The Importance of Succession Management for Future Business Performance

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Thing is, organizations get succession wrong 82% of the time. (Ouch.) 

Implementing a robust succession planning process complete with safeguards and contingencies—aka, succession management—is not just about de-risking talent decisions. It’s the heart of ensuring future organizational success. 

In this article, we dive deep into creating a succession management model and how to make the business case for it.  

What is succession management? 

Succession management is a systematic approach to identifying, selecting, and developing an organization-wide talent pipeline. The aim is to proactively de-risk the workforce by:

• Ensuring smoother role transitions into leadership positions.
• Engaging high-potential employees, decreasing turnover
• Retaining institutional knowledge, maintaining strategic strengths

Succession management vs succession planning 

Succession planning is the process of identifying and developing a talent bench for a specific leadership position. Succession management is more of a birds-eye view that focuses on building long-term pipeline and leadership maps for the organization at large.

The succession planning process can often be managed or informed by the outgoing leader, but succession management generally falls under the umbrella of HR.

Why is succession management urgent? 

Business conditions directly reflect economic happenings. As the external environment becomes challenging, so does the internal, making it hard to survive (let alone thrive) in volatile conditions. That can manifest in a few ways, but the first is often a shortage of talent.

Lacking a sufficient talent bench, pipeline, or pool then has significant business risks.

• There is no endgame for performance management or development. That means no EVP for employees, and no incentive to perform better. (Now more than ever, employees leave organizations because training is neither relevant nor geared for growth.) 
• KPIs can be tied to job roles, sure, but you may not be able to accurately assess individual proficiency without understanding your organization’s actual talent needs. 
• Sudden vacancies can have financial ramifications beyond immediate control. The majority of unfilled jobs in Australia, for example, are vacant for more than a month.
• You’re at the whim of the labor market and its trends, including supply and quality of local talent (if you’re not offering remote work).

That’s not to mention the insidious day-to-day effects. Poor handover processes, lack of or ill-fit temporary placements, and bad attitudes from neglected or unidentified future leaders will all continue to erode organizational culture.

On the other hand, succession management:

• Creates a readily available pool of talent for critical roles
• Optimizes costs during recruitment
• Clearly defines growth opportunities for top talent (and all the associated benefits, like remuneration)
• Gives HR insight for fairer salary banding, especially when aligned with capability proficiency
• Can uncover underperformers in the same breadth as finding high performers.  

How to create a successful succession management model 

Forewarning: The thing about succession management programs is that they generally need to start earlier or look further ahead than you’d think.

We know without the right tools, effective succession management is often a pipe dream. Don’t despair, though. We’ve got the strategy for you.  

Start with organizational strategy 

If effective succession planning and management is about business continuity, then you need to start with the foundation If effective succession planning and management is about business continuity, then you need to start with the foundation everything else is built on. And that starts with an environmental scan.  

Some thinking points here include: 

• CEO vision 
• Expansion of services, products, or locations 
• Changing customer base 
• Talent supply and accessibility 
• Competitors, specifically how they’re evolving and changing 
• Marketplace and economic trends 
• Current workforce structure. 

Consider these through the lens of significant challenges in the next five years. For example: If your business is looking to expand its suite of products with new creations, keeping the exact same workforce structure in place may mean a lack of capabilities to achieve that goal (and some very unhappy employees trying to do more with the same amount of resources).  

The point of this exercise is to both build a robust business case for a succession management plan and to ensure it actually addresses your organization’s needs. The point is to work backward from where you want to be; this is part of the thinking behind our performance learning management system (PLMS). We advocate for starting with the big, hairy, audacious goal your organization is trying to achieve, and deriving the capabilities you need to achieve that goal from the strategy to do so.

Remember when we said we know this is hard to do without the right tools? We built a platform for this, and it’s aptly called Capabilities. The flow to define your organization’s capabilities generally looks something like:

1. Upload your business strategy or goals into Capabilities.
2. Acorn’s AI will create a capability framework for you from our proprietary Capability Library (free to check out here).
3. You essentially say yes, that looks right, or no, and tweak as needed.
4. In the same amount of time it’d take to have lunch, you have a capability framework tailored to your unique organizational needs.

Next step is to align those capabilities with the right roles.

Identify key positions 

Most succession plans focus on leadership roles, given this is the traditional career track. Likely there are lynchpin roles in your organization. You’ll know them by the knowledge they manage—functional leaders like the CTO are generally your first port of call, then team leaders within those functions.

This is where we call back to those capabilities defined in step one. Rather than matching talent to titles, capabilities enable you to find the right fit for a role based on their skills, knowledge, expertise, and behaviors. That way, if roles need to be reshaped, retired, or created, you can do that without losing momentum in or talent from the succession pool.

The sweet spot for number of capabilities per job role is five to six. Five that focus on the specific expertise of the role (e.g., prospect qualification, account acquisition, and channel management for a sales director), and one or more that measure their leadership skills.

It’s worth noting that a tool like Capabilities allows you to offer non-linear career pathways beyond leadership. Some high performers are most valuable in specialist IC roles—and some of the most valuable roles you can offer to top talent are non-managerial. Identifying key talent for specialist roles creates more avenues for career development for your people, making your organization more desirable as an employer and giving you a richer pool of expertise to pull from when needed. (Side note: Making these roles subject matter experts for peer-to-peer learning can supercharge a learning culture.) 

Assess your bench strength 

Understanding the gap between your current state and desired future standing starts with knowing what you’re working with. 

This is often done manually, or through some kind of 9-box exercise, e.g. getting leaders to list succession candidates in a few different periods. (Now, in the next two years, in the next two to five years, and then five years and beyond.)

Manual identification generally makes this process longer than it need be and can leave room for subjective biases. Consider new leaders, who have never had to assess talent before. How can they be sure they’re doing right by the business? Again, we advocate for using a language everyone understands like capabilities. Within our platform, you can run a Capability Gap Analysis that show the gap between current proficiency levels and the required level of proficiency for any specified role—in this case, high-potential employees and candidates for succession.

Gaps translate to bench strength as they offer the basis for creating leadership development programs. The more advanced the proficiency levels possessed across key roles, the stronger your bench. The more foundational, the more work needs to be done developing talent.

Beyond capabilities, you’ll need to consider if someone:

• Is immediately capable of assuming a new role 
• Could work in a role on an emergency, interim basis 
• Is already working in an interim position (and filling a critical vacancy)
• Is working in another department but could transition with training.

You still want to consider short vs long-term here. You’ll net yourself some low-hanging fruit with roles that are at immediate risk of vacancy, and gain insight into what works for future professional development.

Develop your talent pipeline 

There are a few parts to this. You’ll want to formally identify: 

1. Succession candidates who are ready for critical roles (i.e., your talent pipeline). 
2. Other promising employees who are not quite ready to enter the pipeline (your talent pool). 

Knowing both is crucial to a sustainable succession pipeline. Talent has to come from somewhere, even when just entering the pipeline. Automating this process is equally important; the faster you can identify and analyze workforce data, the faster succession gets rolling. Rather than using your standard, static skills taxonomies, our Capabilities software shows where leadership capabilities are at in real time.

As the bridge for capability gaps, consider leadership development in the context it will be applied. On-the-job training should be central to training future company leaders or experts. Research shows experience is the key driver of earnings growth for employees and talent growth for organizations, so remember the organizational strategy at the root of succession management. The Josh Bersin Company calls it growth in the flow of work—an L&D approach that encapsulates developing leadership skills, fostering a learning culture, utilizing technology and, you guessed it, empowering career growth. 

Revisit and review 

Succession planning and management needs to be a systematic and data-driven process, which means ongoing measurement. 

To make it more of an exact science, consider introducing broad performance metrics. Like leadership or people management capabilities, think of capabilities that are relevant to multiple job roles, families, and departments. Within a learning platform or Capabilities software, you can group these into cohorts to scale development.

Across functions like sales, project management, and finance, you can better forecast the roles you need based on the core capabilities of the department and the availability of those within the team. Plus, team leaders can potentially use shared capabilities as shared goals for their teams to work together towards, fostering more engagement.

It’s also important to evaluate if the process is effectively setting up stakeholders to succeed.

• For employees, that could be surveys to gauge engagement, but also historical capability assessments to understand time to proficiency. Oh, yeah: Capabilities can show this data, both in reports and on learner dashboards, so employees can see how quickly they’re progressing.
• For current leaders, giving them the tools to find and qualify internal candidates in their teams. One: This makes them better coaches for their own high potentials. Two: They have a better understanding of strengths and gaps for those moving into their team. And three: You’re strengthening your existing leadership capabilities, making for a stronger leadership pipeline end-to-end.
• For HR, are you getting exactly the right data for truly strategic workforce planning? Can you provide career line-of-sight for the workforce? Are employees more engaged and satisfied? What is the measure of training effectiveness for development?

The organizational barriers to a strong succession management plan

As with all new and shiny business processes, succession management faces hurdles. You’ll need to speak the language of your various stakeholders (everyone from existing employees and key leaders to senior executives and the board of directors) if you want to nail adoption.

Beyond that, there are a few key hurdles to clear.

Resistance to change 

McKinsey found 60% of executives expect that half their workforce will need to be retrained or replaced within five years. Yet, an old-school approach to talent can prevail. Lingering loyalty to job titles and an entrenched structure can overlook the underlying capabilities needed and exactly where they’re needed.    

Making the case 

Much of the assessment in this process is about the what (what do we have and what are we missing?). HR needs to offer the how (how we’ll build or acquire talent). Arguing for succession management means talking about talent in terms of surplus and shortage. 

While long-term is the name of the game, due diligence means planning for short- and medium-term contingencies that collectively add up to a larger goal. That could be encouraging voluntary turnover of low-potential talent or “renting” employees between departments to cover talent gaps.

Relying solely on performance 

Flawed succession planning relies on the Peter Principle, prioritizing performance in one role over abilities relevant to a future one.  

Hear us out. The reason that performance is not the be-all and end-all is that it’s usually a lagging indicator. People move between roles, industries, and niches fluidly these days, but they also reach a point in which their current skillset is no longer effective (and that’s not just because skills expire quicker every year). Past performance is only half the picture of future potential—you need to be able to evaluate someone’s capacity to perform in a new role.. 

Making the case 

This is not to say that all employees have the potential to be senior leaders one day. There is an upper cap to potential, which throws up two development tracks that are beneficial for employees and organizations alike. 

1. High potential employees, aka those who are likely to become key drivers of organizational performance. This track is the most optimal use of resources in succession management. 
2. General talent gaps in the workforce. You never know where a lynchpin gap might exist. Understanding both potential and gaps means you can restructure teams, offer learning interventions, or hire accordingly. 

Legacy talent processes 

L&D and HR cannot afford to ignore technological innovations in their fields, but sometimes you simply can’t afford the innovations, period. Making the business case for enterprise software is never easy, and often not priority number one for all those with veto power in your organization.  

Making the case 

Using technology, measuring the potential for succession planning can be an inclusive activity.  

Traditionally, digitized talent marketplaces are a “democratized way” to understand talent, capabilities, competency, and individual interest. We use the concept of interest capabilities to gauge what people are interested in developing beyond their role requirements—and tracking these helps managers identify otherwise hidden potential successors.

Integrated with a learning management system, it also makes it easier to match people to jobs, capabilities to learning content, and learner data to tangible performance outcomes in the workplace. Think of it less as a business expense and more a business investment: You will go down with the ship of the old approach to people strategy if you don’t adapt now.

Key takeaways 

Succession planning is only part of the picture when it comes to ensuring a continuous talent pipeline. Having a broader succession management plan in place ensures you’re looking at the potential futures of all the critical roles in your organization. 

You’ll want to be consistently assessing the strength of your leadership bench at any given time and reviewing the efficacy of development pathways to make for a truly impactful succession management process. Linking key roles to key capabilities is also the winning move here—ensuring a clear link to business strategy and more relevant growth opportunities.  

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