Congratulations on having a succession plan in place! Although 98% of organizations consider succession planning essential, nearly 2/3 of them don't have a succession plan in place (according to succession expert Noel Tichy). So, congratulations on being in the leading 1/3 of organizations!

In the following questions, we'll help you explore various aspects of your succession system, share best practices, and help you pinpoint any areas that might have room for improvement.

Here are some advantages of succession planning:

• Succession planning saves money. It is typically less expensive to grow talent internally than to recruit a superstar free agent. Internal hiring saves you costly recruiting fees; advertising expense; and time to interview, background check, negotiate, onboard, train, and get a new executive up to speed.
• Succession planning can improve retention and morale. When you commit to developing your people and promoting from within, employees tend to see a brighter future with your organization, and are less likely to leave.
• Succession planning supports recruitment efforts. Employees are often more apt to refer prospective hires to your organization when they see it as a place they can grow, which improves your pipeline of potential talent.
• Succession planning aids in talent selection. When you know your internal candidates well, you’re more likely to make a good selection decision than you would be with external candidates who tend to be more of an unknown quantity.
• Succession planning decreases downtime and increases productivity. It can take months to bring in someone external for a key position. Plus, when you find the right external candidate, it takes time to train them and get them up to speed. A well-prepared internal successor can move into a new position much more quickly and efficiently.
• Succession planning decreases stress and panic when a key executive departs, especially if the departure is unexpected. Instead of jumping into crisis mode to find an external replacement, you can calmly promote from within as you are following your clearly defined succession plan.
• Succession planning often leads to more positive engagement between managers and high-potential employees. This increase in positive engagement and development supports the organization’s efforts toward talent retention. As the saying goes, people tend to leave managers, not companies.

Here are some strategies to gain commitment for succession planning:

• Identify those key roles for which your organization would benefit from having clearly identified successors. From a risk management standpoint, where could your business be crippled in the event of an unexpected departure?
• Determine retirement dates for all your employees, particularly those in key leadership roles or other hard-to-replace positions. Which retirements are most imminent? Are multiple people retiring in the same department? Checking retirement dates can help identify areas for which succession planning would be helpful.
• Start small and build. Can you start with an area where you are vulnerable? Or do you have a leader who is receptive to developing an internal successor?

You can, of course, conduct succession planning internally. However, if bandwidth and/or lack of expertise are concerns, you can outsource the process. Many organizations own elements of the succession process (e.g. mentoring, talent reviews, performance management) and outsource those areas for which they prefer external expertise (assessment, 360° surveys, coaching, leadership development).

Great! 98% of organizations feel that succession planning is essential. Yet most organizations do not have robust plans in place. When you successfully implement a succession plan, you will be among a select group of organizations.

By initiating succession planning, your organization will realize many benefits, including:

• Succession planning saves money. It is typically less expensive to grow talent internally than to recruit a superstar free agent. Internal hiring saves you costly recruiting fees; advertising expense; and time to interview, background check, negotiate, onboard, train, and get a new employee up to speed.
• Succession planning can improve retention and morale. When you commit to developing your people and promoting from within, employees tend to see a brighter future with your organization, and are less likely to leave.
• Succession planning improves recruitment. Employees are often more apt to refer prospective hires to your organization when they see it as a place they can grow, improving your pipeline of potential talent.
• Succession planning aids in talent selection. When you know your internal candidates well, you’re more apt to make a good selection decision than you would be with external candidates who tend to be more of an unknown quantity.
• Succession planning decreases downtime and increases productivity. It can take months to bring in someone external for a key position. Plus, when you find the right external candidate, it takes time to train them and get them up to speed. A well-prepared internal successor can move into a new position much more quickly and efficiently.
• Succession planning decreases stress and panic when a key executive departs. Instead of jumping into crisis mode to find an external replacement, you can calmly promote from within as you are following your clearly defined succession plan.
• Succession planning often leads to more positive engagement between managers and high-potential employees. This increased positive engagement and development helps the organization’s retention efforts, as an employee’s relationship with their manager is one of the biggest deciding factors in staying with their company.

Succession planning is not a one-size fits all exercise, so it makes sense that your situation is unique. But regardless of your organization’s succession situation, we believe the insights and strategies provided in this survey’s results will be worth your while.

Promoting internally offers a number of advantages:

• It is less expensive. Studies show that external candidates demand 18 – 20% higher salaries than their internally promoted counterparts. This can also raise the pay bar for your other employees as well.
• Internal candidates are more likely to be good fits. According to Forbes, external hires are 61% more likely to be fired than are internally promoted employees.
• There is less downtime. Employers often underestimate the amount of time it takes to get new employees up the learning curve and productive. One study found that during their first two years on the job, external candidates receive lower marks on performance reviews than internally promoted candidates.

When might external candidates be better?

• When your organization needs a specific skill set that isn’t viable to develop internally.
• During periods of rapid growth, when you need more talent than you can develop from within.
• If you are in a turnaround situation or have a major strategy shift.
• When you want a fresh perspective — though some experts argue this may also be obtained from an internal candidate.

Good work! Many experts advise that roughly 80% of your leadership role hires should be filled from within. As you’re likely aware, promoting internally offers a number of advantages:

• It is less expensive. Studies show that external candidates demand 18-20% higher salaries than their internally promoted counterparts. This can also raise the pay bar for your other employees as well.
• Internal candidates are more likely to be good fits. According to Forbes, external hires are 61% more likely to be fired than are internally promoted employees.
• There is less downtime. Employers often underestimate the amount of time it takes to get new employees up the learning curve and productive. One study found that, during their first two years on the job, external candidates get lower marks on performance reviews than internally promoted candidates.

When might external candidates be better?

• When your organization needs a specific skill set that isn’t viable to develop internally.
• During periods of rapid growth, when you need more talent than you can develop from within.
• If you are in a turnaround situation or have a major strategy shift.
• When you want a fresh perspective — though some experts argue this may also be obtained from an internal candidate.

You will want to do some planning so that when these retirements occur, you can fill their positions in an orderly, planful manner. Robert Lefton, CEO of Psychological Associates, says organizations typically need 2 – 5 years to ready a CEO successor for their new role. Lefton advises that organizations begin identifying and planning for the development of the new leader five years in advance of an anticipated retirement.

Many factors could lead key openings to occur sooner than planned, including health issues; the relocation of a spouse or family member; or an employee leaving for a new opportunity.

If key employees are planning to retire in the next few years, that’s an indication you would benefit from succession planning. Even if you don't know about employees' retirement plans, other risks make succession planning a great move.

Baby Boomers are retiring in droves — roughly 10,000 per day, according to an Allure Group study. Fortunately, it doesn’t sound like this large exodus from the workplace will affect your organization.

Succession planning can, however, help your organization ensure against other risks, including health issues, the relocation of a spouse or family member, or the individual leaving for a new opportunity.

For every nine key roles in your organization, odds are that one of them will depart annually. Proper succession planning can help prevent these possible departures from being stressful, costly, and unproductive for your organization.

Well done! The American Management Association Enterprise surveyed 1,100 senior managers, and found that 39% say their bench strength is inadequate. Only 10% of those surveyed consider their company's bench strength to be robust. Congratulations in being on the leading edge of talent readiness!

As you know, a key metric in any succession program is the length of time it takes to fill a key position. If you don't have someone ready to take over a key role, it can take months to recruit, interview, hire, train, and get a new hire up to speed — costing you valuable resources and productivity. And if you have to heap that work on others in the interim, your employees can feel overloaded and unappreciated. You’re then vulnerable to them leaving as well, creating a domino effect of departures. It’s much better to implement a succession plan so you don't miss a beat!

Here are some strategies to attract more high potentials: Commit to promoting from within whenever possible. Focus on making your organization a great place to work. Determine where your high-potentials came from and look for more. When recruiting, leverage your high-potentials — they often attract talent similar to themselves.

If a key position departs unexpectedly, your organization could be vulnerable. The American Management Association Enterprise surveyed 1,100 senior managers and found that 39% say their bench strength is inadequate. Only 10% of those surveyed consider their company's bench strength to be robust.

A key metric in any succession program is the length of time it takes to fill a key position. If you don't have someone ready to take over a key role, it can take months to recruit, interview, hire, train, and get a new hire up to speed, costing you valuable resources and productivity. And if you have to heap that work on others in the interim, your employees can feel overloaded and unappreciated. You’re then vulnerable to them leaving as well, creating a domino effect of departures. It’s much better to implement a succession plan so you don't miss a beat!

How to attract more high-potentials? Commit to promoting from within whenever possible. Focus on making your organization a great place to work. Determine where your high-potentials came from and look for more. When recruiting, leverage your high-potentials — they often attract talent similar to themselves.

Congratulations, you are in the upper 50% of organizations! Research indicates that few organizations are prepared for the sudden departure of the CEO. According to a survey by InterSearch Worldwide, less than 50% of organizations had a process for conducting CEO succession planning.

Reaching outside for a CEO, according to succession expert, Noel Tichy, is a sign of a broken leadership pipeline. It's equivalent to a football team throwing a “Hail Mary Pass.”

"Simply put," write Jim Collins and Jerry Porras in their classic, Built to Last, "our research leads us to conclude that it is extraordinarily difficult to become and remain a highly visionary company by hiring top management from outside the organization."

You are not alone. Research indicates that few organizations are prepared for a CEO’s sudden departure. According to a survey by InterSearch Worldwide, less than 50% of organizations had a process for conducting CEO succession planning.

Reaching outside for a CEO, according to succession expert, Noel Tichy, is a sign of a broken leadership pipeline. It's equivalent to a football team throwing a “Hail Mary Pass.”

"Simply put," write Jim Collins and Jerry Porras in their classic, Built to Last, "our research leads us to conclude that it is extraordinarily difficult to become and remain a highly visionary company by hiring top management from outside the organization."

When building your talent pipeline, you want people that can lead your organization into the future—which can mean different skills than the ones you have now. Determine what you’re looking for, then assess for those skills and traits in your new hires, or develop them among your high potentials.

Don't get stuck in the past! When succession is informal and unplanned, it devolves to replacement hiring. Hiring tends to fill positions with people who were like the previous job holders, leaving your organization mired in the past while the world is moving forward.

With today's fast-changing environment, succession planning needs to be dynamic, not static. At a minimum, succession plans and your progress should be reviewed annually.

In fast-changing industries, the skills your organization requires of its leaders can change. You need to keep abreast of this. Fortunately, it sounds like major change is not on the horizon for your business.

People in business do often change. For this reason, it is best to review your succession plans and your progress annually at a minimum.

Well done! It’s best practice to identify any key positions for which you need to develop successors. When in doubt, use the Uproar Test: The greater the uproar a vacancy would cause, the more essential the position. What positions are so important that if they suddenly became vacant, the organization would have difficulty achieving results?

The competitive environment, technology, and your organization’s talent are always evolving. Plan to review key roles at least annually to see if anything has changed.

Some high potentials are groomed to fill a specific position. Others may be developed more broadly, so that they’re able to fill any of several key positions. It’s important to distinguish between those team members who are capable of filling a broader range of leadership positions and those more suited for a position within their functional area. If a key position requires specialized skills that are currently not available — or developable — within your organization, identify an external pipeline that you can quickly access if needed.

It’s best practice to identify any key positions for which you need to develop people. Use the Uproar Test: The greater the uproar a vacancy would cause, the more essential the position. What positions are so important that if they suddenly became vacant, the organization would have difficulty achieving results?

The competitive environment, technology, and your organization’s talent are always evolving. Plan to review those key roles at least annually to see if anything has changed.

Some high-potentials are groomed to fill a specific position. Others may be developed more broadly, so that they’re able to fill any of several key positions. Knowing which team members are capable of filling a broader range of leadership positions and which are more suited for a position within their functional area is an important distinction to make in succession planning. If a key position requires specialized skills that are currently not available — or developable — within your organization, identify an external pipeline that you can quickly access if needed.

Impressive! This is a key ingredient of good succession management.

Unfortunately, most organizations do a poor job of selecting their leaders. It’s been estimated that as many as 1/3 of all leadership positions would not be filled by present incumbents if decision makers had it to do over again.

Typically, high-potentials are employees who are capable of advancing two or more levels beyond their present placement, and they make up just 1 – 10% of the workforce.

Senior leaders who are asked to identify high potentials may be influenced by personal favoritism, pigeonholing, or unconscious bias. Research suggests that if a leader identifies a high-potential candidate as attractive or similar to themselves, a “halo” effect can make the candidate appear more desirable than is actually the case.

To make well-informed decisions, utilize both intuitive judgements and impartial input: assessment and 360° surveys, as well as data on performance management, functional background, and engagement.

Unfortunately, most organizations do a poor job of selecting their leaders. It’s been estimated that as many as 1/3 of all leadership positions would not be filled by present incumbents if decision makers had it to do over again.

Typically, high-potentials are employees who are capable of advancing two or more levels beyond their present placement, and they make up just 1 – 10% of the workforce.

Senior leaders who are asked to identify high potentials may be influenced by personal favoritism, pigeonholing, or unconscious bias. Research suggests that if a leader identifies a high-potential candidate as attractive or similar to themselves, a “halo” effect can make the candidate appear more desirable than is actually the case.

To make well-informed decisions, utilize both intuitive judgements and impartial input: assessment and 360° surveys, as well as data on performance management, functional background, and engagement.

Good work! As you likely are aware, succession should not be a function of seniority, personal favoritism, or even of a demonstrated track record in past positions. It’s best practice to augment subjective judgements with objective data. The more important the succession decision, the more data you want (within reason) — and the better your decision will be.

Assessments can uncover capabilities that may not be evident in a high potential’s current job. They can also shed light on cognitive horsepower, which is especially important in leadership positions. Don't mistake being articulate or well-read for cognitive capacity. Assess your high-potentials to get an accurate gauge of their cognitive abilities.

360° feedback should be tied to your organization’s competencies. Best practice in 360° feedback looks at not only what your employees do, but how they do it. For example, are decisions made pragmatically, passive-aggressively, dogmatically, or in a conflict-avoiding manner? The feedback-action planning session that follows the survey is helpful in identifying best strategies for future development.

In many organizations, existing performance data is not very useful for succession planning. Such data may exist for some but not all high-potentials. Ratings can skew high, stripping them of meaning. Sometimes, ratings are more about activities and less about results. Objective data enables you to compare candidates on a level playing field. It's an essential addition to your gut instincts about your high-potentials.

Succession should not be a function of seniority, personal favoritism, or even of a demonstrated track record in past positions. It’s best practice to augment subjective judgements with objective data. The more important the succession decision, the more data you want (within reason) — and the better your decision will be.

Assessments can uncover capabilities that may not be evident in a high potential’s current job. They can also shed light on cognitive horsepower, which is especially important in leadership positions. Don't mistake being articulate or well-read for cognitive capacity. Assess your high-potentials to get an accurate gauge of their cognitive abilities.

360° feedback should be tied to your organization’s competencies. Best practice in 360° feedback looks at not only what your employees do, but how they do it. For example, are decisions made pragmatically, passive-aggressively, dogmatically, or in a conflict-avoiding manner? The feedback-action planning session that follows the survey is helpful in identifying best strategies for future development.

In many organizations, existing performance data is not very useful for succession planning. Such data may exist for some but not all high-potentials. Ratings can skew high, stripping them of meaning. Sometimes, ratings are more about activities and less about results. Objective data enables you to compare candidates on a level playing field. It's an essential addition to your gut instincts about your high-potentials.

Objective data enables you to compare candidates on a level playing field. It's an essential addition to your gut instincts about your high-potentials.

Nicely done.

It’s best practice to choose 5 – 7 leadership competencies that align your talent with your strategy. Competencies contribute to successful job performance and achievement of organizational results. Your hiring, performance management, training, and promotion practices should all incorporate those competencies.

Competencies should be behaviorally defined and vary by level. For instance, if “drives results” is a competency for your organization, expectations for a first-line leader will differ greatly from those for a senior vice president.

It’s best practice to choose 5 – 7 leadership competencies that align your talent with your strategy. Competencies contribute to successful job performance and achievement of organizational results. Your hiring, performance management, training, and promotion practices should all incorporate those competencies.

Competencies should be behaviorally defined and vary by level. For instance, if “drives results” is a competency for your organization, expectations for a first-line leader will differ greatly from those for a senior vice president.

Congratulations! Accurately assessing potential is an advanced element of succession planning.

A common error when evaluating candidates for promotions is giving undue weight to past performance. If someone has been a great salesperson, we believe they’ll make a terrific sales manager. No wonder the Peter Principle (in which people rise to their level of incompetence) is so prevalent!

How well an employee does in their current role is a great indicator of performance. But it is often not a good indicator of potential — how they will perform in a more complex job with different competencies.

Assessments and 360° surveys are a great way to understand a candidate’s potential, surfacing capabilities that weren’t utilized or required in past positions, but will be in future roles.

A common error when evaluating candidates for promotions is giving undue weight to past performance. If someone has been a great salesperson, we believe they’ll make a terrific sales manager. No wonder the Peter principle (in which people rise to their level of incompetence) is so prevalent!

How well an employee does in their current role is a great indicator of performance. But it is often not a good indicator of potential — how they will perform in a more complex job with different competencies.

Assessments and 360° surveys are a great way to understand a candidate’s potential, surfacing capabilities that weren’t utilized or required in past positions, but will be in future roles.

You are in the top one-third of organizations! Nearly 2/3 of companies in a Conference Board survey had no leadership development processes in place, according to Noel Tichy in his classic book, Succession. At almost every level, managers are dissatisfied with leadership development opportunities at work, reports succession expert William Rothwell.

To create an effective individual development plan, gather data from a variety of sources so you understand the employee’s strengths and opportunities for improvement. We typically recommend cognitive, leadership, and job-related personality assessments; 360° surveys; and functional history. In creating the individual development plan, take into account your organization's strategy and goals, as well as input from the individual and their manager.

You are not alone. A Conference Board survey found that nearly 2/3 of companies had no leadership development processes in place, according to Noel Tichy in his classic book, Succession. At almost every level, managers are dissatisfied with leadership development opportunities at work, reports succession expert William Rothwell.

To create an effective individual development plan, gather data from a variety of sources so you understand the employee’s strengths and opportunities for improvement. We typically recommend cognitive, leadership, and job-related personality assessments; 360° surveys; and functional history. In creating the individual development plan, take into account your organization's strategy and goals, as well as input from the individual and their manager.

Good for you! Best practice organizations often undertake a 1 – 3 year development program for their future leaders, combining leadership development workshops, leadership coaching, business skill coaching, mentoring, stretch assignments, and action learning.

Is it worth it to put all these programs together? Research suggests that exemplary performers may be as much as 20 times more productive than their fully successful counterparts. We recommend a mix of 10% classroom/online learning, 20% coaching/mentoring, and 70% on-the-job learning.

It’s a good idea to give individual CEO candidates an issue to work on, and have them report their results to the Board. This moves the company forward while also allowing the Board to see their work in action. It’s also a good idea to seat CEO candidates on other company Boards to help them gain outside experience and perspective.

Best practice organizations often undertake a 1 – 3 year development program for their future leaders, combining leadership development workshops, leadership coaching, business skill coaching, mentoring, stretch assignments, and action learning.

Is it worth it to put all these programs together? Research suggests that exemplary performers may be as much as 20 times more productive than their fully successful counterparts. We recommend a mix of 10% classroom/online learning, 20% coaching/mentoring, and 70% on-the-job learning.

It’s a good idea to give individual CEO candidates an issue to work on, and have them report their results to the Board. This moves the company forward while also allowing the Board to see their work in action. It’s also a good idea to seat CEO candidates on other company Boards to help them gain outside experience and perspective.

Kudos! You are on the leading edge of organizations with this practice. A survey found that 2/3 of companies do not hold managers accountable for developing talent, according to succession expert William Rothwell.

Some companies, like Accenture, do this well. Joe Forehand, Accenture's former CEO, acknowledged “the primary responsibility of a leader today is to become a teacher of future leaders.” Camile Mirshokrai, Accenture's Head of Global Leadership Development, adds, “A key part of stewardship requires the leaders of today to help to teach the next generation, so that we can leave Accenture at the end of our time here stronger than we found it.”

On a 1 – 10 scale, how would you rate your managers’ ability to coach their direct reports? If you think they’re at a 7 or below, consider investing in some training for them. The better your managers coach your high-potentials, the less likely your future leaders are to leave, and the more effective both managers and high-potentials will become.

More companies should make managers’ development of their people a key element of their performance management systems.

A survey found that 2/3 of companies do not hold managers accountable for developing talent, according to succession expert William Rothwell.

Some companies, like Accenture, do this well. Joe Forehand, Accenture's former CEO, acknowledged “the primary responsibility of a leader today is to become a teacher of future leaders.” Camile Mirshokrai, Accenture's Head of Global Leadership Development, adds, “A key part of stewardship requires the leaders of today to help to teach the next generation, so that we can leave Accenture at the end of our time here stronger than we found it.”

On a 1 – 10 scale, how would you rate your managers’ ability to coach their direct reports? If you think they’re at a 7 or below, consider investing in some training for them. The better your managers coach your high-potentials, the less likely your future leaders are to leave, and the more effective both managers and high-potentials will become.

More companies should make managers’ development of their people a key element of their performance management systems.

In Managing in a Time of Great Change, Peter Drucker laments, “Organizations say routinely ‘People are our greatest asset.’ Yet few practice what they preach, let alone truly believe it.”

Documenting your high potentials’ strengths and opportunities lets you create meaningful development plans for them, while also evaluating their fit for future positions. However, doing this well can be a challenge. For one thing, strategy can be difficult to link to succession planning. What sort of strengths are needed, for instance, to increase market share or boost return on investment?

Organizations that do a good job of documenting strengths and opportunities in their talent development programs realize big payoffs. Bersin & Associates reported a 600% increase in overall business impact from leadership development; a 640% improvement in leadership bench strength; 480% improvement in leader engagement and retention; and 570% improvement in overall employee retention.

Documenting the strengths and developmental gaps of your organization’s future leaders will put you on the path to creating meaningful development plans for your high potentials.

In Managing in a Time of Great Change, Peter Drucker laments, “Organizations say routinely ‘People are our greatest asset.’ Yet few practice what they preach, let alone truly believe it.”

Documenting your high potentials’ strengths and opportunities lets you create meaningful development plans for them, while also evaluating their fit for future positions. However, doing this well can be a challenge. For one thing, strategy can be difficult to link to succession planning. What sort of strengths are needed, for instance, to increase market share or boost return on investment?

Organizations that do a good job of documenting strengths and opportunities in their talent development programs realize big payoffs. Bersin & Associates reported a 600% increase in overall business impact from leadership development; a 640% improvement in leadership bench strength; 480% improvement in leader engagement and retention; and 570% improvement in overall employee retention.