifies, develops, and prepares future leaders for key organizational roles. Similarly, PepsiCo has a robust talent management program includes formal assessments, development plans, and regular monitoring to ensure a strong pipeline of future leaders.

Effective Strategies for Succession Planning

Succession planning is a critical process for organizations to ensure the smooth transition of leadership and maintain business continuity. To achieve successful succession planning, it is essential to implement effective strategies to identify, develop, and retain talented individuals within the organization.

Mentoring programs are one effective strategy to help identify and develop potential successors. These programs can pair high-potential employees with experienced leaders, allowing them to gain valuable skills and knowledge.

Job rotations are another strategy that can help prepare potential successors for leadership roles. This allows them to understand the organization’s functions and operations, enhancing their ability to make informed decisions when necessary.

Talent retention initiatives ensure that top performers remain within the organization. These initiatives can include competitive compensation packages, opportunities for professional growth, and a positive work environment.

Effective strategies for succession planning can result in a robust talent pipeline, ensuring a smooth leadership transition within the organization. Therefore, organizations must consider implementing these strategies when developing succession plans.

Real-Life Examples of Succession Planning

Real-life examples of successful succession planning can provide valuable insights into transitioning leadership and maintaining continuity in a business effectively. Let’s look at some organizations that have navigated leadership transition with aplomb.

Case Study 1: McDonald’s

McDonald’s is a prime example of a company that has executed a smooth leadership transition. In 2015, Steve Easterbrook succeeded Don Thompson as CEO, and the transition was seamless. This was due to McDonald’s focus on developing and nurturing talent from within. The company boasts of a robust talent development program that identifies potential leaders early on and grooms them for leadership positions.

Case Study 2: Microsoft

Microsoft’s recent CEO transition from Steve Ballmer to Satya Nadella in 2014 was a significant moment in the company’s history. Microsoft’s previous CEO had been at the helm for 14 years, and the company faced stiff competition in the technology industry. However, the company successfully navigated the transition by selecting a leader with a clear vision and focused on innovation.

“I think it’s important to have a CEO who is committed to innovation and has a vision of where to take the company.” – Bill Gates, Co-founder, Microsoft

Case Study 3: Ford

One of the most challenging situations a company can face is a sudden leadership change due to unforeseen circumstances. This was the situation Ford found itself in when CEO Alan Mulally retired unexpectedly in 2014. However, the company successfully transitioned by promoting Mark Fields, who had been groomed for leadership for several years.

“We have a very disciplined talent management process, and we’re constantly evaluating our leadership pipeline.” – Bill Ford Jr., Executive Chairman, Ford Motor Company

These examples show that a deliberate approach to succession planning can ensure continuity and success in a business. Organizations can navigate leadership transitions and emerge even stronger by developing and nurturing talent from within, selecting leaders with clear visions, and having a disciplined talent management process.

Successful Leadership Succession Planning

Leadership succession planning is crucial for any organization to maintain stability and growth. Without a solid leadership development pipeline, organizations may struggle to keep up with changing environments and remain competitive.

One example of successful leadership succession planning is General Electric (GE). In the early 2000s, GE identified a need to develop a strong pipeline of leaders to ensure a smooth transition of power. The company created a top-level development program called the GE Executive Leadership Program (ELP) to identify and groom potential successors for the CEO position.

As a result of the program, GE was able to develop a deep and diverse pool of successors for the CEO position and ensure a smooth succession when Jeff Immelt retired in 2017.

Another example of successful leadership succession planning is McDonald’s. In 2015, the fast-food giant started a leadership development program to prepare potential successors for the CEO position held by Steve Easterbrook.

The program included:

  • 1-on-1 coaching and mentoring
  • Job rotations across functions and regions
  • Leadership development workshops

The program paid off when Easterbrook was fired in 2019, and McDonald’s was able to transition to new leadership seamlessly.

These examples demonstrate the importance of leadership succession planning and the positive outcomes that can be achieved through a thoughtful and comprehensive approach.

Development and Succession Planning Examples

Development and succession planning go hand in hand to ensure a steady flow of talented employees who rise to the ranks to fill key leadership roles. Many organizations incorporate development opportunities within their succession planning process to create a strong talent pipeline and ensure a smooth transition.

For example, Johnson & Johnson’s leadership development program prepares potential successors for key positions by allowing them to work in different functions and regions. This helps individuals develop a broad perspective and skillset, making them better suited to lead. Similarly, GE’s leadership development program includes job rotations, mentoring, and coaching to provide potential successors with the knowledge and skills they need to thrive in key leadership roles.

Successful Executive Succession Planning

To ensure a smooth leadership transition, executive succession planning is crucial for any organization.

One example of successful executive succession planning can be seen at Microsoft. Satya Nadella was groomed as a potential successor to CEO Steve Ballmer through his 22-year tenure with the company, during which he held various leadership positions. When Ballmer stepped down in 2014, Nadella was selected to take over, and since then has led the company to new heights.

“Succession planning should be a continuous process, not a one-time event. It should be integrated into the organization’s culture, and all employees should understand its importance.”

Another example is Procter & Gamble, which has a robust executive development program that identifies high-potential leaders early on and provides targeted training and development opportunities. In 2015, when CEO A.G. Lafley announced his retirement, the company was well-prepared with a strong pipeline of potential successors. The board ultimately chose David Taylor, who had been with the company for over 35 years, as the new CEO.

Key components of successful executive succession planning include identifying potential successors early on, providing targeted development opportunities, and ensuring the company has a strong talent pipeline. By integrating executive succession planning into the organization’s culture and regularly evaluating progress, companies can ensure they are prepared for any leadership transitions.

Key Components of a Succession Plan

A successful succession plan requires careful planning and consideration of key components. These components include:

  • Talent Assessment: Identifying potential successors for key positions and assessing their skills, knowledge, and abilities.
  • Leadership Development Programs: Creating comprehensive development plans to prepare potential successors for future roles.
  • Monitoring Mechanisms: Implementing systems to track progress and measure the success of the succession plan.
  • Communication Strategies: Effectively communicating the succession plan to all stakeholders, including employees, shareholders, and customers.

The most successful succession plans are those that are designed to meet the specific needs of the organization. By incorporating these key components, a succession plan can help ensure a smooth transition and a strong talent pipeline for the future.

Overcoming Succession Planning Obstacles

While succession planning is essential for the continuity of any organization, it is not without its challenges. Here we look at some of the most common obstacles organizations face when implementing a succession planning strategy and how they can be overcome.

Obstacle 1: Lack of Ownership

One of the primary reasons succession planning fails is the lack of ownership within the organization. Without ownership from top management, the process can be neglected, leading to an ineffective plan.

Solution: Ensure that responsibility for succession planning is assigned to a specific department or individual with the authority and resources to execute the plan.

Obstacle 2: Limited Resources

Small and medium-sized enterprises often struggle with limited resources, making creating and maintaining a comprehensive succession plan difficult.

Solution: Prioritize succession planning and allocate resources accordingly. Consider leveraging technology or partnering with external providers to create cost-effective solutions.

Obstacle 3: Resistance to Change

Resistance to change can often slow down or impede the implementation of a succession plan.

Solution: Educate employees on the importance of succession planning and its benefits. Involve employees in the process, gathering feedback and suggestions to increase buy-in and acceptance.

Obstacle 4: Lack of Diversity

Succession planning may overlook diverse candidates, leading to a narrow pool of potential successors.

Solution: Ensure diversity and inclusion are integrated into the succession planning process. Create opportunities for underrepresented groups, and provide support and resources for their development.

Organizations can create effective succession plans that mitigate risk and ensure success by addressing these common obstacles.

Succession planning is a critical process that ensures the smooth transition of leadership within an organization. As demonstrated in this article, effective succession planning involves thoughtful consideration of potential successors, identification, and development of skills and capabilities, and implementation of robust monitoring mechanisms.

By following best practices and implementing effective strategies such as mentoring programs, job rotations, and talent retention initiatives, organizations can create a strong talent pipeline that ensures optimal success in the long term.

Real-life examples have shown that organizations that invest in succession planning enjoy many benefits, including enhanced business continuity, reduced disruption, and increased employee engagement.

What is succession planning? Explain with an example.

What is an example of succession planning in an organization, what is a good example of succession, what is an example of a succession plan failure, what is an example of succession planning in hrm, related posts:.

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The High Cost of Poor Succession Planning

  • Claudio Fernández-Aráoz,
  • Gregory Nagel,
  • Carrie Green

examples of succession planning in companies

Many large companies fail to pay enough attention to their leadership pipelines and succession practices. That leads to excessive turnover at the top and destroys a significant amount of value—close to $1 trillion a year among the S&P 1500 alone, say the authors of this article. The biggest costs are underperformance at companies that hire ill-suited external CEOs, the loss of intellectual capital in the C-suites of organizations that executives leave behind, and for companies promoting from within, the lower performance of ill-prepared successors.

Companies and their boards can (and must) do better. The solution isn’t that complicated: Firms need to start succession planning well before they think they need to; make sure they identify and develop rising stars; appoint the most-promising executives to the board to help prepare them to take on the top job; and look at both internal and external candidates. In addition, when working with search consultants, firms should avoid perverse incentives like contingency and percentage fees.

A better way to find your next CEO

Idea in Brief

The problem.

Many large companies fail to pay adequate attention to their top-level leadership pipelines and succession processes, which results in excessive turnover and significant value destruction for companies and investment portfolios.

The Research

Analysis suggests that the market value wiped out by badly managed CEO and C-suite transitions in the S&P 1500 alone is close to $1 trillion a year. Better succession planning could, by contrast, help the large-cap U.S. equity market add a full point to the 4% to 5% annual gains Wall Street projects for it.

Companies—and especially their directors—must plan leadership changes before they’re needed, identify and develop rising stars, give them access to the board, look at both internal and external candidates, and partner cautiously with executive search firms.

In August 2013, Steve Ballmer abruptly announced that he would step down as chief executive of Microsoft as soon as his replacement could be found. Thus began one of the most important CEO searches in the past decade—and a case study in the dos and don’ts of senior leadership succession.

  • Claudio Fernández-Aráoz  is an advisor on Talent and Family Businesses, a frequent lecturer at Harvard Business School, and the author of  It’s Not the How or the What but the Who .
  • Gregory Nagel is a professor of finance at Middle Tennessee State University.
  • CG Carrie Green is the director of equities for the Tennessee Consolidated Retirement System.

examples of succession planning in companies

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Do you think succession planning is just for family businesses or for business owners who are close to retirement? Think again.

Whether retirement is 30 years away, just over the horizon, or not in your game plan at all, a succession plan is vital to ensuring the continued success of your business.

A good succession plan can help:.

  • Transfer ownership when the time comes
  • Maintain your lifestyle in retirement
  • Provide for your heirs financially
  • Prepare the business to handle unexpected events

Why is a succession plan so important?

Life happens—and unless you have a plan to deal with the unexpected, the business you worked so hard to build could crumble if you become disabled, die, get divorced, or decide to split with your business partner.

Think of a succession plan as peace of mind for the business you’ve worked so hard to build.

In this guide, learn how to develop a succession plan that works for your business.  

Some items covered include:

1. Decide how to exit your business. Should you:

  • Transfer the business to your heirs
  • Sell the business to your business partner/s
  • Sell the business to a key employee
  • Sell the business to an outside buyer

2. Conduct a business valuation

Even if you aren’t planning to sell your business, conducting a business valuation has many benefits. It helps you develop a retirement income strategy, properly value future owners’ shares, and purchase adequate insurance for protection planning. It can even make it easier for your business or potential buyers to get loans or attract investors.

3. Prepare for the transition

The transition period to new ownership is a vulnerable time for a business. Prepare both your successor and your business for a smooth hand-off.

4. Review your plan regularly

Creating a succession plan is a big accomplishment, so give yourself a pat on the back. But don’t just file your plan away and forget about it. Over the years, key employees may leave your business, family members may lose interest in taking the reins, and your own plans for your future may shift. Reviewing your succession plan annually with your team of advisors will help ensure a successful and seamless transition — no matter when or under what circumstances it happens.  

Covering Your Back: The Buy-Sell Agreement Whether you’re launching with one partner or 10, the buy-sell agreement protects stakeholders from sticky situations that could rock the entire boat.

7 Legal and Financial Steps to Closing Your Small Business Exiting a business requires filing paperwork to officially dissolve your business with the state and taking care of other legal and financial formalities.

Copyright © 2023 SCORE Association, SCORE.org

Funded, in part, through a Cooperative Agreement with the U.S. Small Business Administration. All opinions, and/or recommendations expressed herein are those of the author(s) and do not necessarily reflect the views of the SBA.


  • Succession Planning
  • Knowledge Hub
  • Human Resources

This article is going to explain what succession planning is and how it can be applied to your business.

After reading this guide, you will have a strong idea of creating or improving your succession planning process and the best practices involved.

What is succession planning?

Business succession planning, benefits of succession planning, succession planning process, succession planning best practices, faq about succession planning.

  • Succession planning template

Succession planning is the process whereby you identify new leaders and develop them to take over the role of the incumbent.

For businesses to thrive, it needs to avoid moments of crisis and lack of leadership.

At some point, succession planning will help with such a situation by preparing a candidate for a planned or emergency replacement. This could be because of retirement, a new opportunity, or in the event of death.

Succession planning is your safety net to ensure that business operations can remain smooth. A robust process will help you identify key individuals who could fill leadership positions.

In the best-case scenario, you will be given advance notice when someone is going to leave. A succession plan prepares you for the worst-case scenario and no notice.

At the same time, an effective succession planning strategy will avoid any questions of succession where leadership positions are concerned.

In the monarchy, this is often resolved through the order of succession. A well-understood model that passes the office to the nearest descendant. This model is also common with family-run businesses that intend to leave the business to their children or next of kin.

Banner for succession planning template

In business, succession planning plays a vital role in identifying candidates to take on more challenging roles. When an important postholder departs they leave behind a void that can disrupt the company.

No matter the size of your business, a succession plan is a key to having a smooth transition.

Large companies such as Pepsi , Microsoft , and General Electric have well-known succession plans for executive talent.

For large corporations, it will typically fall to the CEO and the board of directors to oversee the succession plans. They will evaluate employees to identify leadership qualities and provide training for those in consideration.

Often the succession plan will look internally for candidates to take over positions. However, some companies may look to external candidates and may even employ the use of headhunters.

Smaller-scale companies may not need a comprehensive succession plan compared to large businesses. However, there will still be a need to identify someone to take over in the event of an emergency.

Therefore it is wise to train potential successors so they are prepared to step up if the need arises.

Types of succession plans

There are two types of succession plans that should be considered. This will give your business something to fall back on in the case of an emergency.

1. Long-term succession plan

The first type of succession plan you should consider is your long-term succession plan. This is the plan that you will more or less stick to as a standard for key positions.

A succession plan of this nature can be reevaluated and changed as the company grows. For large companies, this would be the plan that outlines the details of succession for all key positions.

2. Emergency succession plan

A secondary emergency succession plan can also be created, where appropriate, to be deployed in the event of an emergency.

This type of plan may involve more temporary measures but is intended to keep operations running smoothly.

This could see other senior members of staff take on extra responsibilities while a replacement is sought.

Many small and medium businesses do not have a succession plan. Of those that do, some of them have only informal plans.

This can be a risk for your business as there could be unforeseen incidents that could occur such as death. It is worth creating a formal, written succession plan that is developed and easily accessible.

Here are some of the benefits for businesses of any size to create a succession plan:

1. Candidates ready to start

When an upcoming promotion, retirement, or departure is approaching you will have the next generation of leaders ready to go.

Thanks to your succession plan the replacement will already have the skills required to take over the role.

2. Encourages managers to develop junior employees

Your succession plan can help your managers to start developing lower-level employees.

The plan helps to define clear progression routes through the company so managers can share appropriate training and information with junior staff.

Managers will also be able to start training their replacement when promotions are approaching.

3. It leads to higher job satisfaction

Employees report higher job satisfaction when there is a succession plan at their company. This is because it helps to define routes to progressions and lowers job insecurity.

A succession plan can help employees understand what they need to do to achieve a promotion. It can help with goal-setting and giving employees a sense of direction at work.

4. Helps to track progress

Succession planning can help your managers to track employee progress through performance reviews.

Internal opportunities can also be quickly filled with knowledgeable employees who have been upskilled and crossed trained.

5. Keeps shareholders confident

Whenever a high-ranking postholder leaves the organization it can leave shareholders feeling uneasy.

In some cases, they may look to sell their shares. A good succession plan can help keep investors on board.

For positions like CEO or CFO, the board may have had some input into the choice of successor. This will give the shareholders confidence in the company and the new postholder.

6. Cultivate and maintain company loyalty

Having a strong culture of promoting from within can lead to increased company loyalty.

You can attract talented employees who will stay with you for a long time. This helps them to have a strong understanding of the businesses, morals, and expectations.

Employees are more likely to stick around for the long term if there are defined advancement opportunities.

Instead of an informal plan, it’s a good idea to make a comprehensive document that outlines how succession should work.

Small and family businesses may only need a limited plan that outlines succession for a single person.

Larger corporations may need a comprehensive document that starts with the hiring process and works its way through the ranks and details different leadership positions.

The fundamentals of your succession plan will remain the same which is what we’re going to look at now.

It’s also worth pointing out that this document can be revised and amended whenever it is necessary.

1. Determine the scope

You will need to figure out how comprehensive you want your succession planning to be.

A small business might only need to find a replacement for ownership. Medium and large businesses may only want to consider the succession plan for their C-suite of employees.

It may also be the case you want a succession plan that covers every eventuality from store manager to distribution to CEO.

Ask yourself the following questions to decide what is best for your business:

  • Do you only need a plan that covers senior management?
  • Do you want a succession plan that covers the entire organization?
  • Are there any vulnerabilities in your business? Such as having a division with a higher amount of employees nearing retirement. Are you prepared for that?
  • Should performance reviews be used to help identify potential candidates?
  • Should the talent acquisition process be a part of your succession plan?

It’s important to understand what your specific needs are as well as the needs of the business.

The size and type of your business can help to inform some of your decisions but ultimately every business will be different.

2. Identify key positions and skills

First, you have to identify the key roles in your organization that will be good to secure.

It could be the CEO, CFO, CCO, CHRO, and different heads of departments.

Second, you might have some specific specialists that are unique to the industry or your business, e.g. it might be some highly skilled engineer, programmer, scientist, etc.

Consider the following questions to identify key positions and the skills needed for that post:

  • How does this position impact the company?
  • If this position became vacant, how would that affect the company?
  • Are there some big risks if this position became vacant?
  • What skills (both hard and soft) are needed for this specific role?

The objective is to figure out how crucial the position is. If the company would be severely affected by a vacated position then this is one that should be considered within your succession plan.

You will also need to understand what specific attributes are needed for the role. That way you can build your training and development around nurturing those key skills.

3. Identify potential candidates

Perhaps the most crucial stage is finding the employees that might be suited to a tougher challenge .

You could ask the current postholder for help determining who could step up in their absence.

It’s also worth considering that the right person for the job isn’t necessarily the next in line. Candidates could be sidestepped in the role or there could be other promising candidates in the business.

You may wish to make hiring a part of the plan and therefore can use interviews to vet potential recruits for career prospects.

Try to answer the next questions:

  • Who are the strongest candidates to step into this role?
  • What skills do they possess that could benefit their new office?
  • What skills are the candidates lacking?
  • Does this person have the appetite for more responsibility?
  • What training will they need to succeed?

It’s important to identify people who want more responsibility. Your top choice maybe someone who is happy in their current role and not looking to change.

This is something that can be gauged during annual reviews or in meetings about their professional goals.

4. Speak to the candidates

It would be wise to speak with the people you are considering.

This will give you a clear answer if they would be interested in the role.

Don’t make any promises but explain that they are being considered for leadership.

Explain that nothing is guaranteed as there are plenty of moving factors to consider. This includes the current postholder, the company, and the candidates.

However, you can gauge their interest and it may help to encourage high-performing individuals to remain loyal to the company.

5. Work on professional development

Leadership development is worth investing in particularly for employees you have identified for succession into key roles.

There are a variety of ways to develop potential successors and help them to develop leadership skills.

You can create a leadership development plan to ensure candidates have the right skills and are a good fit for leading positions. Employees being groomed for leadership roles can be developed in several ways .

You need to test your employees to make sure they can meet the demands of the increased responsibilities.

Some of the ways this can be achieved are through:

Connect the candidates with business leaders in your company. They can help to develop the skills of succession candidates and even share knowledge that might not be immediately obvious.

You can send prospects on courses to help develop their skills. These could be in-house courses or ones run through independent third parties.

Task forces

Task forces and project management is a great way to test your candidates. This will give them the opportunity to lead a team and test how well they cope under pressure.

When you think about development consider the following questions:

  • What is the best way to upskill?
  • What resources are required and available?
  • Are there some additional skills needed?

The focus should be on improving a candidate’s interpersonal abilities and communication skills that are important in a leading position.

You will also want to give them the opportunity to learn and develop the necessary skills required to do the specific job.

6. Trial and error

There should be ample opportunity to give your succession plan a trial run with the candidates you are considering. For example, if the postholder is away on holiday or off sick for an extended period you can use this as an opportunity to try someone in the role.

The benefit here is twofold, the candidate will get a feel for the position and appreciate the opportunity. While you can assess whether they are the right candidate for the position.

Note: Such tests can affect the team so pay close attention to this . This is especially true for external candidates and people from different teams. Not everybody will like it, unless the candidate is a strong leader from the inside of the team.

This is what you need to consider:

  • How does the employee interact with others?
  • Have they kept the department running smoothly?
  • How do they handle issues that arise?
  • How do they react to stressful situations and conflicts?
  • How much help do they need in the role?

You want to see them step up and take control of the position. This will help identify if there is any specific training they need to take the role full-time.

You can gauge whether someone is wrong for the position. This may come down to their interpersonal skills or ability to deal with new challenges.

7. Refine and redefine

Your succession plan is something that can be developed over time.

It may be that what was working years ago isn’t quite the same now.

You may need to adjust the succession plan to adapt to a changing business landscape. As the business grows you may need to redefine what is included in your succession plan.

It would be prudent to start with the most important roles in the business. After all, you can’t totally predict when a key position will become vacant.

Once you have those key positions locked down you can start to expand the scope of your succession plan.

1. Start from key roles

You should start with the most important roles first.

Which of the positions will have the greatest effect on your business if the postholder doesn’t turn up tomorrow?

Roles at an executive level are going to be the most disruptive ones. From there work out the specific skills and knowledge required for the role. This will help you to create your plan and identify potential successors.

Once the most pressing roles are covered you can look at what other roles are important to include.

2. Talk to your employees

Your succession plan will affect people and may make some people feel nervous.

It’s important to explain the scope of the succession plan and why certain roles are included in it.

You may only look to include executive positions or your plan may include managers and supervisory staff as well.

By giving a clearly defined scope you can avoid members of staff second-guessing their position.

3. Collaboration between management and HR

This is a process that should be driven by the business leaders with support from HR where necessary.

It is not strictly an HR process and therefore senior leadership should be communicated with regarding the succession plan.

Gain insights, input, and information from across the senior positions to help the succession plan run smoothly. Interviewing the post holders about the wants and needs of their job can provide crucial information.

4. Forecast your business needs

You should have an emergency succession plan in place that can deal with the untimely vacancy of a position.

Alongside this, you can create a detailed forecast and a longer-term plan. This is necessary to address things like upcoming retirement and promotions.

You will also need to consider how quickly the business can mobilize to fill this position.

A strong succession plan will understand how it will impact the business in 6 months, 1 year, and 5 years.

5. Create a pipeline of talent

Create a pipeline of talent so you have individuals ready to take up new challenges as they arrive.

A pipeline of this kind is essential for finding a talented successor but it’s also a good idea to help fill newly created positions. New recruits can be included in your pipeline of talent.

You can learn about this in our talent acquisition guide.

Even if you don’t have any open positions currently, you can still start cultivating a pool of talented individuals.

6. Annual talent reviews

Your succession plan is something that should be continually developed.

This includes reviewing the candidates on an annual basis or more. People may have moved on or into new positions within your company. Promising candidates may no longer be performing at the standard you would like.

Take a look at your succession plan every year and adapt and change things where it is necessary.

7. Build the learning culture inside your organization

It will help you nurture and grow potential candidates as well as new talents.

When you have identified the individuals that are being considered for senior positions you will need to develop their skills.

You can work with the candidates and they can lead their own individual development plan.

This ensures that their progress is actively monitored and they can take ownership of the process.

Managers should be on hand to provide guidance, resources, and provide timely reviews.

Why is succession planning important?

Succession plans make your business disaster-proof. They provide a concrete plan for filling key roles and help to avoid times of uncertainty. It can be reassuring for investors to know that there is a carefully considered plan in place.

How to do succession planning?

Succession planning should be conducted by business leaders with support from the HR teams. All affected individuals need to be involved in the process. Start with the end goal to identify what you need to achieve. Each business will have different needs so consider which positions will have the biggest effect on operations.

What is business succession planning?

Business succession planning is the process whereby you identify candidates to be groomed for senior positions. Specifically, when the incumbent leaves the role, this could be for a promotion, retirement, or an untimely death. Your business succession plan is in place to facilitate a transfer of power and keep your business sailing smoothly.

What is the correct order of the succession planning process?

  • Identify which positions need to be included
  • What specific skills are required for those roles?
  • Identify people who could be a good fit
  • Start grooming them for succession
  • Review your succession plan and candidates annually

Succession Planning template

Avoid moments of crisis and lack of leadership by preparing candidates for a planned or emergency replacement.

examples of succession planning in companies

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  • HCM Data Loading Business Objects

Examples of Loading Succession Plans

You can use HCM Data Loader to create and update succession plans. A succession plan identifies a group of workers as candidates to replace key personnel in an organization.

Succession plans include assessments of a worker's readiness to move into a vacancy and the risk and impact of the worker's loss. This topic provides some examples showing how to load succession plans.

Create Succession Plans

This example SuccessionPlan.dat file creates an incumbent succession plan using source keys.

This example SuccessionPlan.dat file creates a job succession plan. It uses user keys to reference the job to which the succession plan relates, the succession plan owner, and its candidates.

These rules apply when you create a succession plan using HCM Data Loader:

You must supply a Success Plan Owner component, and the OwnerTypeCode attribute must be ADMINISTRATOR . A succession plan must always have an administrator owner.

Incumbents, plan owners, and plan candidates must have active assignments.

Enable Alerts for Succession Plans

A succession plan has an Alerts section. This section has check boxes that control whether notifications are sent or not for assignment changes of either the plan incumbent or candidates. You can upload these alerts related attributes for succession plans:

IncumbentRoleChangeFlag : Indicates whether the job role has changed for the incumbent of a succession plan

EnableSuccessorAlert : Indicates whether an alert notification should be sent when a candidate moves to the role of the succession plan

EnableMovedToDiffRoleAlert : Determines whether an alert notification should be sent when a candidate moves to a role that's different from the role of the succession plan

EnableIncumbentJobChangeAlert : Determines whether an alert notification should be sent when the plan incumbent's role changes

When you upload data about the succession plan owners, use the EnableAlert attribute to enable alerts for the plan owner.

When you upload candidate data, you can also upload these attributes:

ShowSuccessionStatusFlag : Determines if banners are shown in the Candidates section when a candidate changes roles.

SuccessionStatus : Indicates the code of the candidate succession status. The values that you can enter are NULL , ORA_HRM_MOVED_TO_DIFF_ROLE , and ORA_HRM_SUCCESSOR . The default value is NULL .

This example SuccessionPlan.dat file creates a job succession plan. It enables alerts for these assignment changes:

Candidate moves to the role of the succession plan

Candidate moves to a role that's different from the role of the succession plan

It also enables alerts for the plan owner and shows a banner for a candidate to indicate the candidate's role change.

Remove Plan Owners

Sometimes workers may no longer be part of the organization. You may want to remove terminated workers who were added as owners from succession plans.

This example SuccessionPlan.dat file is used for removing a terminated plan owner from a succession plan. It uses source keys to identify the succession plan.

Business Succession Planning: A Step-by-Step Guide

examples of succession planning in companies

Business succession planning is a valuable tool for both small businesses and growing enterprises. In small businesses, succession planning means effectively managing changes in ownership or leadership. In larger organizations, it that can help to avoid potential talent gaps that have a detrimental effect on the company. The right strategy can help you plan ahead so that you can transfer knowledge and retain employees in key roles. And this is a top priority in these uncertain, post-pandemic times.

With that in mind, we have created a step-by-step guide to help you design and implement a plan that sets your business up for long-term success . We will take a look at the benefits of succession planning in HR and break down the succession planning process to help you understand everything that’s involved.

Table of Contents


What Is a Succession Plan?

So, what is the definition of succession planning? How can you apply it to your business?

Business succession planning is a process that helps you prepare your company for the future. Essentially, it’s about creating a strategy and process for identifying potential future leaders and developing their skills so that they are ready to take on a new role when one of your key employees leaves the company.

Through careful planning, communication, training, and feedback, you can create a successful change management strategy that prepares you for potential transitions in your business. This helps you avoid key player talent gaps. It also helps you proactively develop your inclusive leaders of the future.

Despite its valuable role in business planning, according to a survey conducted by SHRM last year, only 44% of HR professionals claim that their organization has a succession plan in place. What’s more, only 21% of those that do have a plan in place have created a formal succession management plan.

Do you have a detailed succession plan in place? If not, then you’ve come to the right place.

Why is Business Succession Planning Important?

According to the 2021 Global Leadership Forecast , companies around the world are facing a leadership crisis. In fact, only 11% of surveyed organizations reported that they have a “strong” or “very strong” leadership bench, the lowest rating in the past 10 years (it has been in decline since 2011’s reported 18%). This drop has been attributed to a decline in leadership development and transition training in organizations.

Understandable given the distractions the world has had over the past couple of years.

Nonetheless, this figure shows just how important it is for organizations to work on their succession management strategies. This is the most effective way to ensure that the leaders of the future have the right skills and experience to guide them to success . And this is what business succession planning is all about.

By preparing strong leaders for the future, you can help your organization reach its long-term goals, reduce employee turnover , and build a stronger and more resilient business that’s ready to thrive.

Benefits of Business Succession Planning

In case you’re still not convinced, let’s take a look at some of the specific benefits of business succession planning in a bit more detail.

  • Identifying and developing your existing employees for future leadership roles helps you to promote from within . Aside from reducing turnover and hiring expenses , this also helps you ensure your future leaders have the right organizational knowledge and internal relationships , something which external recruits will lack.
  • Promoting the development of your existing employees shows them that you are willing to invest in their future . This can be a great morale boost that motivates employees to stay at your company. This helps you stay competitive and attract top talent to your business.
  • A well-designed succession plan helps you formalize training for both present and future leaders. It keeps your business moving forward and helps you retain your top performers .
  • Business succession planning is also an effective tool for mitigating the risks of organizational change . This helps you avoid any potential talent gaps when someone leaves your company. It also helps you pass on valuable institutional knowledge to future leaders before it’s too late.

What is Succession Planning in HR?

Succession planning in HR consists is a vital part of talent management. It’s all about your role as an HR professional in identifying key roles and positions that may need filling in the future and finding and developing internal candidates who may have the right skills and experience to fill them. The right strategy can help you retain staff, cut recruitment costs and better manage your internal recruitment processes .

HR succession planning is the process of identifying, selecting and developing employees who could potentially become key players with the right development. This helps you prepare for potential organizational changes so that you have skilled and engaged employees waiting to fill key leadership roles when the time comes.

As an HR professional, you play a significant role in preparing and facilitating your organization’s succession management strategy. However, for your succession planning in HR strategy to succeed, it’s equally important to get the support of senior management so that your plan is as effective as possible and aligned with your organizational goals .

Talent Management and Succession Planning: Employee Buy-in

Business succession planning is also about managing your existing talent so that you are able to retain as much institutional knowledge and experience as possible. This means that, aside from working with senior management, you also need to rely on the feedback of your employees.

What do we mean by this?

Essentially, it’s all good and well managing and developing your existing talent, but they need to be on board with your succession plan and have a genuine interest in remaining at your company and developing their skills. Otherwise, the time and money you invest in preparing them for future leadership positions will be wasted.

Make sure the potential succession candidates you select are:

  • Interested in learning new skills
  • Comfortable with change
  • Motivated and engaged
  • Able to adapt to uncertainty and new working environments
  • Willing to take on more responsibilities
  • Up for a challenge

The Business Succession Planning Process in 5 Steps

Now that we’ve discussed what business succession planning is, let’s take a look at what you need to include in your succession planning process.

Make sure your succession planning framework includes the following 5 key stages.

Define & Align Your Goals

The first step is creating a succession leadership plan. This means you need to define your goals and align them with your business. You may need to meet with senior leaders for this phase to ensure your goals are aligned with your overall strategy.

You also need to have a clear idea of who you are as a business before creating your succession leadership plan. Once you understand “who” you are, you will be better equipped to identify your potential new leaders.

Finally, to complete your plan, you need to:

  • Define the roles, skills, and experience that each successor will require (your succession profiles). Make sure you gather as much feedback on this as possible from your team to help you get a full picture of what you need to include in your succession plan.
  • Create a forecast of your company’s needs . Where do you need to be as a company within the next 5 years? How will your organizational structure change over this time? Think about your turnover trends, compensation strategies, who may be due to retire, and training and development plans for the future.
  • Update your job descriptions to reflect the information you’ve gathered. Make sure you are clear about your expectations . This will help you define the right candidate profiles for your succession plan.


Create Your Succession Strategy

Defining your goals is one part of your plan, but you also need to create a comprehensive succession planning strategy to make sure you are on the right track – you need a business strategy game plan !

So, what does this mean, exactly?

Put simply, you need to define a series of actions and strategic moves that help you align your succession goals and objectives with your overall HR strategy .

Consider the following:

  • Where do you want to be as a business? What roles, positions, skills and experience will you need to succeed?
  • Which senior/leadership roles do you need to create a succession plan for?
  • Will you take business succession planning into account during performance appraisals in order to identify potential candidates throughout the year?
  • Does your business have any specific vulnerabilities that may affect your succession plan? (For example, a high percentage of employees that are due to retire soon)
  • Have you considered adjusting your hiring strategy to account for successor roles?

The key here is to be as proactive as possible with your strategy. Anticipate potential gaps in your workforce before they occur.

Identify Potential Candidates

The next step is to evaluate your current workforce in order to identify key positions that may need filling in the future, and key employees that may be suitable replacements. This is where you will implement the succession profiles and job descriptions that you created in the previous step. The more information you include in your profiles and descriptions, the easier it will be to identify the right match within your existing workforce.

Generally speaking, the best candidates will be supportive, proactive, engaged with learning and development, great problem-solvers, adaptable and able to take on more responsibility.

It’s important to be as objective as possible in this stage. You also need to consider that potential candidates may not currently be in leadership roles. It’s all about finding potential. The most effective way to do this is by using succession planning tools and metrics, rather than relying on personal opinions. More on this shortly.

Establish Professional Development Opportunities

As soon as you have your list of potential candidates and you know what skills they need to work on in order to eventually fill the role you have matched them to, it’s time to create a professional development plan to help them get where they need to be.

Which skills does each candidate need to develop? What learning opportunities would help them get the right experience and expand their current skillset? Are there any knowledge gaps that you need to address?

Create a list of the skills each candidate currently has vs. the skills they need to acquire, then work out the best way to offer them suitable opportunities for learning and development. Create individual development plans, offer formal training, consider creating a mentoring or coaching program to support them, and encourage continuous feedback and communication.

Implement Your Plan

The final stage is implementing your business succession plan. This will usually be a gradual transition with multiple short and long-term layers.

The first layer involves officially announcing your succession plan and notifying potential candidates. You then need to roll out your individual development plans and arrange training. Introduce candidates to their mentors, if you are using them, and encourage them to meet regularly. This will show your employees that you support their professional development, and you can see that they have potential.

Most importantly, make sure you collect regular feedback to see how your individual development plans are progressing, and if potential candidates are on track to reach their succession objectives.

Business Succession Planning Best Practices

Here are a few business succession planning best practices to help you create a plan that sets you up for success:

  • Formalize your plan . The sooner you create and formalize a detailed succession management plan, the better. Make sure your succession planning process focuses on all key stages. That means not just identifying the roles and skills you need for your future leaders, but also implementing individual development plans to get your workforce where they need to be.
  • Make sure your succession planning in HR plan is dynamic . Succession planning is all about change management. Be prepared to adapt to change by constantly updating your plan.
  • Collect regular 360-degree feedback . This will help you keep track of your employees’ interests, skills, performance, strengths, weaknesses, and opportunities.
  • Promote open communication . This will help you build trust and set clear expectations.
  • Consider your entire workforce . Don’t just focus on your managers. Your leaders of the future might be hiding in lower-level positions. Look for potential, not existing skills.

Succession Planning Template

One of the most valuable tools you can use for this strategy is a succession planning template. The right template will help you define key roles within your company and identify suitable replacements. Make sure you include a template in your HR audit checklist (check out this HR audit checklist template if you don’t already have one!)

Here are a few examples of the information you can collect with a succession plan template:

  • Current key employees and potential replacements
  • Key skills and experience that each position requires
  • Candidate training and/or experience level
  • The time it would take to onboard a candidate for an existing position
  • An overview of upcoming vacancies (for example, key employees that are due to retire)

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Succession Planning Tools

In order to create and manage an effective business succession planning strategy, you need to use the right succession planning tools. These are the tools that will help you identify which candidates could potentially be future leaders at your organization. They also help you identify potential succession gaps and map the right candidates to the right positions.

Ideally, you should be using a range of tools to help you get a full picture. Here are a few examples of succession planning assessment tools that will help you with this:

  • Personality assessment tools : to help you get a comprehensive picture of your existing culture (e.g. tools for tracking motivation levels)
  • Behavioral assessment tools : to help you identify and analyze employee leadership skills and assess how they behave at work (e.g. situational judgment tests)
  • Cognitive assessment tools : to evaluate critical thinking and reasoning skills related to performance (e.g. a cognitive aptitude test)
  • 360-degree feedback : to gather valuable input from employees and their peers in order to understand their readiness to take on future roles (included in most performance management software solutions)

Succession Planning Software

Finally, once you have designed and implemented your business succession plan, you need to regularly monitor progress. This will help you determine if your plan is working and if potential candidates are on track to reach their succession goals.

And this is where succession planning software can help.

Succession planning software isn’t as daunting as it sounds. In fact, most HRIS systems can provide you with the data you need.

The first thing you need is access to key metrics and KPIs . This includes turnover rates, retention rates, cost-per-hire, time-per-hire, and the rate of planned positions being filled. You also need to evaluate performance metrics to determine if business succession planning candidates that have taken on their new role were ready for it.

Did they achieve the training and experience they needed during the development phase in order to take on their new leadership role? If not, what could you have done better?

By analyzing the right data, you can determine what areas of your business succession planning strategy you need to work on in order to continuously improve the quality of your succession candidates. And by using the right HR software and performance management software you can easily identify talent gaps, make comparisons between employees, and simplify the succession management process.

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Buying and Selling a Business | Templates

Succession Planning Template & 5 Steps to Write a Succession Plan

Published October 14, 2019

Published Oct 14, 2019

Robert Newcomer-Dyer

WRITTEN BY: Robert Newcomer-Dyer

A business succession plan includes step-by-step instructions that establish procedures in the event a business owner or key employee leaves the business. Our succession planning template helps business owners as they answer questions like who will take over the business, how long will it take, and what standard operating procedures need to be passed on.

There are five common steps involved in succession planning:

  • Timeline of succession
  • Determining your successor
  • Formalize your standard operating procedures (SOPs)
  • Value your business
  • Fund your succession plan

Download Succession Planning Template

Succession Planning Template

Click below to download our succession plan template as a DOCX or PDF:

  • Download as PDF
  • Download as DOCX

How Succession Planning Works

Succession planning is the set of events, timelines, and standard operating procedures that are established ahead of a change of ownership in a business. Business owners can create a succession plan in a number of ways, including by following this succession planning template, as well as by engaging a professional who’s well-versed in the process.

Who Should Create a Succession Plan?

Any business owner with a successful, thriving business should consider creating a succession plan. Often thought about in the context of retirement or sale of a business, a succession plan is also a critical tool in the event of untimely death or illness. A properly constructed succession plan acts like a will for your business, ensuring the best interests of the business are carried out.

When to Create a Succession Plan

Business owners wondering when to use this succession planning template to create a plan might wonder when they should get started. Much like a personal will, the answer depends on a variety of factors, but generally comes down to as soon as possible.

Creating a succession plan takes time and effort, and answering the questions accurately is not easy. For this reason, many business owners start planning for succession at least five to six years before a transition. Creating a succession plan should be considered as a contingency in case of death, illness, or other circumstance that creates an unexpected need for transition.

Succession Planning Resources

Finding help with succession planning may mean working with your current accounting firm (provided they have experience with helping to develop succession plans). The amount of help you need will likely scale up with the urgency of your succession planning needs, as well as the size and complexity of the business. Consider whether to bring in a temporary accounting and finance professional, or hire an accounting firm to assist you.

Some resources you can tap to help you with succession planning are:

As one of the accounting industry’s “Big Four,” PricewaterhouseCoopers (now doing business as PwC) is a firm with extensive experience in succession planning. The company’s self-described focus on small, privately held businesses minimizes the risk of becoming just another number and means it commonly deals with the sort of obstacles that you’ll encounter.

SCORE , the nation’s largest network providing small business mentoring, has developed a quick guide to succession planning. The real value is that small business owners can apply to be matched with mentors who offer their assistance on a volunteer basis. For business owners in need of simple succession planning help, this option is worth consideration.

Local Accountant

Small business owners may wish to consider working with a local accountant (provided that accountant is well versed in succession planning). Entrepreneurs who choose this route can ask around in their personal network, tap in to their local Chamber of Commerce or other local business support groups, or search for a certified public accountant in the directory provided by the American Institute of Certified Public Accountants.

The Five Steps to Writing a Succession Plan

Writing a succession plan can be a daunting task. Indeed, many business owners put it off because they’re not ready to tackle the complexities. We’ve narrowed the process down to five simple steps to direct you along the way, including choosing your successor and determining whether to sell your business using life insurance, an acquisition loan, or other methods.

The five common steps to preparing a business succession plan template are:

1. Timeline of Succession

There are two key types of succession plans: an exit succession plan and a death-or-accident succession plan. You may wish to write a death-or-accident succession plan well in advance of when you think you’ll need it to protect your business and successors in the event of unanticipated events. An exit succession plan should be written when you have a specific plan to transfer ownership of your small business.

The two most common types of succession plans are:

  • Exit succession plan: A plan to transfer ownership on a specific date, e.g., at retirement.
  • Death-or-accident succession plan: A plan for one’s business in the event of their death or disability.

While an accident plan should be considered at any age, an exit succession plan should be written when you are within several years of retirement or wish to otherwise exit the business. When writing an exit succession plan, you should have a specific date that you would like to transfer the business, and indicate whether you will remain involved in the business post-succession or prefer a clean separation.

Template Tip

On the succession planning template, answer all the questions in section one. If you’re writing this succession plan to exit your business on a known date, fill out any remaining details, including how long you expect the transition to last.

2. Determining Your Successor

A highly important aspect of writing a succession plan is choosing who will take over the business. Many business owners plan to have a family member, such as a child, take over the business. Other common choices include a business partner or key employee in the business. And of course, an outside buyer is always a possibility.

Common successors business owners choose are:

  • Family members
  • Key employees
  • Outside buyers

Choosing a successor may be difficult, and requires considering what is in everyone’s—including the business’—best interest. While keeping the business in the family may seem like a clear choice, keep in mind that second generation businesses have a high failure rate. For this reason, many business owners choose instead to sell the business and provide a cash inheritance for their family.

Consider filling out profiles for at least three potential candidates. This will give you a good preliminary comparison of everybody’s skill and experience. Even if you’re already set on a candidate, you may wish to have a backup plan in the event the person leaves your business or doesn’t want to become an owner.

3. Formalize Your Standard Operating Procedures (SOPs)

As a small business owner, you should understand the importance of recording and formalizing day-to-day functions. Standard operating procedures should be documented for your managers and employees to reference, as well as any future owners of the business. Important items to document may include a daily checklist of opening and closing procedures, training for new employees, and a performance management system .

SOPs vary from business to business, but often include the following items:

Common Standard Operating Procedures

In our succession plan template, we’ve provided a checklist for these items—feel free to add or remove any, if necessary. Once you have completed an up-to-date document, attach it to your succession plan and check it off the list.

4. Value Your Business

Figuring out the value of your business should happen early—and regularly. It’s an unfortunate fact that many business owners tend to overvalue their enterprise, and these misjudgments can snowball into financial errors when planning for retirement.

There are several ways you can determine the value of your business, from using a simple business valuation calculator to provide a rough estimate, to following more advanced methods for how to value a business , as well as hiring a professional appraiser. You may also consider working with a company that offers business valuation services, such as BizEquity or Guidant Financial .

A good practice is to consider the lowest price the business should sell for. When the business is eventually listed for sale, it may take a long time to find a buyer who is willing to pay your asking price. The succession plan should provide stipulations regarding how long to wait before dropping the price, how much to lower the price, and the lowest acceptable offer.

5. Fund Your Succession Plan

Few buyers out there have enough liquid cash to pay for your business upfront. This is why every succession plan needs a specific plan for how the buyer will make the purchase, whether it’s a loan, installment payments, or other option. The last thing you want is to reach your retirement date, or triggering event, and find that your chosen successor has no way to afford your business.

This is also why your funding plan will often need a buy-sell agreement. This is a legal document in which your buyer agrees to a specific course of action (like taking out a loan or life insurance policy) in order to afford the purchase. Once you’ve settled on a specific method of funding, make sure you meet with a legal professional to draft your buy-sell contract.

Common Succession Plan Funding Options

Life insurance.

Most commonly used when a family member or co-owner is taking over the business, a life insurance policy can help your successor purchase the business from you or your heirs. Contrary to how it sounds, life insurance isn’t only used in the event of one’s untimely death. Permanent life insurance builds cash value that can be taken out at any time, so it can also be used in the event of retirement, disability, or any other triggering event.

Life insurance arrangements are common in family successions, especially when you may have multiple children, but only one is taking over the business. With your chosen successor as the beneficiary, a life insurance payout can enable them to purchase shares from your other children, thus leaving everyone with some compensation and financial security.

Acquisition Loan

An acquisition loan is money borrowed by the buyer in order to purchase the business. This is common when a key employee or outside party is taking over and they need some funding to afford the purchase. Buyers can typically get 70% to 80% of the purchase price financed from a bank or the Small Business Administration (SBA) —which is great news for sellers who want to be paid in full upfront.

Acquisition loans are secured against future profits of the business. While this makes them a generally reliable option, it also means a bit of work for the seller. Prior to the purchase, you’ll need to provide a lot of details about your business for the bank’s due diligence. Even then, however, the loan is not guaranteed. Pre-approval can provide some security, but it would need to be undergone regularly (every six to 12 months) up until the transfer date or triggering event.

Seller Financing

Seller financing is when the buyer pays you back gradually over time. This is one of the easiest and most flexible arrangements, as the business owner and buyer can set whatever terms they like. Most agreements involve a down payment of 10% or higher, followed by monthly or quarterly payments with interest until the purchase is paid for in full. Again, however, the exact terms can vary widely.

The key downside to seller financing is the time it takes to get paid back. Especially if you’re relying on the sale to fund your retirement, a 20-year term may be less than ideal. However, given the flexibility of seller financing, it can be possible to find an arrangement that works for everyone.

Business Succession Planning Tips From the Pros

We asked industry experts in succession planning to provide some tips for business owners thinking about creating a succession plan. Choosing the right successor is a critical step, as is ensuring that you have realistic expectations throughout the process. Many business owners also ask themselves whether they should consider creating a succession plan.

Some tips when creating a business succession plan are:

Ray McKenzie

Groom Your Successor Ahead of Time

Ray mckenzie, founder & managing director at red beach advisors.

“A majority of businesses do not have a formal business succession plan and never anticipate it being needed.

“The most common mistake business owners make is they retain and keep information only for themselves. This can be signatory rights, passwords, access, or key phrases.

“Review your company succession plan every six months and every time a critical employee leaves the business.”

Ed Alexander

Keep Your Expectations Realistic

Ed alexander, esq., founder at alexander abramson pllc.

“The biggest mistake small business owners make in their succession plans (aside from not having one) is having unrealistic expectations.

“First, business owners regularly have an unrealistic conception of what their business is worth. It’s their baby, and they have an emotional connection to it, but this connection can’t be laid out in a profit and loss statement.

“Second, Family Business Institute data has shown that 88% of small business owners believe that transferring the business to their children is a viable succession option. The reality is that only 30% of small businesses will pass to a second generation, and only 12% to a third generation.”

Patrick Hicks succession planning template - Tips from the Pros

Consider the Risk of No Succession Planning

Patrick hicks, head of legal for trust & will.

“Having a business succession plan becomes more important if your business has valuable assets or has employees. If you operate your own business with just yourself and no business assets, the downsides of having no plan may be smaller.

“If you have employees, consider who will be able to make payments to those employees and who will carry on operations after your death.

“Machinery, equipment, materials, intellectual property, and customer lists can all be valuable assets—the brand and reputation associated with your business—that can all disappear if you don’t have a plan in place to deal with those assets.”

One of the most common mistakes business owners make in succession planning is failing to review their plan regularly. Time changes many things, and in order for your succession plan to be effective, it needs to be reviewed regularly and updated to reflect any changes. These could be company changes, tax law updates, changes in valuation, or new industry developments, among other things.

For family-owned businesses, you’ll also need to consider aspects such as changing family dynamics—do all members have the same desire regarding what to do in the future, or are all key players still with the business? It’s essential that business owners update and adjust their business plan to reflect changes such as these.

Bottom Line

Often, the most difficult part of succession planning is answering difficult questions. What unexpected events should you prepare for? Who will take over your business? How will you compensate yourself, your spouse, or your children? You can answer these questions with the help of our succession planning template. You may also wish to engage legal or financial experts with experience in succession planning.

About the Author

Robert Newcomer-Dyer

Find Robert On LinkedIn

Robert Newcomer-Dyer

Robert has over 15 years of experience in sales leadership, finance, and business development. He recently spent six years leading a team of small business financing professionals, facilitating the deployment of critical capital to over 9,000 small businesses across the US.

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