Given today’s dynamic business landscape, few employees stay with their companies for the entirety of their careers. In fact, research from the U.S. Bureau of Labor Statistics shows that the median tenure of U.S. workers with their current employer is 3.9 years. Additionally, tenure continues to decline among younger workers, with employees ages 25 to 34 averaging 2.7 years, compared to 9.6 years for those 55 to 64.
No matter the reason for employee turnover — such as accepting a role at a different company, transitioning to a new industry, taking a career break, or retiring — having a proactive succession planning strategy in place is critical to long-term business success. Effective executive succession planning is particularly important to ensure your organization has a pipeline of capable leaders ready to step into key roles when the need arises.
In this article, we’ll explore the importance of aligning executive succession planning with your long-term business strategy.
Executive succession planning is the proactive process identifying, developing, and preparing future leaders within an organization. While talent pipelining often focuses on identifying external candidates, succession planning places an emphasis on preparing existing employees to take on leadership roles at the company.
Executive succession planning goes beyond simply filling vacancies and is about ensuring the right talent is in place to drive your company’s vision and strategy forward.
Benefits of proactive executive succession planning include:
Succession planning is also beneficial to employees in the following ways:
Leaders play a critical role in business growth and success. Each time an executive or leader leaves your organization, company knowledge walks out the door and your team risks lost morale, productivity, and revenue. Analysis published in Harvard Business Review found that poorly managed CEO and C-suite transitions in the S&P 1500 can wipe out close to $1 trillion a year in market value each year. Because of this, succession planning is critical to your overall business and talent management strategy.
HR leaders recognize the importance of succession planning and are leading the charge with implementing proactive leadership development and succession plans. According to the 2024 Voice of the CHRO report distributed by Mercer, over half of respondents (52%) identified building leadership capabilities as their top priority. Additionally, among surveyed CHROs, succession readiness for critical roles (39%) and executive roles (37%) were identified as the top two significant people risks at their organizations.
In an ideal scenario, succession plans should be in place for all roles across the organization. However, this can be challenging to scale, especially at larger companies. At the very least, individual succession plans should be created for C-suite, executive, and management positions, as well as any critical specialist roles that would leave a significant knowledge gap if they leave the organization.
Many organizations don’t have formal succession plans in place and instead take a reactive approach to backfilling roles as the need arises. Consider implementing the following steps to take a more strategic, proactive approach to executive succession planning.
Start the process by thoroughly understanding your company’s vision, goals, and strategic initiatives for the next five to 10 years. Your business strategy outlines where you want your company to be in the coming years, such as revenue growth goals, new products or services, and expansion into new markets.
By aligning succession planning with this strategy, you can identify the specific leadership skills and experience needed to achieve your goals. This approach can help you prepare and develop internal candidates or seek external talent that matches your future business needs.
Rather than starting from scratch each time you need to fill an executive or leadership role, developing a succession plan template for critical roles across the organization can help your organization better prepare for internal transitions.
Here are some details to include in an executive succession planning template:
While developing a succession planning strategy is often the responsibility of HR and talent teams, confirming alignment and approval from leaders and other stakeholders within the company is essential to successfully implementing the strategy.
Schedule a meeting with leaders and executives across the organization to share the strategy and request and encourage feedback. During this meeting, you can have productive discussions to begin finalizing the plan. Following the meeting, also provide a few additional days for stakeholders to review the plan on their own and share additional feedback.
Gaining buy-in from executives and leaders at your company is particularly important because leaders also need to understand how succession planning will impact their specific roles.
As part of the review and approval process, also consider sharing the plan with your board of directors or board of advisors, if applicable. The Voice of the CHRO report from Mercer cited above found that executive succession ranked second among the top HR and people topics on the board agenda, with 42% of CHROs emphasizing its significance.
Once you’ve developed a succession plan template and identified the skills required for success in each role, you can focus on implementing the plan. This process involves:
Keep in mind that a succession planning strategy should be a living and evolving document. As market dynamics or business priorities shift, you may need to add new leadership or executive roles to your team. Additionally, the skills needed for internal or external leadership candidates to succeed may evolve over time.
Keeping an ongoing pulse on the market, your business needs, and your target audience’s pain points and priorities can help you evolve your executive succession planning over time.
While succession planning prioritizes developing current employees to take on future leadership and other critical roles. This approach offers many benefits, such as cost savings and smoother transition and faster learning curve compared to external candidates. In fact, research from Harris Poll and Express Employment Professionals found that 70% of hiring decision-makers surveyed would prefer to train current employees for different roles before bringing on new workers.
Despite the benefits of developing and transitioning internal employees, this isn’t always an option. Because of this, building a pipeline of qualified external candidates can help you proactively prepare to address leadership and executive transitions as needed.
Ways to build a pipeline of external leadership and executive candidates include leveraging an employee referral program or using an executive recruitment platform or other HR technology to proactively source and build relationships with prospective candidates for future opportunities.
Executive succession planning is not just about filling roles, but rather about ensuring you have the right leaders in the right roles to drive long-term business success.By taking a proactive approach and aligning succession planning with long-term business strategy, you can prepare your leadership team to thrive in an ever-evolving business landscape.
Whether you’re developing succession plans building a talent pipeline of external candidates, SucceedSmart executive search software can help ensure you have qualified leaders on your team to achieve strategic business goals.
Our powerful blend of AI-led technology and human expertise from expert talent advisors enables organizations like yours to proactively build pipelines of qualified candidates for both current and future roles. Learn more: request a demo today.
