How to Do Succession Planning: 10 Best Practices You Should Follow - SystemsAccountants

Estimated reading time: 7 minutes How to Do Succession Planning: 10 Best Practices You Should Follow

Succession planning helps companies retain top talent and enable a smooth handover when a key person leaves.

The process ensures that employees are developed to fill important roles within a business, such as an IT manager or Chief Financial Officer (CFO).

By following succession planning best practices, you’ll have groomed a successor with the expertise and management skills to keep the business humming in the event someone departs.

Succession planning means you can move staff from role to role as needed, and create a culture of professional development. It can also help achieve better strategic workforce planning.

Here’s how to do succession planning in 10 steps, focussing on the best practices that should be adopted by all senior management, especially finance leaders like CFOs.

How to do succession planning in 10 steps

  1. Assess the impact of key people leaving
  2. Fully engage the board
  3. Loop in HR
  4. Set skills criteria
  5. Identify potential candidates
  6. Align succession planning with DEI goals
  7. Create the succession plan
  8. Create training opportunities – and motivate employees to participate
  9. Refresh the succession plan, and measure results
  10. Keep in touch with recruitment agencies

1 – Assess the impact of key people leaving

Look closely at every key position in your organisation, and ask yourself what the impact would be if the role suddenly became vacant. How would it affect the business as a whole, and any critical projects they are involved in?

Due to the so-called Great Resignation [LINK 1 – to ‘Attracting and retaining talent after the Great Resignation’, an SA article from current batch] – and record-high job vacancies – there’s a big chance a critical employee will leave sooner than you think. They could be poached, or quit after rethinking their life priorities. Consider the effect on the company if several key people left at the same time. Also bear in mind their notice period – how quickly will you need to arrange a replacement to lessen the impact of their departure?

2 – Fully engage the board

It’s important to engage the board with the process of succession planning. This is especially true for the most senior roles. By bringing them in at an early stage, the board can think about what they want from the company’s next leaders.

Consider which other stakeholders you need to speak to when thinking about how to succession plan. Once the succession plan is created, present it to stakeholders – what do they think about the skills criteria you’ve assigned for each role, and the successors identified – and keep them updated about any changes.

3 – Loop in HR

When it comes to succession planning, the time and expertise you can get from your HR team is invaluable. They can help identify key roles that would benefit from choosing a successor – from senior finance roles to managers overseeing critical projects – and ways to develop talent, such as leadership coaching.

For example, a CFO can work closely with HR to create a succession plan for their own position and other key roles in their department. HR can also assist in presenting the plan to stakeholders and keeping them engaged.

4 – Set skills criteria

Another succession planning best practice is to create a list of skills and competencies for each role. You can then evaluate each potential successor against these criteria, and spot any weaknesses. It could mean the best-suited successor is actually someone different to who you had in mind.

Using this formal approach will help you train employees effectively, and put in place individual learning programmes.

5  – Identify potential candidates

The next step is to identify potential successors. Assess internal candidates using an independent, objective criteria that takes into account the competencies and skills required for the job. Don’t single out favourites, and don’t just consider those who may traditionally get promoted into the role. Look wide and deep.

Look at the different layers within a team. That’s great you’ve found a potential successor for the financial systems director, but who will fill their shoes once they’ve been promoted? IT and accountancy firms should be focused on cultivating leaders two or even three levels down in the organisation.

6 – Align succession planning with DEI goals

Don’t lose sight of your diversity, equity and inclusion (DEI) goals. Succession planning is a great opportunity to build a more diverse and inclusive team. Look out for high-performing members of under-represented groups that could be mentored and trained to eventually fill a senior role.

Consider giving “unconscious bias” training to managers to reduce the likelihood of them choosing only people like themselves – or those already in leadership roles at the company – as potential successors.

7 – Create the succession plan

Now it’s time to get to the nuts and bolts of how to create a succession plan. This document should pinpoint all the roles that need a successor, the competencies and experiences required for each one, plus potential candidates. It can then be converted into a dashboard for grading succession candidates in an objective manner. Don’t forget to include the goals of the succession plan, and the metrics to assess its success.

According to a 2020 study on succession planning by the Institute for Corporate Productivity, 44% of companies approach the process in an ad-hoc fashion. Creating a structured succession plan can reap numerous rewards for a business. Keep the plan updated, and ensure key stakeholders like the CEO, directors and audit committee are involved.

8 – Create training opportunities – and motivate employees to participate

Now it’s time to fill in the expertise and knowledge gap among successors. Compare the requirements of the role with the knowledge and skills of the potential successor. And don’t forget soft skills, such as those required for a CFO role.

Consider the best training formats, whether that’s hands-on experience, or formal training. If it’s the former, rotation programmes can help high performers gain valuable hands-on expertise and build a wide range of skills.

If it’s the latter, think about whether the individual would benefit most from in-person or virtual training, and the type of content used, such as videos.

Succession training can be intensive for employees, so make sure you motivate them to take part. Communicate the benefits: this could be instant feedback from supervisors on performance, guaranteed career progression, extra days of annual leave or even a bonus.

9 – Refresh the succession plan, and measure results

Check and refresh the succession plan on a regular basis and consider what metrics to use to measure the results. This will depend on what your goals were, such as achieving talent mobility or reducing staff turnover.

Succession planning metric examples include the internal placement rate (the percentage of positions filled with internal candidates), time-to-fill (how quickly a vacancy is filled), and the number of positions without identified successors ready to step in.

Revisit your succession plan at least every 12 months, and also if a new key role emerges or the company goes through a significant change. As well as checking the list of important roles and potential successors, look again at the skillsets, and the goals and metrics of the succession plan. Do you need to amend the skills criteria to ensure you find the best person for the job, and for the company to stay competitive and achieve its wider objectives?

10 – Keep in touch with recruitment agencies

Staying in touch with a recruitment firm is important for several reasons. First, succession planning doesn’t happen overnight. It’s a long-term process that requires commitment from stakeholders, and a huge amount of training and development. Second, even when the programme is in place, it may still fail to fulfil all positions.

An external recruiter can keep you informed of available top talent, and search outside your organisation to fill key roles as needed.

Find out how online publisher Bankrate used SystemsAccountants to recruit a financial systems director based in their New York head office.

Key takeaways for succession planning

Many organisations fail to create a formal succession plan, either because they have more pressing matters, or because they don’t understand its value. But this can lead to problems: at best, you lose top talent; at worst, productivity is reduced, strategic decision-making is halted, and staff are demoralised.

Thinking about how to develop a succession plan today will be highly beneficial for your business, both now and in the future.

Find out how SystemsAccountants can fill critical skill gaps with systems specialists, or hybrids of finance and technology talent

If possible each of these will ideally be “jumpto” links that the reader can click to take them to the relevant section in the article:

Great Idea – will look into if this is possible on our site.