Leadership succession is one of the most important things an organization can do to ensure its ongoing growth and sustainability. At Praxis, we encourage clients to think about succession planning at the system level, which includes both planning for the departures of key employees, such as the CEO or executive director, as well as cultivating the future leadership pipeline.

Why develop a succession system

Maintaining continuity

When key leaders depart, significant disruption can follow. By having a succession system strategy, organizations can prepare for these transitions and maintain operational stability, ensuring that the organization does not lose momentum or key relationships. A succession system strategy sets up structures to transfer critical knowledge and skills.

Here's an example. In their strategic planning process, an employee-owned wastewater company identified a clear, transparent CEO leadership succession as one of their strategic priorities. Two internal candidates were identified, and after an extensive assessment process, the Board of Directors made their selection. The outgoing CEO and incoming CEO then put a plan in place to:

• Jointly appear at each of the company’s locations to meet with employee-owners and answer questions about the timing and priorities of the succession process
• Allow the incoming CEO to share their vision for the future
• Meet weekly to gradually transition the CEO duties over a 6-month period
• Share good news, such as the share price, as well as challenges

The result was that this leadership transition was exceptionally collegial, due in part to the amount of dedicated time the outgoing and incoming CEO spent together. This collegiality was apparent to the employee-owners and reassured them that their shared asset was being stewarded responsibly. Both CEOs received positive feedback about the way they managed this significant change without disruption to the business.

Fostering employee engagement

Succession planning fosters a culture of attracting talented people, retaining them, and developing them into leaders. When employees see that there are clear pathways to leadership, they are more likely to stay engaged and committed. This not only helps in retaining top talent but also motivates employees to perform at their best, knowing that their hard work and dedication could lead to advancement within the organization.

A mid-size employee-owned manufacturing company in the Midwest began the development of their succession system just after a new CEO took over in 2013. Their approach was leadership development “from the bottom up,” offering leadership development to their emerging leaders over the course of two years. Eleven years later, two of the emerging leaders from that initial group in 2013 are now members of the executive team, sending a clear message of the organization’s commitment to developing internal leaders.

Building a pipeline of diverse leaders

Setting up a succession system encourages the development of a diverse leadership pipeline. By identifying and nurturing a broad range of talent, organizations can achieve a mix of perspectives and ideas at the leadership level. This diversity is crucial for fostering innovation and helping the organization adapt to changing external conditions.

Organizations tend to develop and promote technical talent, or to believe that specific credentials, such as Professional Engineer or PhD, are necessary to lead at the President or CEO level. But the most effective leaders are people who understand the marketplace, are skilled at building external relationships, and lead with emotional intelligence.

Showing the world you’re prepared

A well-structured succession plan can enhance an organization’s reputation. It demonstrates to its stakeholders — people like employee-owners, clients and customers, donors, and the external marketplace — that the organization is well-prepared and strategically managed. This confidence can translate into increased investment, client and customer loyalty, and employee satisfaction.

Taking the first steps towards a succession system

To start succession planning, I recommend taking the following steps:

1. Involve the right people. I recommend an executive sponsor, a strong process person (often from HR), and a subcommittee of the Board of Directors.
2. Define a clear process to address emergency succession, succession driven by a planned departure, and the strategic development of leaders.
3. Commit resources to leadership development to ensure that the leadership pipeline is being attended to.

Succession planning is not just about filling roles. It is about ensuring the long-term success and sustainability of an organization. A succession system helps your organization prepare for the future by investing in the development of leaders today.