Succession Planning: What It Is and How to Build a Plan in 6 Steps
Author: Kevin Baur BSc
Published on
Contents
Most companies start thinking about succession planning on the day someone important hands in their notice. By then, the plan has turned into a scramble. This guide explains what succession planning means, how it differs from replacement planning and business succession, and how a small company can build a simple succession plan in six steps, with an example you can copy.
What is succession planning?
The CIPD, the UK professional body for HR, describes succession planning as identifying and growing talent to fill business-critical positions in the future. TechTarget puts it in similar words: the strategic process of identifying and developing internal candidates for key roles, so that operations stay steady after departures or unexpected events.
Three things are worth taking from those definitions:
- It is about roles, not people. You start with the positions whose vacancy would hurt, then ask who could fill them.
- It looks ahead. A succession plan is made before a role is empty, not after.
- It is broader than leadership. Older schemes only covered the board and senior managers. The CIPD notes that they overlooked specialists whose expertise was critical, and that many organisations now identify business-critical roles at every level.
That last point matters for small companies. The person you cannot afford to lose is often not the managing director but the one accountant who knows the payroll quirks, the technician who knows the old machine, or the account manager who holds the biggest client relationship.
Succession planning compared with related terms
Several terms get mixed up with succession planning. They overlap, but each answers a different question.
| Term | Question it answers | Typical output |
|---|---|---|
| Replacement planning | Who replaces this specific person? | A list of named backups per post |
| Succession planning | How do we keep critical roles filled over time? | Critical roles, risk ratings, successors and development plans |
| Business succession | Who will own or run the company when the owner exits? | Sale, family transfer or management buyout |
| Knowledge transfer | How does what one person knows reach the next one? | Handover document, sessions, shadowing |
| Business continuity planning | How do we keep operating through any disruption? | Continuity plan covering IT, sites, suppliers and people |
If you came here because you are planning to sell or hand over your own business, that is business succession, which is mostly a legal and tax topic. This guide is about the HR side: keeping key roles covered.
Why succession planning matters in a small team
Large companies have depth: if one controller leaves, another one can cover. A team of 10 or 30 people usually has exactly one person per function. Software teams call this the bus factor, the number of people who would have to disappear before a project stalls. In many small companies that number is 1 for several roles at once.
The real risk is rarely the empty chair. A job can be advertised. The risk is everything that leaves with the person: the order of steps in the month end close, the supplier who needs a phone call instead of an email, the workaround for a system bug nobody ever reported. Much of this is implicit knowledge that the person does not even realise they have. Succession planning is the moment to find it, while there is still time.
How to build a succession plan in 6 steps
1. Identify your critical roles
Go through your team and mark every role where one of these is true:
- Revenue, customers or legal obligations depend directly on it.
- Only one person can do it, or only one person knows how.
- It would take more than three months to hire and train someone new.
- The person holds relationships (clients, suppliers, authorities) that are not documented anywhere.
Hierarchy is not the test. Impact is.
2. Assess the risk for each role
For each critical role, estimate two things: how likely it is that the role becomes vacant in the next one to two years (retirement, a known wish to move, a long leave, a role that is hard to retain), and how much damage a sudden vacancy would cause. A simple grid is enough.
| Impact of a sudden vacancy | Vacancy unlikely | Vacancy likely |
|---|---|---|
| High | Document the knowledge, name an emergency cover | Top priority: successor, documentation and overlap |
| Low | Review once a year | Plan the hire, document the basics |
3. Name an emergency cover and a long term successor
Separate two questions that often get mixed up. Who covers the role tomorrow if the holder is gone without warning? And who could take it over permanently, now or in one to two years? These are often different people. The emergency cover keeps the essentials running for a few weeks; the successor needs development. If there is no internal candidate, write that down too. An honest "external hire needed" is a valid plan.
4. Get the knowledge of the role out of one head
This is the step most succession plans skip, and the one that small companies need most. A named successor is of little use if the knowledge they need is still only in the incumbent's memory. For each critical role, capture recurring tasks and deadlines, systems and access, key contacts, open projects, and above all the exceptions and the reasons behind decisions. An employee handover document is the right format, and the free handover document generator gives you a structure to start from. Do not wait for a resignation to do this.
5. Develop the successor
The CIPD lists lateral moves, secondments and management development as ways to build experience. In a small company that translates into practical steps: let the successor shadow the role, hand over one recurring task at a time, rotate holiday cover, and give them a project that touches the role's key contacts. A structured knowledge transfer with sessions and a reverse check (the successor explains the task back) works better than reading documents.
6. Review the plan regularly
People, roles and plans change. Review the succession plan at least once a year and after any big change: a resignation, a reorganisation, a new major client. Update the handover documents at the same time, otherwise they age quietly.
Example: a succession plan for a 15 person company
An invented example to show the format. One row per critical role is enough.
| Role | Risk | Emergency cover | Long term successor | Knowledge documented? | Next action |
|---|---|---|---|---|---|
| Bookkeeping and payroll | High impact, retirement in 18 months | External tax adviser | Office assistant, ready in 12 months | Partly | Handover document by end of quarter, monthly shadowing |
| Head of service technicians | High impact, vacancy unlikely | Senior technician | Senior technician | No | Document machine quirks and supplier contacts |
| Key account manager | High impact, has mentioned moving | Managing director | External hire needed | No | Introduce a second contact to the three largest clients |
| IT administration | Medium impact | IT service provider | Service provider | Yes | Check access list once a year |
Notice the column "Knowledge documented?". In practice it is the column with the most "no" answers, and the one that decides whether a successor can actually start.
Common succession planning mistakes
- Only planning for the top. The critical specialist is often more exposed than the managing director.
- A name without a handover. A successor on paper who has never done the job and has no documentation is not a plan.
- Keeping it secret. The CIPD warns that confidential processes can undermine trust. People who never hear that they are seen as successors may leave.
- Waiting for the retirement date. Retirement is the one departure you can see coming. Our guide to knowledge transfer before retirement shows how to use that time.
- No plan for the sudden case. Illness, accidents and resignations with short notice do not follow the plan. The emergency cover and the documented knowledge are what carry you through.
Keep reading
Frequently asked questions
- What is succession planning in simple words?
- Deciding in advance who can take over each role your business cannot run without, and preparing those people and the knowledge they need before the current holder leaves.
- What is the difference between succession planning and replacement planning?
- Replacement planning names a backup for one specific person. Succession planning looks at critical roles over time, rates the risk, develops successors and makes sure the knowledge of the role is available. Replacement planning is one part of it.
- Is succession planning the same as business succession?
- No. Business succession is about who owns or runs the company when the owner exits, through a sale, a family transfer or a buyout. Succession planning in HR is about keeping key roles filled inside the company.
- Do small businesses need a succession plan?
- Yes, often more than large ones, because many roles are held by exactly one person. A small company does not need a talent programme. A table with critical roles, an emergency cover, a possible successor and the state of the documentation per role is enough to start.
- What should a succession plan include?
- The critical roles, a risk rating for each, an emergency cover, a long term successor or the note that an external hire is needed, the status of the role's documentation, development steps for the successor and a review date.
- How often should a succession plan be reviewed?
- At least once a year and after any major change, such as a resignation, a reorganisation or a new important client. Update the handover documents of the roles at the same time.