Most HR Managers know what a succession plan is, but may not be aware of just how important having one in place can be. For the uninitiated, a succession plan involves the strategic planning of what happens when critical positions within a company are vacated, unexpectedly or otherwise. These high-level positions remaining empty for too long or left in the wrong hands can be damaging to businesses, a problem that succession planning can prevent by identifying and preparing candidates for these roles, years before they get them.

Although it might not be at the top of an HR Manager’s to-do list, succession planning is crucial for a company’s long-term success. More importantly, it can help you avoid hefty price tags, as a study focusing on 2,500 companies found that difficulties with replacing departing CEOs cost an average of $1.8 billion in shareholder value. Despite this very real and expensive risk, however, a KPMG survey reveals that only 14% of directors have a detailed board succession plan, with most leaving their businesses vulnerable in case of a vacant seat at the top.

That said, following and maintaining the steps of a succession plan is no easy task, as some may take years — even decades — to come to fruition. However, the benefits far outweigh the difficulty of the process, as long-term success and security for the company are achieved by following these steps:

Align company goals with capability analysis

An important ability that HR Managers should have is thinking about the future. By working with senior-level employees to outline what roles will be needed the most in the next 10-20 years, you will be able to create a picture of what kind of employees the organisation will most likely require.

All of this should be done with the company’s broader goals and core values in mind to align what managerial competencies will be essential to match them. A previous article here on HR Future discussed the shift from job-based analysis to a capability-based approach, which means thinking less about current roles in an organisational structure, and more about asking if you are building the right skills and talents to meet future challenges. Once you’ve clarified your goals and necessary skill sets through this step, you can then begin opening the lines of communication with your workers.

Share the plan with management and protégés

Keeping the design of the succession plan to yourself doesn’t help anyone, and can even compromise the work that you are doing in grooming potential protégés. It’s crucial that you involve people who are part of the process and communicate to them exactly what their role is in the bigger picture. When an employee is identified as a suitable successor for a management role, HR managers should meet with the person to discuss the role and a structured plan that works for everybody.

Collaborating with protégés will not only make training and preparation easier, but it will also boost employee retention by showing workers that there is a clear path for them in the company. Special Counsel’s guide to succession planning highlights the importance of protecting soft assets in this way, as putting your key employees on a succession track can prevent them from pursuing other opportunities outside of the company. Communicate your expectations to certain employees and let them know what’s in store for them in the future if they continue to do well.

Upskill high-potential employees

With potential successors in mind, it’s now time to develop a concrete development plan for each worker. After agreeing with them on what capabilities they need to future-proof the company’s leadership, identify the skills gap that exists from here to then, and plan out how to bridge this gap effectively. A structured programme would include monitoring tools, funding for training and workshops, and an unbridled enquiry that asks what the candidate must do or do differently to position themselves for future roles. In this process, the protégés will ideally be able to develop clearly defined skills and capabilities that match what is expected of them in the future.

Create mentorship programmes

Leaders may not want to think about succession plans because it’s daunting to imagine no longer being at the company they dedicated most of their professional lives to. However, HR Managers can only do so much without the help of the actual person to be replaced. Participation in the form of mentorship from current leaders is invaluable for potential successors to learn about the role straight from the horse’s mouth.

Mentors can even go so far as to test how effective the succession plans is by allowing their protégé the opportunity to take on the mentor’s role during a long vacation or sudden absence. A CEO writing for Harvard Business Review details how she did something similar to her designated ‘responsibility successors.’ She points out how when reassigning functions to these successors, it’s important to stop mentors from hovering over them and explaining how they would have done the tasks themselves. She adds that most of the time, these colleagues that have been personally selected will have the correct instincts that you expected from them — and if not, at least your test showed you exactly that.

Outline a succession plan on paper

People will come and go in any organisation, and rules tend to change here and there. To have a truly effective succession plan, HR managers must outline the long-term steps on paper for new managers and leaders to execute. General Electric’s thorough five-year succession plan is an excellent example of how to pass the baton for companies and has proved extremely useful in their most recent CEO transition.

At the end of the day, businesses must prepare for long-term success in the face of inevitable changes in leadership. Succession planning is not just some vague idea of encouraging workers to climb the corporate ladder, but rather, a clear structured outline detailing growth and succession within a company.

After working in HR for over 20 years, David E Morris now enjoys imparting his wisdom to others via contributing to many blogs. After leaving the corporate world five years ago, he can now be found living in a rural area and trying to recover from 25 years of city living.