Talent Management and Succession Planning: Learn the Basics

In today’s world of work, few individuals stay with the same company or in the same role for the entirety of their careers. In fact, a record 50.5 million U.S. workers quit their jobs in 2022. Because of this high level of churn, HR and business leaders need to be prepared to replace workers when they either transition internally at the company or leave the organization. This proactive approach to dealing with turnover of key employees is known as succession planning.

Whether your organization is looking to build a succession plan for the first time or improve the one you already have in place, it’s helpful to understand what succession planning is at a high level, learn how it fits into the talent management process, and pick up tips for developing an effective plan.

Table of contents:

• What is succession planning?
• Succession planning within the talent management process
• An example of succession planning
• 7 tips to create an effective succession plan

What is succession planning?

Succession planning is the process of mapping key roles and skills within an organization and identifying and developing workers to take on critical positions when team members transition out of the team. This approach comes into play when workers leave the organization for any number of reasons, such as resignation, termination, retirement, a leave of absence, or illness. Succession planning may also be needed in anticipation of workers moving to another team or receiving internal promotions.

Effective succession planning requires both supporting workers so they can make successful career transitions and taking proactive steps to minimize lost productivity when a worker leaves their role.

While some companies may focus succession planning primarily on backfilling senior leadership or executive roles, the most impactful succession plans prioritize cross-training and development opportunities at all levels across an organization. By taking a proactive, ongoing approach to developing team members, your organization can more efficiently identify and fill any skills gaps you may have by building a pipeline of talent for key roles.

Who benefits from effective succession planning?

Companies without succession planning in place risk a decline in productivity and business performance. At the same time, individuals staying in the team may end up overworked or with a lack of insight into how team responsibilities should shift when a leader or other team member exits the company. Organizations of all sizes and across industries, as well as individual workers, can benefit from strategic succession planning.

Some benefits for organizations include:

• Identifying current and future skills needs, along with a plan to efficiently fill skills gaps
• Supporting business resilience by preparing for unexpected team changes
• Ensuring effective operational processes and knowledge transfer
• Maintaining company knowledge after a team member departs
• Reducing costs by minimizing lost productivity
• Maintaining a positive brand reputation
• Building a culture of ongoing training and development, which can drive team member engagement

A few ways individuals can benefit from succession planning include:

• Understanding the company’s commitment to business resilience and change management
• Avoiding burnout from an expanded scope of work when team members exit
• Learning new skills to future proof their careers
• Gaining confidence in their job security and role at the company
• Receiving clarity about opportunities for internal mobility and advancement

Who should succession plans be created for?

In an ideal scenario, a succession plan should be created for every role at an organization. Each time a team member leaves, company knowledge walks out the door and your team risks lost productivity. However, creating and managing individual succession plans can be challenging to scale—especially at large organizations.

Formal, tailored succession plans should be created for mission-critical and vulnerable roles across the organization. Identify which vacancies would have the most significant impact on your ability to maintain day-to-day operations and achieve strategic business objectives. While this will likely include C-suite, executive, and management roles, individuals in expert or specialist roles across all levels and departments may leave a critical knowledge or skills gap if they exit the company.

Once succession plans are developed for critical roles, a more generic, scalable succession planning template can be created for additional roles across the organization. Each time a team member is identified for a key role, also have a process in place to determine a replacement for the individual if the move creates a critical gap. Additionally, training and development resources should be offered to all team members with succession planning in mind, so workers can continually learn new skills and better prepare to take on new roles in the future.

Who should create the succession plan?

The individuals responsible for creating and implementing a succession plan vary depending on the structure and size of an organization. At a small business, the CEO or owner may oversee succession planning, while the human resources department may manage the process at larger organizations with additional resources.

No matter who leads succession plan development, all company stakeholders should be involved in the process, including executives, management, and, if applicable, the board of directors. An executive transition in particular can have a significant impact on company reputation and revenue once the news is announced—especially if the departure is sudden or for a negative reason—meaning all key stakeholders need to be on board with the transition and communication plan.

Succession planning within the talent management process

Succession planning is only one of many key elements of a successful talent management process and strategy. Talent management is an ongoing, strategic process that involves attracting, onboarding, developing, retaining, and transitioning workers to achieve strategic business objectives. Because workers are essential to long-term business success, talent management is a top priority for companies of all sizes and across industries.

The succession planning process ties in with many other aspects of the talent management process, including development and retention. Effective development and retention are needed to ensure existing workers are prepared to take on new roles across the organization.

Engaging, developing, and retaining existing workers—rather than bringing in external talent—offers organizations many benefits, whether a team member leaves the company or the skills needed by the business shift. In fact, according to Harris Poll research commissioned by Express Employment Professionals, 70% of hiring decision-makers surveyed would prefer to train current employees for different roles before bringing on new workers.

Developing and transitioning current workers can save time and money, among other advantages; however, identifying team members to take on internal roles isn’t always possible. When an internal successor isn’t an option, succession plan objectives—such as required skills and experience for the role—can be shared with the talent acquisition team to quickly engage qualified external talent.

Succession planning should be taken into consideration during the talent acquisition phase of the talent management process. For example, when interviewing and evaluating prospective workers, leadership and growth potential should be key factors in hiring decisions.  

When searching for external candidates, think about whether certain skills gaps can be filled with independent talent, rather than exclusively relying on full-time, in-house workers. Independent professionals possess highly specialized skills and can be brought on in a matter of days. This approach can help de-risk your succession plan and avoid lost productivity—rather than the weeks or months it may take to engage full-time talent using a traditional process.

According to our 2022 Future Workforce Report, 93% of hiring managers often or occasionally convert freelancers into full-time employees. Through Upwork’s end-to-end full-time hiring solution, you also have the option to initiate contract-to-hire working relationships, which can help your team quickly fill skills gaps identified in your succession planning, engage workers for a trial period, and decide whether to move to a full-time relationship.

An example of succession planning

A well-known example of succession planning done right is Tim Cook’s transition from COO to CEO of Apple when founder and former CEO Steve Jobs passed away in 2011. While Jobs was known around the world as the visionary behind Apple, the succession plan was successful for two primary reasons.

The first key to success was that Cook joined the company as head of operations in 2000 and formed a close partnership with Jobs over the course of more than a decade. By the time he transitioned to the CEO role, Cook had in-depth knowledge of Apple’s business operations and Jobs’ management philosophies.

The second contributor to success was the establishment of Apple University, a world-class executive training program designed to carry on Jobs’ vision for Apple and retain top leadership talent through coaching and development. Apple University was launched in 2008 under the oversight of Joel Poldony, former dean of Yale Business School.

Since Cook took the reins as CEO in 2011, the company continues to prioritize succession planning through Apple University. In fact, Cook said in 2017 that part of his role as CEO is to prepare as many people as possible to be CEO. In 2022, Richard Locke, former provost at Brown University, was brought on as vice president and dean of Apple University.    

For small or family-owned businesses, succession planning may involve deciding which family member, current team member, or outside individual will take over the business. If you’re planning to promote an existing team member to take over the business or a leadership role, beginning the training process sooner rather than later is beneficial.

Planning ahead is also critical if you intend to pass the business over to a family member because this involves estate planning and can be complex. Tax implications come into play, including income tax, gift tax, generation-skipping tax, and estate tasks, so you’ll want to involve an attorney and accountant in addition to training your family member to take over business responsibilities.

7 tips to create an effective succession plan

While an effective succession plan is a key element of any impactful business strategy, many organizations don’t have a formal succession plan in place and may be unsure of where to start with developing one.  

Consider the following tips as you develop or improve your organization’s succession plan.

1. Establish clear and concise objectives

Each time you develop a succession plan for a specific role, you’ll want to establish clear, defined objectives to ensure the plan is successful.

As you develop succession objectives, consider the following questions:

• How does this role impact overall business goals?
• Which skills and competencies are required for the role?
• Have business goals or in-demand skills changed since this individual joined the team?
• How likely is the current worker in this role to leave?
• What company or process-related knowledge does the individual possess and how can it be shared or documented?
• Does the individual have close client or other external relationships that will need to be transitioned?
• What will the transition timeline look like?  
• Which development resources are available to prepare potential successors?
• Are additional training or development resources needed to maximize workers’ potential?  
• Which existing team members are ready or have the potential to take on the role?
• Does the team need to consider external talent for the role?  

2. Consider immediate and long-term strategies

Succession plan needs and timelines vary, from replacing a team member who has to immediately step down to planning ahead if a leader intends to retire in a few years.

Depending on the scenario and role, outline both immediate and long-term strategies. An immediate strategy for an urgent executive departure may include appointing a successor in an interim capacity, while they continue to refine their skills and take on the role permanently. Another option may be enlisting another leader at the company to temporarily manage the team while an internal successor prepares to take over or an external replacement is found.

Long-term succession planning offers more flexibility for a strategic approach and worker development. Apple’s transition from Jobs to Cook is an ideal example of this. If a critical team member knows they will leave in several months or a year or two down the road, they can be involved in mentoring and training potential successors. Development programs and resources can also be identified to build workers’ skills over time and prepare for the transition.    

In addition to identifying and developing successors, another option to consider is shifting your organizational structure. For example, if a leader steps down and your business objectives have changed since they joined the organization, it may make sense to elevate the leader of another team to oversee two combined teams in a more strategic capacity. This can be effective for teams that already work in close partnership, such as product and engineering or sales and customer success.

3. Draft your succession plan

Developing and implementing a companywide succession plan can help your organization better prepare for any team member transitions you may face. Once your succession plan is in place, consider updating the plan annually as part of overall business planning and leave room for ad hoc updates as needed throughout the year.

Leverage your existing organizational chart to draft your succession plan. Identify mission-critical roles that may require successors and outline key details needed to support smooth internal transitions.

Some details to consider highlighting for each role in your succession plan include:

• Job title
• Current team member in the role
• Risk of the team member leaving
• Job description (or, at least a high-level bulleted list of responsibilities)
• List of required skills
• Direct reports (if applicable)
• Shortlist of potential internal candidates  
• Readiness score for each potential successor
• Development options and timeline to improve readiness scores
  
  

To determine potential candidates’ readiness, consider using a standardized rubric to evaluate all individuals on an unbiased scale. For example, once you create a list of required skills, score each candidate’s capabilities on a scale of one to five. Alternatively, rate from below expectations to exceeding expectations. Also consider leveraging a 9-box grid, a common talent management tool used in succession planning to assess workers’ performance and potential. Workers are divided into nine boxes, from “low performer, low potential” to “high performer, high potential.” Individuals in the upper right quadrant are likely the most prepared to potentially take on an expanded role. Those listed as “moderate performer, high potential” and “high performer, moderate potential” are likely close on the readiness scale, but may require a bit more training or coaching. Offering development resources can help workers build critical skills needed to prepare for the next level, while stretch assignments can challenge and engage workers to grow more in their current role.

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4. Get approval from relevant stakeholders

While the human resources department or people team may be responsible for initial succession plan development, gaining alignment and approval among stakeholders across the organization is an important step before finalizing the plan and taking action. If you’re not aligned on the goals of your succession plan—especially at the executive level—you may experience challenges with implementation and adoption down the road.

Consider scheduling a meeting to share the initial plan with stakeholders and encourage feedback. With attendees’ permission, record the meeting in case some individuals cannot attend. Following the meeting, leave a few additional days for decision-makers to share feedback before finalizing the plan.

Gaining buy-in from leaders and executives is especially important because the succession process for their specific roles will be the most in-depth—and may require longer than the standard two weeks’ notice workers typically submit. Therefore, it’s important for leaders to understand and be on board with how their specific transition plan will work if and when the time comes.

Maintaining transparency with succession planning helps build a culture of trust, so once stakeholders approve the plan, consider sharing a high-level overview with all team members so they understand the succession process. This approach will also show team members that you value their skills and experience and are committed to supporting their continued growth.  

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5. Transition team members as needed and measure performance

While successful companies hope to retain top performers long term, succession plans provide insurance and ease team member transitions when the time comes. When an individual leaves their role, select the worker from your team who is the best-fit successor, based on the criteria from your succession plan.

While existing team members are already familiar with your company’s structure, culture, and processes, treat the initial transition period similar to onboarding. Make sure to provide relevant training, introductory meetings, and other resources as needed to achieve key objectives.

Each time a team member transitions internally, also measure performance to ensure your succession plan is driving results. For example, if a worker moves into a sales leadership position, hold them accountable to meeting revenue goals and managing individual team members to reach their sales targets.

If results fall short at first, provide coaching and additional support. However, if the transition takes longer than expected and doesn’t meet expectations, it may be time to reevaluate your decision and the overall succession plan.

6. Develop and assess workers regularly

Even if your team doesn't have immediate succession needs, talent development is foundational to ensuring your long-term approach to succession planning is effective. As skills and talent needs evolve, continually developing and assessing workers can help your organization be better prepared to fill gaps when the need arises. As an added benefit, developing team members can help improve worker engagement and retention.

Some talent development options include, but aren’t limited to:

• Standardized onboarding sessions
• Individual development plans
• Performance reviews
• Skill assessments
• Stretch assignments and experiential learning
• Cross-departmental projects and training sessions
• Mentorship opportunities
• Online learning platform access
• Stipends for professional development events and courses

One thing to note is that formal development options such as performance reviews and training plans are meant for full-time, in-house workers. If your team engages independent talent, provide clear, concise project descriptions and well-defined project milestones. Offering independent professionals on your team onboarding and access to online learning platforms can also be beneficial, especially if you’re engaging them for long-term projects or contracts.

7. Improve your succession planning efforts over time

As is the case with any business plan or strategy, succession planning isn’t a one-and-done effort. Rather, evaluating the impact of your organization’s succession plan can help drive long-term improvements.

To accurately evaluate your succession plan, consider regularly tracking metrics related to your initial objectives. Some of these metrics may also tie into your overall talent management strategy, while others will be specific to succession planning.

Business metrics related to succession planning may include:

• Total number of open roles or skills gaps
• Time to fill open roles
• Adoption and ROI of talent development and assessment tools
• Number of roles filled internally
• Percentage of team members who receive promotions
• Success rate of workers who transition internally
• Worker tenure
• Turnover rates
• Team member engagement rates
  

When measuring the effectiveness of your succession plan, also take qualitative feedback into consideration. For example, if your organization facilitates engagement surveys, workers may share open-ended feedback about your onboarding and knowledge transfer process or talent development opportunities. Workers may also share similar feedback related to development and internal growth processes during exit interviews when they leave the organization.

Consider sourcing top talent on Upwork

Developing an effective succession plan is only one of many critical components in a

comprehensive talent management strategy. And talent management will always be a top priority for businesses, because workers are the heart of any company.

To maximize the results of your succession plan and broader talent management efforts, consider engaging an independent talent management professional on Upwork. Talent management professionals have in-depth knowledge of the latest trends and best practices to ensure your organization has the right talent and skills in place to drive business success—and adapt to inevitable workforce transitions.

As you identify skills gaps as part of your succession planning, you can also engage independent talent on Upwork, with professionals having more than 10,000 skills across a variety of specialties. Independent talent can help your team scale up and down and embrace the latest skills as your business needs shift. Get started—search for skilled talent on Upwork today.