Succession: Internal or External for Critical Transitions

What Is Succession Planning?

Succession planning identifies and develops employees to fill key organizational roles when leadership or critical talent transitions occur. It ensures business continuity, reduces disruption, and maintains operational stability by preparing employees for future leadership positions. Companies can engage in internal succession planning, where existing employees are groomed for higher roles, or external succession planning, which involves recruiting outside candidates to bring fresh perspectives and specialized expertise into leadership roles.

Understanding Succession Planning

Succession planning is about creating a talent pipeline to support long-term business growth. The process involves assessing candidates, identifying skill gaps, and providing training, mentorship, and development programs. A strong internal planning approach ensures that employees can seamlessly step into critical roles. However, some organizations opt for external succession planning when there is a need for new leadership perspectives or specific expertise not available internally.

Key positions are whichever positions are vital to day-to-day operations. These generally include the C-suite positions, as well as the payroll manager, the president or CEO’s executive assistant, and other vital roles. In order to fill these positions, businesses can either look within their current employee pool or they can look outside the company for a qualified candidate.

Looking outside the company often means finding a candidate who is currently filling one of the identified key roles for another organization. When hired, that candidate then brings his current experience in the role to the new organization. Theoretically, that experience decreases training and transition time, imparting two huge advantages for management and the executive board and increasing the odds of success for the candidate.

Succession Planning: Internal or External?

Internal candidates, in contrast, don’t possess direct experience but they offer a number of advantages over external candidates. They already know – and fit in with – the company culture. They also have established camaraderie with other employees, which can be crucial to success in a new management or upper-level position, and they have a proven track record of success inside the company.

An employee recruited from within the company to fill a key position has already shown that she is a high potential employee. Competencies have already been demonstrated, and the management team or executive board can trust that she is going to succeed in the chosen role, because she has already succeeded elsewhere. That’s why she was identified as top talent in the first place.

External candidates may have more experience filling a role, but they cannot match the internal candidate’s knowledge of and familiarity with the day-to-day operations of the organization. And that, ultimately, is what translates into less downtime and greater success for everyone involved.

Special Considerations for Critical Talent Transitions

Succession planning should be a continuous, evolving process rather than a reactionary measure when vacancies arise. Companies must continuously evaluate the workforce, align succession strategies with business goals, and ensure smooth leadership transitions. Additionally, businesses need to consider cultural fit, leadership competencies, and long-term organizational needs when selecting succession candidates. A balanced approach between internal and external succession planning ensures businesses remain adaptable and competitive.

Benefits of Succession Planning

Succession planning has several advantages that impact both employees and organizations. It fosters leadership continuity, reduces hiring costs, and strengthens employee engagement by demonstrating clear career progression opportunities. Internal planning builds a strong leadership pipeline and enhances employee loyalty, while external succession planning introduces new perspectives and innovation when needed. Ultimately, succession planning minimizes business disruptions and ensures long-term sustainability.

Succession Planning and Diversity

An inclusive succession planning strategy identifies and develops diverse talent, ensuring leadership teams reflect various perspectives and experiences. Prioritizing diversity in succession efforts promotes equity and enhances decision-making, innovation, and organizational resilience. Companies that integrate diversity into their internal planning efforts create more inclusive workplaces while strengthening their overall talent strategy.

How Does Internal and External Succession Planning Work?

Succession planning begins with identifying critical roles and assessing internal talent for leadership potential. High-potential employees are then placed in leadership development programs, gaining exposure to strategic decision-making and cross-functional experiences. When necessary, external succession planning is used to recruit experienced professionals who can contribute to business growth. Ongoing evaluation ensures the plan remains aligned with business needs, adjusting for market changes and workforce dynamics.

What Is Succession Planning in Business?

In a corporate setting, succession planning ensures that leadership and key operational roles are always filled with competent individuals ready to step in when needed. Companies use internal succession planning to retain institutional knowledge and develop future leaders from within, while external succession planning is leveraged for roles requiring unique skills or an outside perspective. A well-executed internal planning approach reduces talent gaps, drives employee retention, and enhances business stability.

What Are Some of the Common Mistakes Companies Make During Succession Planning?

Many organizations fail in succession planning due to a lack of proactive strategy, relying on reactive hiring instead of structured internal planning. Some common mistakes include focusing solely on top leadership roles while neglecting mid-level talent development, failing to communicate career growth opportunities to employees, and overlooking diversity in leadership pipelines. Additionally, organizations that do not invest in succession candidate development through mentorship and training risk losing valuable talent. By integrating a structured and forward-thinking approach, companies can avoid these pitfalls and build a strong, future-ready workforce.

To see how TalentGuard can help you implement effective Succession Planning Tools for your critical talent transitions, visit our Succession Planning Software page or request a demo.

Succession Planning FAQs

What are the 5 steps of succession planning?

The succession planning process involves five key steps to ensure a smooth transition of leadership and critical roles:

1. Identify key positions – Determine which roles are essential for business continuity and long-term success.
2. Assess potential succession candidates – Evaluate employees based on their skills, leadership potential, and readiness for advancement.
3. Develop talent – Provide training, mentorship, and skill-building opportunities to prepare candidates for future roles.
4. Implement a transition plan – Establish a structured process for role handovers, ensuring minimal disruption.
5. Monitor and update the plan – Continuously review and refine the succession strategy to align with evolving business needs and workforce dynamics.

What is the role of HR in succession planning?

HR plays a critical role in succession planning by identifying high-potential employees, facilitating leadership development, and aligning succession strategies with business goals. HR professionals design talent development programs, oversee internal planning processes, and work with leadership to ensure a steady pipeline of qualified candidates. They also track workforce trends, manage career progression pathways, and implement diversity initiatives to create a more inclusive leadership pipeline.

Why is succession planning important?

Succession planning is essential for ensuring business continuity, leadership stability, and workforce resilience. It minimizes disruptions when key employees leave, reduces external hiring costs, and fosters internal career growth. By proactively preparing succession candidates, organizations strengthen employee engagement, retain institutional knowledge, and build a future-ready workforce. Whether through internal succession planning or external succession planning, having a strategy in place ensures that companies remain competitive and adaptable to change.

What is an example of succession planning?

A common succession planning example is when a company identifies a senior manager nearing retirement and proactively develops an internal candidate to step into the role. The company provides leadership training, cross-functional experience, and mentorship to ensure a smooth transition. Another example is a technology company implementing external succession planning by recruiting a specialized expert for a rapidly evolving leadership position that requires fresh industry insights. Both approaches ensure that critical roles remain filled with skilled professionals who are prepared for success.