Glossary · Hiring & terms
Succession planning
Succession planning is the process of identifying and preparing future leaders to step into critical roles before they fall vacant.
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Good succession planning blends internal development with an external map of the market, so a board always knows its options for a key seat, including candidates it hasn't yet met.
The stakes have been estimated. In a 2021 Harvard Business Review article, Claudio Fernández-Aráoz, Gregory Nagel and Carrie Green put the market value wiped out by badly managed CEO and C-suite transitions in the S&P 1500 alone at close to $1 trillion a year. Their advice is that companies, and especially their directors, plan leadership changes before they are needed, identify and develop rising stars, give them access to the board, look at both internal and external candidates, and partner cautiously with executive search firms.
Two misreadings recur. One mistakes an emergency plan for a succession plan: the same authors call a casual "if the CEO gets hit by a bus tomorrow" plan, which picks a replacement without preparing or vetting that person or weighing alternatives, not enough. The other leaves the plan to the person being succeeded, which they describe as an unacceptable abnegation of duty. The Dutch corporate governance code for listed companies places the duty with the supervisory board, which should ensure the company has a sound plan for the succession of both management and supervisory board members.
In practice
Succession planning takes the form of a standing review rather than a document written once. Critical seats are listed, each with named internal candidates and an assessment of how ready they are: able to step up now, or ready later with specific development. Readiness changes, people leave, and roles are redefined, so the list is kept under review; an assessment left unexamined describes a business that has since moved on.
The second half of the work is external. The internal bench is read against the market: talent mapping across comparable companies establishes who outside could hold the seat, which sets an internal candidate against real alternatives rather than a default promotion. Two cases are also distinguished, because they call for different preparation: the orderly handover planned well ahead, and the emergency cover needed if a leader departs without warning.
Timing is the practical lesson. The HBR authors argue that succession planning should start the moment a new CEO is appointed, and that where no potential successor sits among the CEO's direct reports, the board should look to the next level down. In Dutch listed companies the calendar is partly written in advance: the governance code appoints management board members for a maximum of four years at a time and asks that any reappointment be prepared in a timely fashion. Its neighbours here are talent mapping, the external half of the work; the talent pipeline, where external options are kept warm; and the C-suite, where the plan matters most visibly.
Common questions
- Is succession planning only for the C-suite?
- No. It applies to any role whose sudden loss would disrupt the business, which can include specialist and single-point-of-failure positions well below the C-suite. Senior seats are the most visible case, since a gap there is public and replacement takes longest, but what puts a role in the plan is the disruption its absence would cause, whatever the title on it.
- What is the difference between succession planning and a talent pipeline?
- Succession planning is seat-first; a talent pipeline is people-first. Succession planning starts from specific critical roles and asks who could hold each one, while a talent pipeline builds a standing pool of qualified candidates for roles that may not exist yet. They overlap in practice, since a pipeline can be where a succession plan finds its external options, but the unit of planning differs.
- Who is responsible for succession planning?
- Responsibility is shared. For the most senior seats it sits with the board and the chief executive; human resources designs and runs the process; and line leaders contribute the readiness assessments, since they see the work closest. Where the process is left to human resources alone, the plan can end up recording names that the executives who would have to act on it have never tested.
- Should a succession plan include external candidates?
- The HBR authors recommend it. The best practice they describe is to outline the ideal CEO profile and look both inside and outside for the person who best matches it, and they see value in external searches for benchmarking and comprehensiveness even where an internal successor is preferred. A plan that names only insiders has nothing to measure them against; one that names only outsiders has neglected the bench.
Sources
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