In 2013, Microsoft was the fourth most valuable company in the U.S, and the third most profitable. And yet, the tech giant hadn’t given much thought to succession planning.
So, when then-CEO Steve Ballmer announced his resignation after 14 years at the helm, it sparked a frantic scramble to find a suitable replacement.
As Microsoft didn’t have a succession plan in place, the hiring committee had to start from square one. They initially focused on external candidates, creating a “shortlist” of over 100 prospective replacements for Ballmer from a wide range of industries.
After many rounds of discussions and interviews with promising candidates—including Steve Mollenkopf and Alan Mulally, both of whom fell through—the committee decided to turn its gaze inwards.
And so, six months after Ballmer’s announcement, the board identified Microsoft stalwart Satya Nadella as its new CEO.
As it turns out, Nadella was an excellent choice.
His 21-year tenure, institutional knowledge, and prior leadership experience meant he was intimately familiar with Microsoft’s products and processes—and their shortfalls. Under his leadership, Microsoft has thrived, becoming the second most valuable company in the world.
But what if the board hadn’t picked Nadella?
What if Microsoft had given an outsider like Mulally, with no prior tech experience, the top job? And why, with all his experience and demonstrated leadership capability, wasn’t Nadella already on the board’s radar as a potential successor?
Microsoft got lucky. Not having a proper succession plan could have spelled disaster.
Succession planning refers to the practice of building systems and processes to ensure future leadership continuity in an organization.
When C-suite executives or other key employees retire, resign, pass away, take an extended leave of absence, or move to a different position, it’s crucial to identify a suitable replacement, quickly.
A succession strategy helps human resources to fill such vacancies ASAP with a talent pipeline of locked-and-loaded, high-potential candidates.
The succession planning process involves identifying critical roles, analyzing the core competencies these roles require, and developing action plans to fill those key positions to achieve the organization’s current and future goals.
An ideal succession strategy cultivates bench strength throughout the organization, developing team members at all levels, not just at the top.
The Benefits Of Succession Planning
Successful succession planning does the following:
Strengthens the organization’s long-term business strategy through ongoing goals analysis and alignment
Ensures better internal communication, continuity and minimizes upheaval in the face of change
Retains institutional knowledge and leverages intellectual capital by promoting from within
Fosters more capable leaders through deliberate competency development
Improves employee retention by providing employees—including senior executives—with a clearer view of their career prospects
Improves alignment between business development plans and company values by creating opportunities for DEI implementation.
Sure, no business can ever truly be future-proof, that favorite of corporate buzzwords.
Even the best-made plans can be laid to waste by unstable economic conditions, fluctuating consumer sentiment, socio-political upheaval, shifting regulatory environments, and a range of other challenges.
However, organizations that continuously identify and develop potential leaders are more likely to weather the winds of change if (or when) they unexpectedly find themselves without a captain to steer the ship—or when new roles arise throughout the company.
That’s why succession planning is critical to mitigating risk and stacking the odds in favor of long-term success.
The Succession Planning Process
An effective succession planning strategy starts with a structured approach that encompasses identifying key roles, forecasting potential vacancies, creating profiles for ideal candidates for each role, identifying and nurturing high-potential internal talent, and strategic hiring practices.
Once you have a functioning succession planning process, you can systemize, analyze, iterate, and automate it using tools like templates, workflow automation solutions, and human resources management software.
Step One: Identify critical roles in the organization
First, it’s important to pinpoint which roles are likely to have the biggest business impact if they suddenly become vacant. This involves reviewing and analyzing each role’s current day-to-day impact and anticipating how its vacancy would affect operations.
It makes sense to start with leadership positions, as these typically have the most far-reaching consequences, but you shouldn’t stop there.
In every organization, there are some employees who are more effective than others but may not be part of the leadership team (yet). Think of them as load-bearing employees. Much like load-bearing walls, their absence can result in catastrophic structural failure.
You certainly don’t want to be in a position where you only discover that someone’s been doing four people’s jobs when they depart and you suddenly need to find four replacements!
By identifying these load-bearing employees early, you can recognize and fast-track them for leadership positions, prevent burnout-induced turnover, and provide well-deserved recognition—
not to mention spreading the load by developing competencies in team members or other employees at their level.
Step Two: Outline core competencies for each critical role
Now, before you can start looking for potential successors for your leadership roles and load-bearing employees, you need to understand the demands of the role.
What are the core competencies needed to do the job? For instance, in a CEO, you might prioritize factors like
Prior leadership experience
Familiarity with the company, its product(s), and its customers
Evidence of resilience in the face of change and challenges
An appetite for innovation—the ability to not just stay the course but explore uncharted waters
What hard skills and soft skills do candidates need to have to succeed in this role?
Which requirements are non-negotiable, and which skills or experience are less critical?
What other considerations—such as diversity, equity, and inclusion (DEI)—should factor into your succession plan?
Which strengths does the person currently holding the position feel are the most important to success in this role?
Which metrics can you use to assess a candidate’s suitability for the role?
How can you apply this profile to develop high-potential candidates in preparation for the new role?
Step Three: Identify and develop your top talent
Once you have a profile for the role(s) you need to fill, it’s time to focus on assessing and developing your existing talent to prepare your next generation of leaders.
Hiring with your talent pipeline in mind is crucial to successful succession planning.
While you should ideally be promoting from within when hiring for top positions, that doesn’t mean you should neglect to bring in outside talent. It simply means that you bring new talent on board earlier in the pipeline so you can nurture and groom them to be your organization’s future leaders.
In truth, your talent management team should always seek to hire high-potential candidates with in-demand skill sets or experience that can contribute new perspectives.
This is particularly true if certain demographics are underrepresented in your organization and DEI-informed hiring can help correct the balance.
Keep an eye on the competition and industry benchmarks and bring in new talent for new roles and vacancies in key positions for which you don’t currently have a strong bench.
Thoughtful hiring practices will ensure that you always have a deep talent pool to draw from when you need to fill top positions.
Succession Planning, Leadership Development, and Talent Management
There’s a lot of overlap between talent management, leadership development, and succession planning, with the caveat that good succession planning requires a far more proactive approach to talent management than most companies are currently taking.
Developing and retaining top talent is cost-effective and a crucial aspect of the employee life cycle.