The Comprehensive Guide to Succession Planning
Succession planning is crucial for businesses facing key personnel retirements. Learn the steps to identify successors, develop profiles, and create implementation plans with this comprehensive guide. Ensure a smooth transition to secure your organization's future.
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The Comprehensive Guide to The Comprehensive Guide to Succession Planning Succession Planning Interactive Workbook
Table of Contents Introduction Pre-Succession Planning Checklist Step 1: Identify critical positions Step 2: Develop success profiles Step 3: Identify and assess potential successors against success profiles Step 4: Create development plans Step 5: Identify knowledge loss risks and priorities Step 6: Capture at-risk knowledge Step 7: Develop implementation plan
Introduction For many small and medium sized businesses, succession planning becomes important when someone mentions the word retirement . Maybe it s a person in a key position, such as the CEO, or many senior employees with years of experience and critical knowledge. Either way, the situation can foster a feeling of panic and an overwhelming sense of urgency. A far cry from ongoing leadership development and knowledge transfer many large organizations maintain. It s helpful to consider that there are three main types of succession planning. Types of Succession Planning Ongoing Leadership Development Defined Departure Emergency or Interim Many larger organizations, or those experienced with succession planning, utilize it as an ongoing process of leadership development and knowledge transfer. This is the ideal, and supports a healthy and effectively managed organization. Smaller businesses with less resources may have to handle succession planning as issues arise, such as a CEO s retirement, or the loss of one or more key employees. This step-by-step guide was created for businesses who are planning for a defined departure of key leadership or key employees. By following the outlined steps you will: Identify critical positions which require highly capable employees and may be at risk of retirement Identify the most competent person for each specific critical position Identify knowledge loss risks and priorities for knowledge transfer Identify success profiles for critical positions that will be vacated Create development plans for successors to ensure they are ready to assume future roles Develop a complete succession implementation plan
Pre-Succession Planning Checklist Before you begin with step 1, review the following items as part of the pre-succession planning checklist: Document current organizational structure Do you have an organizational structure? Is it documented? This is important for any company, as it provides clarity on roles and reporting relationships. Org structures serve as the foundation on which to build any HR-related strategy. Document future organizational structure In 5 years, what will your organizational chart look like? Are you aware of certain people retiring? For leadership positions, show that the position will be vacant. Consider your future goals and what positions you will need to support your vision. Document and update job descriptions Job descriptions are a basic, yet very important and often overlooked piece of documentation. They help employees understand their roles, are critical for hiring purposes, and serve as the basis for any training documentation. Attain leadership buy-in Getting buy-in from leadership before moving forward is critical. Is the CEO onboard? Is the leadership team invested? Ensure everyone understands the importance of succession planning, and what s involved. Assign a process champion Having one person responsible for ensuring overall success of these efforts is critical. This person will hold people accountable for their action items on the master implementation plan.
Step 1: Identify critical positions Succession planning begins with the identification of which positions require leadership development planning. To do this, you must analyze positions that are most critical to the success of the company, and gather information on which incumbents may be exiting the organization. Position Criticality Critical positions are vital to achieving strategic goals. Future success of the business will be compromised if these roles are not filled with highly competent, capable people who are ready to take leadership roles. In the template below, indicate the level of position criticality on a scale of 1-5. Ask yourself, to what extent does the position: Drive revenue and impact bottom-line financial results? Involve developing strategy, designing new products, or creating growth opportunities for the organization? Require broad decision making authority? Involve relationships with external customers and key stakeholders? Influence the performance of or manage other critical positions? If the answers to the above questions were a resounding yes, rate the position criticality factor 5. If most of the answers were no, give a rating of 1 or 2. Retirement Risk Factor Simply provide a score corresponding to the amount of time until the current incumbent is expected to leave the position. 5 Within 2 years; 4 Within 3 years; 3 Within 4 years; 2 Within 5 years; 1 Within or greater than 6 years Total Score (Multiply previous 2 columns) Retirement Risk Factor Position Criticality Position
Step 2: Develop success profiles Which positions had the highest scores in step one? Positions with scores of 16 and above require immediate action in succession planning and leadership development. Now it s time to analyze which success factors the incumbent needs in order to perform these critical positions successfully. Consider the following success profile factors. Behaviors Knowledge Motivations and personal dispositions. Technical/professional information. What fosters success on the job? Experience Skills Educational and work achievements. Ability and expertise to do something well. Use the form below to complete a success profile for a critical position you have identified in the previous step. Critical Position Title: Experience and Education Required: Technical and Professional Knowledge Required: Desired Behaviors: Autonomy Authority Collaboration Competition Creativity Decision Making Trustworthiness Results-Oriented Self-Improvement Leadership Skills Required: Problem Solving Organization Task Delegation Technical Skills Public Speaking Strategic Planning Continuous Impvmt Change Mgmt Relationship Building
Step 3: Assess successors against success profiles Now that you have developed a success profile for your critical positions, the next step is to assess potential successors against those profiles. This will help determine whether or not they have the knowledge, experience, personal attributes and competencies required of the position. While knowledge, experience and skills are easier to train for, remember that behaviors are inherent traits which are more static. First, decide what the desired skill level is for each success factor. Some may be more critical than others. Next, rate the potential successor s skill level. A rating of 5 would indicate the greatest ability, extensive experience, or strongest knowledge/behaviors. A rating of 1 would indicate that potential successor requires training or doesn t have the required behaviors. Critical Potential Successor Position Title Desired Level 0-5 Actual Level 0-5 Gap (Desired- actual) Success Factor Knowledge - Technical and professional attributes Experience - Educational and work achievements Skills - Ability and expertise to do something well Behaviors - Motivations and personal dispositions Total Gap
Step 4: Create development plans How did the potential successor stack up against the desired success factor levels? Was there a large total success factor gap? This could indicate a lot of time, resources and training are required to prepare the candidate for the position. Remember, behaviors are difficult to change. So if there is a large gap between the desired and actual behavior scores, you may want to consider another potential candidate. Once you have decided on an appropriate candidate, your training plan should be based off of the gap scores for each individual success factor. Use the following template to record the success factor which requires training and the recommended learning activities. Success Factor goal- Which specific skill or behavior needs improving? Learning activities- Examples include job shadowing, on-the-job training, college courses, joining networking groups, self-study, etc. Goal date- Specific month and date the skill goal should be achieved Comments- Any additional comments on learning activity ideas or on the goal itself Status notes- What is the current status of the skill goal? Success Factor Goal Goal Date (M/Y) Learning Activities Comments Status Notes
Step 5: Identify knowledge loss risks and priorities While the people part is the most important aspect of the succession planning process, you will also need to spend time on the knowledge capture and transfer process. This is critical to ensure that all knowledge which leaves the organization through people is properly captured and transferred to the next generation of workers. This part of the process is very similar to step 1, identifying critical positions. However, in this case we are identifying critical knowledge which is at risk of leaving the organization. Use the following scoring method to rate the amount of risk the organization would experience if this person s knowledge and skills were lost. Ask yourself, What type of knowledge and skills does this employee possess? 5- Critical and unique knowledge/skills. Requires 3-5 years of training and experience. No ready replacements. 4- Critical knowledge/skills. Limited duplication at other locations, some documentation. Requires 2-4 years of focused training and experience. 3- Important knowledge and skills. Documentation exists. Personnel on- site possess the same knowledge/skills. Requires 1-2 years of training. 2- Procedural non-mission critical knowledge and skills. Up-to-date documentation exists. Current training programs in place can be completed in > 1 year. 1- Common knowledge and skills. External hires with knowledge/skills readily available. Next, utilize the same retirement risk factor scoring method used in step 1. Multiply these scores to reach the total knowledge loss risk score. Incumbent Position Risk Factor Retirement Risk Factor Total Score (multiply previous columns)
Step 6: Capture at-risk knowledge Which incumbents have total attrition factors of 16 or above? Losing their undocumented knowledge would have a strong negative impact on the organization. Now is the time to take action! Capturing at-risk knowledge should begin with an initial discovery interview. This initial interview helps identify what main areas of knowledge should receive the focus of further knowledge capture efforts. There are many specialized ways to capture and transfer knowledge. Some include: Process maps Documented processes Knowledge maps Knowledge inventories Job aids Decision trees Name: Title: What skills or knowledge do you possess that may be considered unique or difficult to replace? What are the key resources that you use to do your job? Where do others often seek your expertise? What kind of special tools, equipment, or computer programs do you use to do your job? Do you have any historical knowledge that might help avoid the repeat of a major error in the future?
Step 7: Develop implementation plan Creating a master implementation plan for the succession planning items is critical to ensure long-term success of the project. This plan is used to record goals, identify who is responsible for completing them, and create a timeline of when they should be completed. For this step, take some time to review the information you ve captured in the templates in the previous steps. What are the most critical goals and who is responsible for seeing them through? Mark an x for each year the action item will be worked on. Some items may take more than one year. Here are a few examples of questions you can ask yourself to identify the action goals: 1. What critical positions do I need to hire for? 2. Which employees moving into new positions need training and development plans? 3. What critical at-risk knowledge needs to be captured? Use this master implementation plan to guide your succession planning efforts over the next 5 years. Keep this master plan front of mind and use it as a tool to hold people accountable to the action goals. Action Responsible Year 1 Year 2 Year 3 Year 4 Year 5 Once you ve created your implementation plan, conduct discussions with your attorney and CPA regarding future structure, transition of ownership, tax management and legal processes/documentation required.
