What are the Seven Steps to Succession Planning?
16% CEOs left their jobs last year.
45% U.S. companies don’t have a contingency plan for CEO.
46% Of Companies don’t have a process to develop one.
Sixteen percent of CEOs left their jobs last year – most notably Amazon’s Jeff Bezos and Disney’s Bob Iger, who caused quite a stir.1 Succession plans prepare companies for change in leadership. Yet, 45% of U.S. companies don’t have a contingency plan for CEO succession and 46% don’t even have a process to develop one.2 Succession planning isn’t as hard as it may seem. Seven steps can ensure it’s done correctly.
1. Envision when and why a succession plan might be needed.
Succession planning requires evaluating company needs and goals. Is there an offer on the table? Has the market changed? Planning should also involve evaluating CEO’s, owners’, and other critical staff’s personal and professional goals to determine when they might be ready for a change. Reasons might include a job offer, retirement or disability.
2. Decide which positions need a succession plan.
The CEO is an obvious candidate for succession planning. But there are usually several talented leaders across the company who would be hard to replace. The succession plan will need to address and document requirements for each role.
3. Identify and advise successor candidates.
Successors are usually employees with high potential for advancement into key roles. Surprisingly, succession planners often fail to discuss their plans with candidates. So, it's always best to discuss the plan with the candidates themselves. Ideally, you’ll want to consider multiple candidates for each position.
4. Establish recruiting and retention strategies.
In succession planning, human resources will need to develop recruiting plans for unfilled roles and make sure that salaries and other compensation are attractive. Long-term benefits like retirement and employee stock ownership plans could be helpful in attracting and retaining key employees.
5. Develop and train candidates.
Successors usually need significant development before they're ready to assume a new role. Compare each candidate's current skills to the written job requirements of the role for which they are being considered. Talent management and development can help address any shortfalls. Mentors can also share their experience and insights, as well as provide much-needed feedback on performance. Organizations may also allow candidates to assume responsibilities for leaders when they are on extended leave or vacation.
6. Consider the firm's financial needs.
Succession planning is largely about people, but a variety of documents and funding mechanisms are also important. A professional appraisal of the business’ monetary value will be needed, and usually sets the parameters for buy-sell agreements. Buy-sell agreements define how business ownership will transition in the event the company must be sold. Life and disability insurance may also be included in buy-sell agreements.
7. Update the plan as often as needed.
The work doesn’t stop once the plan is done. It should be periodically updated. Annual reviews are standard, but in fast-changing business environments or if performance goals are fluid, plans may need to be updated more often.
The succession plan provides a roster of candidates to support the business’ mission long-term. For more information, including employee benefits planning, contact a Synovus Business Banker or Relationship Manager.