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Succession planning for businesses (with expert tips and free template)

Succession planning for businesses (with expert tips and free template)

Is your business prepared for the future? What happens if a key leader leaves unexpectedly? 

Now, here are two things that can happen: either the organisation scrambles to find a replacement, which leads to disruption and potential loss, or it smoothly transitions with a successor in place, ensuring continuity and stability.

A process like succession planning can help you achieve that quickly and smoothly, which is essential, especially for small businesses. 

But what exactly is a succession plan, and how can you create one that fits your business needs?

To break down this process, here’s a guide I’ve created along with a free template and practical insights, to help your business navigate this critical stage. 

What is a succession plan? 

If you're running a small business, you definitely have critical roles or positions that are filled with valuable employees. 

Examples of these critical roles include those of the C-suite and mid-level management. It could be catastrophic if one happened to leave, as it could jeopardise the entire business, especially when you don’t have the same means as bigger businesses. 

A succession plan is a strategic approach that ensures these critical roles within a business are filled promptly when they become vacant. 

It involves identifying and developing potential employees to fill key positions, ensuring business success, and reducing disruptions.

What happens when a critical role becomes vacant?

Without an immediate replacement (either internal by training your own team members or external by recruiting new talent), you may face several challenges, such as: 

  • Operational disruptions: key roles leaving a company means there might be a delay in daily operations. This delay can lead to inefficiency in the company's processes. For example, missed sales opportunities and unfulfilled orders can have a direct impact on a company's revenue. 
  • Lost expertise: when leaders depart unexpectedly, they leave with specialised knowledge and skills without passing on their expertise to successors. This can affect performance and decision-making within the organisation. 
  • Decreased morale: employees may feel stressed and uncertain after seeing their leaders depart. This can cause a reduction in their productivity and engagement levels.
  • Client impact: relationships with clients may suffer, possibly resulting in lost business and a damaged reputation.
  • Increased costs: recruiting and training a new employee can be time-consuming and expensive, adding to the financial burden on the company.
  • Overburdened staff: existing employees might need to take on additional responsibilities, increasing the risk of burnout and further turnover.

Benefits of a succession plan for small businesses

There are many benefits to a succession plan, including the ones below: 

  • Smooth transitions: Prepared successors can step into roles seamlessly, ensuring continuous operations.
  • Knowledge retention: Successors who are already familiar with the role can retain and apply essential knowledge.
  • Boosted morale: Employees feel valued and secure knowing there is a clear path for advancement and continuity.
  • Leadership development: Regular training and development of potential successors strengthen the overall leadership within the company.
  • Strategic flexibility: The company can adapt more quickly and effectively to changes, maintaining its competitive advantage.

How to draft a succession planning document 

According to research by Deloitte, while 86% of leaders consider leadership succession planning a priority, only 14% believe they excel at it. Creating a succession plan can be complex. Without a framework, businesses can face uncertainty and inefficiency in managing succession. 

To help with this, I’ve put together a template that can help with your succession planning process – it can be used by small businesses, but also by bigger organisations.

This template will guide you through the essential steps and considerations to ensure a smooth transition and continuity within your small business. 

Here are the key components to include when drafting your succession planning document:

Identify key roles

Before you find successors to fill the leadership positions, you have to list the roles that are vital to the business. HR managers should work alongside senior leadership in this process. Leaders often have a deeper understanding of the business’ structure, goals, and strategies. 

Define requirements

What are the skills and competencies required for the individual to thrive in a successor's role? This will become the basis for your talent assessment and the development areas to train individuals to take over this role. 

For example, if the Head of Sales is leaving, they will need to be quickly replaced. For an individual to excel in that role, they need to be a good leader, plan strategically, communicate effectively, manage customer relationships well, analyse data, negotiate, know their industry, adapt, understand finances, and be tech-savvy. This is a lot, so you need to make sure you set the right expectations for the role. 

Assess your team

Based on the business’ needs and the qualities required for future leadership roles, a vetting process is essential to identifying the right talents. Ideally, 2-4 people should be selected for the successor role. 

For example, our evaluation process at Charlie involves the use of criteria that have been developed by our HR leaders and top management. We also strive to make the process as transparent and free from bias as possible.  

Here’s an overview: 

  • They consistently maintain high-performance levels. This means always achieving their goals and being able to outperform. 
  • They are recognised by colleagues, subordinates, customers, and management as leaders in their field. This process involves gathering feedback from everyone involved. Each person completes a survey assessing skills such as leadership and teamwork, providing ratings for each. Charlie's 360-degree feedback can also simplify this process, and it’s a good idea to do it regularly. 

Add peer feedback to your review.webp

  • They should consistently demonstrate our high-performance behaviours – drive for results, be humble, get uncomfortable and give energy. 
  • They make a measurable and positive impact on business performance – this is measured through our KRs and the goals we set each week. 

Create development plans

A succession plan is a process for recognising, developing, and retaining top leadership talent. That means after selecting the best candidates, the next step is to develop a talent pool of potential successors by providing adequate training, mentoring, and coaching to these employees.

Who should provide the coaching? Candidates should be coached by the current employee in this position.  

These team members will also need to provide practical, hands-on learning experiences instead of relying solely on theoretical teachings. This helps the person taking over to understand what it's like to lead in a practical business scenario, preparing them for future leadership roles.

An annual review should also be held by the HR leader, talent developer and line manager, assessing each candidate's performance. Here, they discuss how the succession development is going, and if the individual still needs further development or training. However, for individuals who are ready to take up the position, they should be put into a ready pool. 

Implementation and monitoring 

To ensure that your succession planning efforts succeed, you have to regularly monitor the effectiveness of the plan, evaluate its success and adjust as needed. 

Succession planning template 

Feel free to download our succession planning template and fill in the details for your organisation's succession planning needs.

Download our succession planning template.webp

5 best practices for succession planning 

Succession planning is important for keeping your small business stable. Here are some things that have worked for us at Charlie:

  1. Listen to team members: use surveys to gather feedback from your team and make sure their opinions are considered.
  2. Encourage feedback: make it easy for everyone to give and receive feedback, so expectations are clear. 
  3. Conduct regular performance reviews: have regular reviews to discuss work, give feedback, and address any performance gaps. 
  4. Train managers: teach managers to recognise when team members might want to leave, discuss their options, and make their work life better.
  5. Offer flexible working: allow team members to balance their work and personal lives without micromanaging them. Trust and autonomy are important if you want to retain your employees. 

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