Succession planning is often talked about, but when it comes down to execution, many companies fall short. In fact, 38% of Chief Human Resources Officers (CHROs) express confidence in their organisation’s succession outcomes, while 72% struggle to close capability gaps in their successors. Even more concerning, only 35% align their successors to the future needs of the organisation.
The truth is, succession planning isn’t just about filling a position when someone leaves. It’s about ensuring the continuity of leadership, knowledge, and decision-making to maintain organisational success over time.
Succession is Not Ownership Transfer. It’s Continuity of Capability.
When we think of succession, many immediately focus on ownership transfer. However, true succession is about ensuring the continuity of capability, not just transferring shares or assets.
It’s about maintaining:
- Decision-making
- Knowledge
- Relationships
- Leadership identity
You can sell shares overnight, but you can’t transfer judgement overnight. The real question is: Do you have a system in place to nurture the capabilities of future leaders and keep your organisation moving forward?
The 3 Hidden Risks Where Succession Breaks
Succession isn’t just about having a plan, it’s about addressing the real risks that undermine it. Here are the three hidden risks that can break a succession plan:
1. Key Person Dependency
Who in your organisation, if they left today, would leave a significant hole? These are the individuals whose absence could cause disruption to your operations. They may not always be the most senior, but their impact is undeniable.
2. Tribal Knowledge Loss
Much of the knowledge that drives an organisation’s success exists informally. It’s the ‘tribal knowledge’ that isn’t written down or documented. When key people leave, this valuable knowledge can be lost, leaving gaps that are difficult to fill.
3. Leadership Vacuum
A lack of leadership can lead to a significant drop in productivity – up to 15%. Leadership gaps can create confusion, delay decision-making, and reduce morale. Without a plan in place to fill these gaps, your organisation risks a decline in performance.
Companies That Prioritise Talent Outperform
The connection between talent management and business performance is clear. Companies that prioritise talent deliver higher returns and outperform their competitors. On the flip side, poor talent systems can result in substantial losses. For example, a poorly managed talent strategy can result in up to $480 million in lost productivity (Median S&P 500, source: McKinsey).
“People don’t leave businesses.
They leave unclear futures.”
Building Systems to Produce Successors
Succession planning isn’t about picking one person to take over a role. It’s about building systems that can consistently produce leaders. 61% of organisations focus too much on hierarchy, not critical roles (Gartner). The key to effective succession is having a pipeline of capable people ready to step into critical roles when the time comes. There are significantly higher failure rates with external hires as successors than with those who have been developed internally.
Here are three practical levers to build successors:
Capability Mapping
Identify critical roles, not just senior positions. Look beyond titles and focus on the skills and capabilities your organisation will need now and in the future. Mapping these capabilities allows you to identify and develop the right talent for these roles.
Stretch Assignments and Exposure
Leaders are not born, they are made through experiences. Give high-potential individuals opportunities to stretch beyond their comfort zones. Expose them to new challenges, leadership opportunities, and situations that allow them to develop their skills and judgement under pressure.
Leadership Identity Shift
Future leaders need to see themselves as leaders. This requires a shift in mindset, from being a task performer to a strategic decision-maker. Provide leadership development that helps individuals develop a leadership identity and understand the expectations of being a leader within your organisation.
Structure Either Enables Succession or Blocks It
Your organisation’s structure is a critical element in determining the success of your succession planning efforts. If everything still flows through one person such as the founder, the CEO, or a key leader, succession is going to be difficult, if not impossible. Succession planning requires a structure that empowers others to lead and take on responsibilities.
A strong, decentralised leadership structure enables succession. Organisations with strong leadership pipelines are 2.4 times more likely to outperform their peers. If your structure is too centralised, it blocks succession by creating a bottleneck that prevents leadership development.
Succession is Not an Event. It’s a Design Choice.
Succession is not a one-time event or something that happens when a key person retires or leaves. It’s a continuous, ongoing process that requires intentional design. You don’t just protect the value of your organisation through succession planning. You create value by ensuring the continuity of leadership and capability.
As you think about your organisation’s future, consider these questions:
- What role in your business is hardest to replace today?
- Where are you most exposed in terms of talent and leadership gaps?
- Do your key people know where they are headed in the organisation?
Succession is not just about planning for the future. It’s about designing your business to scale beyond your current leadership, ensuring it continues to thrive and grow.
Learn More About Succession Planning
If you’ve been putting off creating a succession plan, now’s the time to start. Leadership transitions shouldn’t catch you off guard. If you’re thinking about where to start or how to do it differently, Zest is here to help. Get in touch with us to discuss what a strong succession plan could look like for your organisation.