Look to the Future with Succession Planning

As experienced individuals retire or leave your organization, make sure business objectives can still be met by establishing a succession plan.

Many organizations are facing the problem of the so-called “graying” of the workforce. According to a Pew Research report, 10,000 baby boomers will turn 65 every day over the next two decades (1). As they retire, there will be more job vacancies and fewer similarly experienced employees ready to fill those positions.

If your company is at risk of its most skilled and experienced employees leaving, consider succession planning to limit the impact of their absence and ensure the stability and long-term continuity of your business endeavors. Succession planning is a deliberate and systematic effort to identify and develop potential leaders within an organization. It answers the question: “Who will lead our organization in the next three or five or even 10 years?” The process does not need to be formal or complex, but it does need to be structured and proactive.

▲Figure 1. Succession planning is not a one-time event. It should be conducted periodically, especially as strategic goals change or talent leaves the company.

This article describes a six-step procedure that your organization can use to develop an effective succession plan (Figure 1).

1. Clarify your strategic business goals

To clarify your business goals, answer the questions: “What do you want your organization to achieve in the next three to five years?” and “What obstacles does the organization face in achieving those goals?”

Strategic goals might include increasing net profit by a certain percentage annually; introducing new products; expanding sales to the global marketplace; increasing efficiency by leveraging new technologies; establishing strategic business alliances; reducing safety incidents; or adopting industry best practices.

Obstacles to achieving your organization’s goals may be external, and, thus, out of your control, such as economic factors, the political climate, regulations, or technological developments. Internal obstacles that you can overcome include limited resources or employees’ resistance to change.

2. Determine the scope of your succession plan

Some organizations focus their succession planning efforts on successors to the senior team, while others broaden the scope to specific individuals with the potential to fulfill key positions, and some include all employees.

If your company’s goals depend on research and development (R&D), you may want to develop a succession plan for leaders and key employees in the R&D department. The benefit of a narrow focus is that you can devote your resources to employees with the highest likelihood to influence your organization’s future success. The downside, however, is that you may overlook hidden talent and demotivate the overlooked employees.

3. Define future talent requirements

In Step 1, you defined your goals and identified obstacles to achieving those goals. Now consider how your organization will achieve those goals and address those obstacles. What capabilities (i.e., skills, knowledge, and abilities) are required? How do these capabilities differ from those your company’s employees already possess? For example, if your goal is to introduce new products, you may need engineering executives who can lead teams that work collaboratively with other disciplines on product launches.

Identify no more than ten key capabilities you believe your organization...