Does Every Business Need a Succession Plan?

Succession planning refers to the idea that the ability to fill key roles in an organization should not be left to chance—the succession should be planned in advance. From the CEO on down, a business should be prepared in advance with a plan of who might fill each key role when the time comes.

For some firms, this focus stays at the executive level. A transition in top leadership can be a difficult time if not planned well and handled with care. In fact, it can even be the reason the entire company fails if handled poorly or if the key roles are not filled quickly with appropriate people.

How deep into the organization this goes is a matter up for debate; the answer depends on the circumstances faced by each organization. That said, a succession plan—at least for key individuals and perhaps for all employees—is important for nearly every company that needs to survive a major transition.

Inadequate Succession Planning: What Are the Risks?

When a key role becomes suddenly vacant for any reason, it can mean an organization is scrambling to fill it quickly. This rush can force decisions to be made too hastily, which could result in filling the role with someone who is not a good fit. That person may not be capable of taking on the responsibilities immediately or may not have a desire to be in that position.

Furthermore, business could be disrupted during the transition. Not only could customers suffer from this disruption and employee distraction, but employee morale can suffer as well—especially in small organizations where most employees know one another.

These potential risks can lead to big problems for the business. It could mean high turnover for employees and lost customers, which could, in turn, even result in the business failing altogether. It’s hard to overstate what’s ultimately at stake.

Even for larger organizations that have more employees to pick up the slack, the risk is still there. For key roles, there is a risk of losing continuity for large customers, which could result in lost sales. And if the transitions are not handled well internally, there can be ripple effects with other employees. While it is less likely to result in the entire business failing, there are still extreme repercussions that could occur.

Effective Succession Planning: What Are the Benefits?

On the other hand, if an organization does well with succession planning, it is far more likely to experience a smooth transition when a key role needs to be filled. On top of mitigating all of the risks outlined above, succession planning can also improve employee morale all around.

Succession planning can even be integrated into an employee’s development plan. For example, if Employee A is a potential candidate to fill a vacancy at a higher level, then Employee A’s development plan could include appropriate training and development to prepare him or her for that role. This benefits everyone both now (the employee gains more skills) and in the future when the transition occurs.

Here are some other benefits of succession planning:

  • It helps the organization be prepared in the case of unforeseen circumstances, such as an emergency that requires an immediate handover of duties.
  • It strengthens employees in their current roles. When employees receive training and grooming for a future role, they benefit in the present as well.
  • It helps the organization plan for the long term. This includes creating financial projections for the costs associated with the transition when key roles become vacant.
  • It reduces unnecessary stress during times of transition.
  • It can make investors (for publicly-traded companies) more at ease.
  • It can help to crystallize career paths within the organization. (This benefit can have an add-on benefit of being an employee recruitment and retention tool.)
  • It lets organizations see which roles can be filled internally and which should be filled with new hires.

Does Every Company Need a Succession Plan?

Generally speaking, the benefits of succession planning can be applied to almost any organization that has more than one employee. Instead of asking “Do we need a succession plan?” perhaps it’s better to ask “Which roles should we have a succession plan for?”

While many organizations start with the CEO or owner and stop at the executive level, there’s an argument to be made that a succession plan is appropriate for any employee whose departure would cause undue disruption to the organization. The final answer to this question depends on the company structure, size, and circumstances; there is no one-size-fits-all answer. But every organization should give fair consideration to how deep into the organization its succession planning efforts should go.

About Bridget Miller:

Bridget Miller is a business consultant with a specialized MBA in International Economics and Management, which provides a unique perspective on business challenges. She’s been working in the corporate world for over 15 years, with experience across multiple diverse departments including HR, sales, marketing, IT, commercial development, and training.