6 Succession Planning Examples From Companies (the Good & the Bad)
Don’t take a gamble on your next senior appointment. Discover the secrets to smart succession planning with real-world examples to guide your strategy.
Why is it important to study succession planning examples when developing your strategy? Worryingly, research shows 86% of leaders see succession planning as a priority, but only 14% believe they do it well.
In another study highlighting the significance of succession planning for nurturing internal talent, it was found that among Fortune 500 companies, only 54% of boards were actively developing a successor for their CEO. And 39% had zero suitable internal candidates who could immediately fill the role.
Staring at a blank page to craft your succession plan can be daunting. But there’s a shortcut: Learn from the successes and failures of other companies. Read on to discover practical examples of succession planning and learn how you can apply effective strategies and avoid pitfalls.
Contents
What is succession planning?
What are the goals of succession planning?
Building the succession plan model
6 succession planning examples
Common mistakes to avoid in succession planning
What is succession planning?
Succession planning is all about having a game plan for when key people in your organization move on. This could be due to retirement, a promotion, or even an unexpected departure.
It involves identifying talented individuals and preparing them for future leadership roles. This benefits both high-potential employees, who see a clear career path forward, and the company, which retains knowledge and experiences through smooth leadership transitions.
HR plays a crucial role in identifying strong internal candidates, overseeing development programs, and facilitating career discussions. To ensure a robust pipeline, HR should also proactively keep an eye out for external top-tier talent to build a talent database.
Why is succession planning so important? It’s crucial for business continuity and future success. It helps minimize risk and disruption by ensuring a seamless transfer of knowledge and expertise when key personnel depart. Succession planning also serves as motivation for top-performing employees by offering a clear career path and showing the organization’s dedication to long-term planning for different scenarios.
What are the goals of succession planning?
As with any HR initiative, your main objectives should be focused on achieving business outcomes that benefit your organization and its team – and succession planning is no different.
Here is a list of success planning objective examples to help you kick off your planning:
- Identify the positions and skills most critical to your organization’s success
- Find high-potential employees and nurture them for future leadership roles
- Offer clear career paths, growth opportunities, and recognition to retain your best people
- Ensure smooth transitions and business continuity by having qualified internal candidates ready
- Identify underperformers or those whose goals don’t align with the organization and take necessary actions
- Foster transparency throughout the process to avoid anxiety and fear in leaders who may feel threatened by potential replacements.
Building the succession plan model
Now that you’re clear on your main objectives, the next step is to build a succession planning model. The cornerstone of effective succession planning is a structured approach to building a culture of leadership development.
By using a robust framework or model you can identify critical roles and align development plans to ensure a pipeline of qualified talent is nurtured and prepared to step into key positions when needed.
Set SMART succession planning goals
Once your succession planning model is in place, it’s time to set your goals. By using SMART succession planning goals, you can ensure that your planning efforts are focused and measurable, leading to a ready pool of qualified talent for future leadership roles.
Here’s how to frame your SMART goals (Specific, Measurable, Achievable, Relevant, and Time-bound) for effective succession planning:
- Specificity means clearly defining what success looks like in developing talent. For example, a SMART goal could be ‘to train three high-potential employees for leadership roles within the next 18 months.’
- Measurability refers to tracking progress toward goals. This could involve metrics like the number of training hours completed or readiness for a promotion based on assessments.
- Achievability relates to setting ambitious but attainable goals. When setting your goals, consider the resources available and the capabilities of your employees.
- Relevance means ensuring your goals align with both employee development needs and the organization’s future leadership requirements.
- Time-bound means setting deadlines for achieving development milestones to ensure you keep the process on track.
6 succession planning examples
Sometimes, looking at others’ mistakes can be more instructive than studying their successes. That’s why we’ve included hits and misses in this list. Let’s take a look at a few examples of where companies get succession planning right and where they go wrong—beginning with the most important role in any organization: Your CEO.
Example 1: P&G CEO transition, take two
Successful transitions in the key role of CEO are difficult – take it from a company with a well-deserved reputation for excelling as an incubator of C-Suite talent.
P&G (Procter & Gamble) is known as a frontrunner in employee development and fostering future leaders, and the metrics back this up. At P&G, new employees rotate through different roles, averaging five within 10 years, and almost all senior leaders (99%) are internally promoted.
So, when legendary CEO Alan G. Lafley retired in 2010, no one imagined he’d be back in the same role just four years later after his successor Robert McDonald stepped down following disappointing financial results.
Succession planning lessons and strategies
- Senior leadership successions are hard: Despite Lafley mentoring his successor for six months before exiting P&G the first time around, McDonald did not have the qualities needed to thrive in the role. The lesson here is that succession transitions are challenging. Even companies known for being great at developing future leaders sometimes get it wrong.
- Succession planning must be prioritized: When Lafely took over as CEO for the second time, he immediately began planning his succession. What does this tell us? Succession planning should not begin when a leader in a critical role like the CEO exits; it should start as soon as your new CEO does.
- Identify your past mistakes and fix them: In response to their succession crisis, HR developed a rigorous CEO succession planning program:
- P&G’s developed a well-established and transparent succession planning process
- Through implementing strict procedures and standards, P&G made certain that potential successors underwent thorough assessment and development
- P&G created direct and thorough communication between the board and potential successors. This facilitated a better understanding of the candidates’ capabilities and their suitability for the role
- Instead of focusing on grooming a single successor, P&G emphasized nurturing a wide range of potential CEOs, ensuring a robust pool of leaders. This strategy enabled the company to have an exceptional successor and a group of senior executives who contributed to the company’s achievements.
Example 2: The Coco-Cola Company CEO debacle
Even the corporate giants make succession mistakes—just ask the Coca-Cola Company. While this is not a recent event, it remains instructional.
In 1999, Doug Ivester resigned after only two years as CEO of Coca-Cola. Why? Despite having been a highly effective CFO at the business and being personally mentored by Roberto Goizueta, the previous CEO, for over 10 years – Ivester simply lacked the critical leadership skills required for the role.
When Goizueta passed away unexpectedly, the board promoted his protégé to CEO, believing this was in line with their former leaders’ wishes. During Ivester’s brief tenure, it became evident that he was insensitive to socio-political contexts and was unable to address stakeholder concerns.
The resultant impact included mishandling the company’s greatest health scare (which involved children in Belgium falling sick) and the loss of business in Europe as a result of not tackling the anti-Americanism sentiment of some executives in that region. This provoked the resignation of Coke’s highest-ranked African American executive, which caused an uproar. It was evident that while Ivester may have been a good manager, he was not a capable leader.
Succession planning lessons and strategies
- Avoid the ‘Peter Principle’: Just because an executive excels at one level (in Ivester’s case as an outstanding CFO), that does not mean they will be successful at the next. This exemplifies the ‘Peter Principle,’ where individuals rise to their level of incompetence. Coca-Cola’s board overlooked this by assuming Ivester’s financial proficiency automatically translated to suitable CEO qualifications.
- Missed HR and employee insights: Instead of consulting more widely with employees, many of whom felt Ivester lacked leadership abilities based on their first-hand experience, the board acted independently in appointing him as CEO. This missed opportunity to gain valuable insights from within the company (and HR) could have helped identify potential shortcomings in Ivester’s candidacy.
- Don’t neglect interim plans: Cater for unexpected events by having an interim plan in place for emergencies. In Coca-Cola’s case, it was the passing of their previous CEO, Goizueta. Installing Ivester as an interim successor would have revealed he was not an ideal fit for the role while also providing HR with time to vet other candidates. This approach allows for a smoother transition and avoids the risk of a permanent misstep.
Example 3: Starbucks CEO succession planning missteps
Starbucks’ recent CEO transition highlights the critical, often overlooked, importance of effective succession planning. Howard Schultz’s three stints as CEO, punctuated by struggles to find a suitable successor, showcased a company grappling with this fundamental responsibility.
This was summarized by Gautam Mukunda, an Assistant Professor at Harvard Business School, who quipped, “Howard, you have a lot of amazing skills, but maybe picking a successor isn’t one of them.”
In 2022, when Kevin Johnson announced his retirement following five years at the helm as CEO, Schultz stepped back into the role on an interim basis. Schultz publicly stated that the company was not considering internal candidates for the permanent CEO position.
The business justified its external search by citing the need for fresh perspectives to tackle new challenges. However, this decision sparked criticism from some commentators, who claimed that this was a failure on Starbucks’ part in both succession planning and leadership development.
Succession planning lessons and strategies
- Internal candidates matter: Research suggests internal promotions lead to higher CEO success rates. Starbucks’ decision to prioritize external candidates went against this trend. While external perspectives can be valuable, neglecting a pool of experienced internal talent weakens the succession pipeline.
- Succession planning is a continuous process: Effective leadership development goes hand-in-hand with succession planning. Starbucks invested in leadership programs, yet their struggles suggest these programs may not have been aligned with long-term CEO succession goals. A well-defined succession plan should identify high-potential candidates early, providing tailored development opportunities to prepare them for future leadership roles.
HR tip
Looking inside or outside? Research shows that at least 30% of newly hired executives fail in their first 18 months due to poor culture fit. That’s why many experts on CEO succession suggest that internal candidates are the preferable choice.
Example 4: PepsiCo CFO succession success
If finding a successor to your CFO is keeping you up at night, you’re not alone. CFO turnover has hit an all-time record, with stats showing that CFO turnover is at its highest in a decade in the US and Europe, and one-third of FTSE 100 companies hired new CFOs last year.
In an interview on how to prepare for the CFO role, a former Chief Financial Officer of Global Operations at PepsiCo, Arun Nayar, shared his insights. A few years into his role in the treasury department at PepsiCo, Nayar realized that to progress higher within the organization, he’d need to enhance his financial expertise with operational know-how.
To gain that experience, he lobbied the company’s leaders to give him a lateral role overseeing finance in the global operations division, an area of the business he knew nothing about. “When I went into those meetings, it was a different language,” he explained. “That was my steepest learning curve. It put me in the deep water, and I had to swim or drown.”
The experience was crucial in helping him achieve his goal of becoming a CFO, and it prompted him to establish the ‘No Fear Club,’ where he continues to guide other up-and-coming finance professionals.
Succession planning lessons and strategies
While Nayar was the catalyst behind his own success, here are tactics you can borrow for your planning:
- Strategic and leadership skills extend beyond core capabilities: Senior roles like CFOs require advisory and strategic skills to help provide guidance on organizational priorities and strategy. As such, they must be respected as challengers, innovation champions, and conveners of cross-enterprise initiatives. That’s why senior executives must possess extensive experience and skills that transcend traditional expertise.
- Matching talent to strategic objectives: Similar to CEOs, the success of chief roles often depends on whether they have the qualities the business requires at a specific time. Therefore, your succession planning must evaluate the strengths and weaknesses of candidates against your company’s strategic needs for the next three to five years.
- Importance of senior mentorship programs: Nayar’s experience highlights the value of senior guidance. By developing your version of a ‘No Fear Club’ mentorship initiative, you can better equip rising financial professionals with the necessary knowledge and confidence for career advancement.
- Consider lateral moves for development: Well-planned lateral moves within your organization can expand the horizons of your future senior leaders while providing crucial operational experience to develop diverse skill sets needed for leadership positions.
Case study: Operational management succession success at Toyota New Zealand
Former CEO of Toyota New Zealand, Alistair Davis knows a thing or two about succession planning, with a career that spanned more than 40 years with the company.
Speaking as CEO, he said, “We always look internally at the management level. In the last twenty years, there have only been two external management appointments. Succession planning has always been important to Toyota New Zealand; we’ve always had that mentality. I was groomed into the role of chief executive over several decades.”
The company is highly committed to the development of its employees and conducts 360-degree annual reviews at the management level and above. Another crucial aspect of succession planning is the emphasis on ongoing education. This includes company-specific training, on-the-job learning, and encouragement for further tertiary education.
“While we obviously try to marry talents to positions, it is my feeling that to be a successor or land a management role, our people require broad and proven experience across all areas of the business,” said Davis.
Succession planning lessons and strategies
Toyota New Zealand’s succession blueprint focuses on four core areas:
- Broad operational capability: Future managers must demonstrate operational capability, such as selling or running a revenue-generating business.
- Corporate functional expertise: They need to perform well in corporate functions, such as roles in marketing, information technology, or finance.
- Understanding the global philosophy: They must understand Toyota’s global philosophy and embrace its way of thinking gained through exposure to Toyota Motor Corporation in Japan.
- People leadership: Finally, future managers must demonstrate their ability in people leadership by building strong teams and fostering a positive corporate culture.
Example 5: How Unilever grows its future leaders
Fast-moving consumer goods multinational company Unilever takes a long-term view on developing future leaders, as one former HR executive confirms.
Jade Wright-Komal, secured a place on the coveted Unilever Future Leaders Program (UFLP) after graduating from university. Within three and a half years, she was promoted to her first management position.
Wright-Komal explained how the program accelerated her HR career: “During this period, I gained both breadth and depth of HR professional skills, having held roles within Expertise specialist teams as well as in HR Business partnering. Upon completing this program, I was promoted to an HR leadership position as HR manager, partnering with a large manufacturing site within a unionized environment. In 2020, I was promoted to HR Director for Africa. I also passionately led the Equity Diversity and Inclusion agenda across Africa.”
Succession planning lessons and strategies
Here’s how the Unilever Future Leaders Programme (UFLP) initiative accelerates talent and shapes future leaders through four key elements:
- Exposure to diverse roles: The program provides participants with a broad range of experiences across various business functions. This equips them with a holistic understanding of the company’s operations.
- Formal mentorship: Dedicated mentors guide UFLP participants, offering valuable coaching and helping them navigate challenges. The program fosters a ‘pay it forward’ mentality, where UFLP participants eventually become mentors to others, creating a cycle of continuous learning.
- Comprehensive training: Unilever provides a rich learning environment with formal and informal training opportunities, including the innovative Degreed online platform, which allows for personalized learning and knowledge sharing among UFLP participants.
- Leadership access: UFLP participants gain access to senior leaders through internal discussions, conferences, and even external events like One Young World. This exposure broadens perspectives and allows for learning from experienced leaders within and beyond Unilever.
Example 6: How ASHE is filling the gap for specialized roles
What protects a hospital against fire? What happens when a hospital loses commercial power, and how are surgical instruments sterilized?
Hospitals rely on specialized staff, with facility managers playing a critical role in overseeing factors that can mean the difference between life and death. However, succession planning for these crucial positions is often neglected.
The American Society for Healthcare Engineering (ASHE) is attempting to address this gap. ASHE President Philip Stephens identifies two key challenges: A lack of clear career paths for aspiring facility managers and the impending retirement of many baby boomers currently holding these posts.
Stephens explains, “I’ve seen positions stay open for a year, and the department loses a tremendous amount of continuity and productivity in the meantime. Things just stop.”
Successful facility managers demonstrate excellence in various areas, including project management, budgeting, industry codes, and operations management. They also need to comprehend how different systems, such as HVAC, electrical, fire, and sprinkler systems, function within a healthcare environment. Additionally, they require strong, soft skills to be effective leaders.
Hospitals today face a shrinking pool of qualified candidates to fill these specialized roles. To address this challenge, ASHE has adopted a long-term view focused on developing the next generation of healthcare facility professionals.
Succession planning lessons and strategies
- Equip college students for success: ASHE has collaborated with universities to develop and define educational programs for aspiring Healthcare Facility Managers in a specialized field where there was no well-defined career path to the role. These programs provide the relevant knowledge and practical experience needed to thrive in the vocation.
- Expose young people to specialized roles: ASHE connects college students with the industry through conferences, competitions, and research opportunities. They also collaborate with companies to provide real-world internships that benefit both students and hospitals, often leading to permanent roles.
Common mistakes to avoid in succession planning
To ensure smooth leadership transitions and maintain a strong pool of talent for succession, it’s important to avoid common mistakes when developing your succession plan:
- Don’t be short-sighted: Develop a long-term plan for future growth and leadership gaps; don’t just focus on current needs or emergencies.
- Don’t use a one-size-fits-all approach: Tailor development plans to specific roles and employee aspirations. Not all high-potential employees crave promotion, so engage them to understand their personal aspirations and career goals.
- Don’t neglect development: Provide opportunities for high-potential employees to gain the skills they need and equip them with training, mentoring, and challenging assignments.
- Don’t overlook internal talent: Seek and develop your internal talent before looking externally.
- Don’t let your plan gather dust: The needs of business and employees are dynamic, and your plan should be, too. Review and update it regularly to remain relevant.
- Don’t keep succession planning a secret: Play open cards with employees to manage expectations and build trust.
- Don’t make empty promises: Be transparent about promotion timelines – unrealistic expectations can lead to discouragement.
HR tip
Counteract fear and insecurity. Succession planning may cause unease among current leaders who fear it signifies their departure, leading to secrecy and hindering the process. Here’s how to break the cycle:
- Make employee development a core value by investing in development programs for all employees, not just those on a predetermined leadership track
- Appoint vice presidents as deputy roles to your senior leadership across departments
- Embrace transparency by openly communicating succession goals and the process itself to reduce anxiety and build trust.
To sum up
Studying succession planning examples from successful companies can help HR professionals benchmark their strategies and discover best practices for developing talent pipelines and preparing future leaders. Embracing best-in-class ideas can spark innovation and guarantee that their initiatives effectively support the growth of outstanding talent.
FAQ
Succession planning involves identifying and developing high-potential employees to fill key roles when they become available. This proactive approach ensures a smooth transition when someone leaves the company, minimizes disruption, and keeps your organization running strong.
Here’s a breakdown by role to illustrate succession planning examples:
• Leadership (CEO, CFO, Sales Director, etc.): Identify high-potential leaders within your organization and provide succession planning opportunities such as mentorship programs. Develop clear career paths for them to gain the necessary experience through strategic project assignments or cross-departmental collaborations.
• Technical Expertise (Lead Engineer, R&D Director): These roles require specialized knowledge. Look for internal talent with strong technical skills and a passion for learning. Join sector-related associations and partner with universities for potential recruits as part of your talent pipeline and succession planning efforts.
• Operations (Operations Manager): Succession planning for critical operational roles like Operations Managers involves cross-training staff to ensure knowledge isn’t siloed. Consider apprenticeship programs and lateral moves that provide broader exposure to facets of the business to develop future operations leaders from within the organization.
• Client Relationships (Client Relationship Manager): Develop strong client relationships across multiple team members to avoid disruption during handovers. Train junior staff in client service, communication, and relationship management.
• Board of Directors: Stagger board member retirements to maintain a balance of experience and fresh perspectives. Establish criteria for selecting new board members, obtain referrals from trusted sources, and cultivate relationships with potential candidates to ensure a smooth board succession plan.
To gauge the effectiveness of your organization’s succession planning, track key metrics such as internal promotion rates, how engaged employees are in development programs, and how long it takes to fill vacancies in critical roles.
Make it a habit to review your strategy regularly and make any necessary changes to maintain a strong talent pipeline and make leadership transitions seamless.
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