Succession Management in Companies: Nurturing Future Leaders

Key takeaways

Succession management prepares companies for large‑scale retirements and turnover by building a long‑term internal talent pipeline.

• Over 4.1 million Americans will turn 65 every year through 2027, marking the historic “Peak 65” retirement wave and therefore a major driver of succession planning [1].

• Succession management is a continuous system that anticipates organizational needs, develops talent over time, and reduces the risks associated with sudden leadership gaps.

• You can strengthen your leadership pool by identifying the skills future roles will require and giving employees access to development opportunities that build those capabilities.

Learn about the benefits of succession management, how it differs from succession planning, and how to create a strategy for your company. If you’re ready to start providing employees with learning opportunities to help them gain in-demand skills for success and empower their development, Coursera for Business can provide valuable training materials in a wide range of areas, including Guided Projects and Professional Certificates. 

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Understanding succession management

According to data from the Retirement Income Institute, over 4.1 million Americans will turn 65 annually through 2027 [1]. This equates to approximately 11,200 people celebrating their 65th birthday daily. This historic event, nicknamed "Peak 65," marks the largest surge of Americans of retirement age in history.

The shift marks a notable change in the nation's workforce, as many consider retirement at this age. As a result, many companies must begin creating succession management plans to ensure responsible, qualified candidates fill leadership roles. 

That said, succession management is more than filling roles as people retire. It's a systematic, long-term approach to developing a talent pipeline within your organization that helps mitigate risks of employee turnover.

With the right processes in place, your organization can identify needs, support employee career advancement, and ensure smooth transitions as employees exit your workforce.

Defining succession management in the corporate landscape

Succession management is the ongoing process of identifying critical roles within the company and ensuring you have a skilled, knowledgeable workforce that moves up the ranks and fuels success.

This strategic process focuses on both internal training to ensure existing employees are ready for advancement and recruiting new employees who bring the evolving skills your company needs. Not only can it help prepare the organization for staffing changes, but it can also help you effectively address skills gaps and foster a learning-and-development-based company culture.

Read more: Skills Gap Analysis: A Guide to Training Your Teams

How succession planning differs from succession management

Succession planning is more of a short-term effort focused on a single event, like replacing a CEO upon retirement. Meanwhile, succession management consistently builds talent and recruits leaders to strengthen the company. As a result, it increases the chances of finding replacements within the organization when openings arise.

Succession planning is the process of identifying positions within the company that will likely become available in the coming years. These openings may arise when leaders retire, when the need to engage and retain top talent presents itself, or when organizational growth creates new positions.

When a C-Suite or other high-level leader plans to leave, it's called a defined departure, and the company prepares to find and train a qualified replacement to ensure a smooth transition. 

Key components of succession management

As your company considers succession management and its role within your organization, it's helpful to understand its key components, including identifying the positions critical to your organization’s operations.

When you work towards succession management, you'll focus on:

• Assessing critical roles: Identify vital positions and their potential for turnover. Which roles already have a viable successor, and what positions are vulnerable?

• Identifying talent: Recognize potential leaders who can fill these roles.

• Creating a leadership development plan: Identify the necessary training and support required for successors to thrive. Provide learning and development opportunities as appropriate, including mentoring and coaching.

• Establishing long-term workflows: Evaluate and revisit company needs frequently, remaining mindful of the number of employees currently ready and those in need of additional training.

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The benefits of succession management

Succession management strengthens your talent pipeline and workplace learning culture by developing a pool of talented employees and giving them the support they need to grow.

More specifically, succession management is beneficial because:

• Employees feel inspired by career advancement opportunities, while the company can start to carve a competitive edge.

• Succession management can save on the significant costs associated with unexpected replacements.

• An investment in training and mentoring often boosts morale and productivity.

• Companies focus on identifying evolving future needs and redefining roles as needed.

• Employee turnover is less risky when you have a talented pool of employees from which to draw.

• Stakeholders feel assured of continued success.

• It can future-proof your business in the event of unforeseen circumstances that result in an unexpected loss of leadership (e.g.illness, or personal issues). 

How to create a succession management plan for your company

Although you tailor your succession management plan to your organization’s unique needs, commonalities apply to everyone. To develop a plan for your organization, you'll identify potential leaders, create a plan to help successors achieve, and ensure succession management is a long-term goal. Consider these steps:

1. Identify critical positions within your organization.

Make a list of titles within your company that are vital to success.

This list represents a group of strategic employees who make a major contribution to the company’s success and without whom the company would likely struggle to achieve its goals. These employees likely drive revenue, develop strategies, and have decision-making authority.

If these employees were to leave, you'd need to fill the roles swiftly with highly competent people ready to step into a leadership position.

To the list, add capabilities and job duties. Focus on behaviors, knowledge, experience, and skills. You'll use this information to identify new candidates and train existing ones. 

2. Secure management buy-in and engagement.

Once you identify your company’s critical positions, the next step is to seek your management team's input. Bringing leaders into the process early strengthens ownership and reinforces that succession planning isn’t an HR initiative in isolation but a shared strategic responsibility.

When leaders understand that their participation directly supports organizational stability and future growth, their support becomes more consistent, and the resources needed to deliver the strategy typically become easier to secure.

3. Assess your company’s talent and identify gaps.

Consider who among your existing workforce has the capabilities to move into a leadership role and what their current skill sets are. List potential successors and compare capabilities. By doing so, you can identify gaps you need to address.

For example, if the pool of existing employees doesn’t quite fit the profile of anyone with the potential to evolve into the chief financial officer (CFO), you'll likely need to explore external candidates. Or, you might realize that a person within your company who's in line to succeed still needs to build specific skills. As a result, you realize the need for training.

4. Nominate successors and make an action plan.

Whether you find successors internally or externally, talk to them about the career advancement you want. Succession planning should be transparent, and it works best with clear communication and a strong, evolving talent pipeline, regardless of open positions.

Create a plan to help the employee take on a leadership role. The plan might include:

• External leadership training.

• Mentoring from the incumbent

• Filling in for the incumbent when he or she is out of the office.

• Taking on special projects as a way to obtain skills.

• Employing job rotation and internal cross-training.

• Building broad talent pools by developing groups of capable employees who can move into multiple leadership roles as needed.

• Aiding in tasks that help develop skills in areas that are currently lacking.

5. Review and make adjustments as needed.

As mentioned, succession management is an ongoing effort. While you cultivate a workforce capable of taking on leadership roles, evaluate your processes as you go. Adjust your thinking or workflow whenever feasible to continually strive towards a well-trained staff that's poised to step into critical roles when the situation arises. 

Regularly reviewing the development of potential successors helps maintain a strong leadership pipeline and prevents misaligned promotions. Ongoing assessment also clarifies where future investment is needed to bolster your overall succession pool.

6. Use data as part of your succession management strategy.

You can assess talent objectively and determine where your pipeline is strong or vulnerable by using a data-driven approach to your succession management. Through automation, you can better track and understand future requirements. You can decide where to concentrate your efforts by using HR technology systems to monitor skill gaps and employee development progress, track readiness, and the size of your candidate pools.

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