Succession Planning: Building Future-Ready Leaders

Quick: Think of a white takeaway coffee cup.

Does it have the Starbucks logo on it? If so, then you’re probably one of many who would’ve envisioned the same.

This is no mere coincidence. For years, Starbucks reigned supreme in the global coffee industry, with its iconic green mermaid not only symbolizing premium coffee but also an entire urban lifestyle.

But then, even the most successful of the greats can stumble. When Howard Schultz, the leader who steered Starbucks all the way to the top for three decades, stepped down as CEO in 2018, it marked the end of an era. His exit left a significant leadership gap, marked by a period of company instability, leadership transitions, and decline in the following years.

Starbucks’ struggles to find a suitable successor for Schultz highlight the plight of poor succession planning. Companies—even those as big or previously successful as Starbucks—will not thrive if their people aren’t ready for their inherited roles. Failing to have well-prepared successors, no matter how big or small the role is, often leads to uncertainty and confusion, resulting in low employee morale and poor retention.

Unfortunately, Starbucks isn’t the only company facing succession planning problems. Studies show that among Fortune 500 companies, only 54% of boards are actively developing CEO successors, while 40% of other companies have no suitable internal candidates ready to step up immediately.

Learn more about succession planning.

What Is Succession Planning?

Succession planning is the process of identifying roles and high-potential internal talent to match them when it’s time for current leadership to depart or retire. It’s a challenge that companies of all sizes are constantly facing, as they run the risk of floundering without the right plan in place.

The nightmare doesn’t end with Starbucks, either. More research reveals that in the first year and a half in a new role, 50% to 70% of executive leaders recruited both internally and externally fail. To top it off, each time a company needs to remove and replace its CEO, it forfeits almost $1.8 billion in shareholder value compared to companies with successful placements.

Instead of focusing only on hiring and retention, organizations must include succession planning in their overall business strategy. Having a well-crafted succession plan does more than just secure continuity – it protects your company’s profitability and preserves the legacy, culture, and trust needed for lasting success.

Why Succession Planning Always Matters

We’re in the midst of an unprecedented workforce crisis. Demographic changes, the lingering economic impact of the COVID-19 pandemic, and shifting workforce expectations are only a few of the factors causing a significant labor shortage.

With around 10,000 baby boomers retiring every day and U.S. birth rates hitting record lows, there simply aren’t enough workers to fill the gap.

In such a tight labor market, where finding qualified replacements is already challenging, securing the ‘perfect candidate’ has become nearly impossible. As competition for skilled talent intensifies, the pool of qualified candidates continues to shrink. It’s also becoming unrealistic—and even unwise—to rely on external hiring alone.

Rather, companies must shift their focus towards building and retaining talent from within. Through a comprehensive succession planning process, companies ensure that their future leaders and key players are in place, trained, and ready to step up when the need arises. This proactive approach offers dual benefits: it not only provides a consistent pipeline of future leaders and skilled professionals ready to maintain continuity and drive growth, but also enhances employee engagement and retention by outlining clear development paths.

The Succession Planning Process

If you’re still thinking that succession planning is only for large conglomerates, then think again. Every organization, regardless of size or industry, stands to gain from proactive future planning.

Proper succession planning boils down to three steps: identification, assessment, and development. These steps apply both to roles within the organization and to your potential successors.

This also shouldn’t be a luxury to pursue when time permits. It’s a necessity that’s integral to your business. In these dynamic times, succession planning may be the solution to your company’s stability, growth, and ultimate survival.

Identify Indispensable Roles & People

Succession planning isn’t only for executive positions. It’s also about identifying and preparing the main players throughout your organization so that you’re not left scrambling to fill their roles if they leave.

That could include:

• Leadership
• Functional and business unit heads
• Managerial positions
• Specialized roles with instrumental internal knowledge

Think of succession planning as a core component of your talent strategy, right alongside hiring and retention efforts. Map out individuals within (or outside) the organization who show potential for future leadership. Look for high-performing individuals who not only align with your organizational values but also demonstrate the ability and desire to grow.

Assess Risk & Readiness

Assess each role to determine its timing and risk level.

In this case, timing includes things like retirement, planned career moves, or strategic initiatives, while risk factors involve a potential loss of critical knowledge and impact on business results.

For example, if a top executive plans to retire within a year, that role requires urgent succession planning. Again, evaluate the impact of a role remaining unfilled—or even worse, filled by an unprepared successor—and determine if your company would face significant challenges in such scenarios. Use these evaluations to prioritize which roles need immediate attention.

Use talent mapping tools to assess individuals on performance and potential. For example, the popular 9-box grid is used to evaluate employees based on two dimensions: performance and potential.

Develop Your Future Leaders

Create development plans that equip potential successors with the necessary skills, experiences, and knowledge for their future roles. Use a blend of on-the-job learning, coaching, and formal training to ensure comprehensive development, following the 70:20:10 learning model (70% experiential, 20% social, 10% formal).

Develop succession plans that detail the steps required to prepare successors for vital positions, including the position, the successor’s name, readiness level, and areas for development.

As potential successors progress, regularly reassess their readiness to ensure they are moving closer to being fully prepared for their future roles. An effective plan should see readiness timelines shortening as development goals are met. Based on these assessments, continuously adjust personalized plans to provide tailored experiences, coaching, and training to equip them with the skills and knowledge they need.

Succession for Small and Mid-Sized Businesses

The myth that succession planning should be done only in large organizations with deep resources can’t be further from the truth. It’s equally necessary for small and medium-sized businesses, too. Here’s how to tailor the process to fit your company’s needs:

Leverage Your Network

For smaller organizations, identifying external successors may be necessary if you don’t have enough staff to select from. Engage with your professional networks and reconnect with high-potential past employees to maintain a broad talent pool.

Flexible Development

Smaller companies may not have extensive internal training programs. In this case, partnering with external training organizations and using targeted project-based learning opportunities will still provide meaningful development for potential successors.

Measure Progress, Not Just Outcomes

While larger organizations might focus on internal promotion rates, smaller companies should emphasize milestones within development plans, such as achieving specific training certifications or successfully managing projects. Focus on individual development plans rather than extensive scorecards.

Resource Allocation

Smaller organizations may need to take on a more agile, lean approach. Assign a team lead or executive to manage succession planning, and keep the process as streamlined as possible while covering the basics.

Benefits of Succession Planning

Succession planning isn’t simply a nice-to-have. It’s necessary for the long-term success of any organization.

Whether you’re a small business or a large corporation, scaling the three-step strategy of identification, assessment, and development to fit your needs will help you build a capable team that’s ready to step up to handle any future challenges.

Make Succession Planning Your Strategic Advantage with Frontline

To learn more about succession planning, watch our free webinar, where Nathan Leaman, Frontline’s Managing Director, covers tools like the 9-box grid and tips for fostering high-potential talent to keep your succession plans sustainable and effective over time.

For more tailored solutions, reach out to us at Frontline. Whether it’s succession planning or addressing broader workforce challenges, we’re here to help you build the right approach for your organization.