By Kent E. Frese, Ph.D. — Industrial-Organizational Psychologist and Founder, TeamLMI
Ask most business leaders whether they have a succession plan, and you will get one of three answers: a confident yes that refers to a single document naming the CEO's replacement, a sheepish admission that they have been meaning to get to it, or a blank look followed by a pivot to more pressing concerns. All three responses point to the same underlying problem. Succession planning — one of the most strategically important talent management activities an organization can undertake — is also one of the most consistently misunderstood, underfunded, and poorly executed.
The research is clear on the consequences. Organizations without systematic succession plans face longer leadership vacancies, greater revenue disruption during transitions, and significantly higher rates of new-leader failure (Rothwell, 2015). A study by the National Association of Corporate Directors found that only 54% of boards were confident in their CEO succession plans, and confidence dropped even further for roles below the C-suite (NACD, 2022). For small and mid-sized businesses — where a single leadership vacancy can cascade into operational crisis — the stakes are even higher. And yet, these are precisely the organizations most likely to treat succession planning as something they will get to "when things slow down."
This article examines the three most common succession planning failures, presents a systematic approach grounded in competency frameworks and assessment data, and offers a practical readiness checklist for organizations ready to move beyond hope as a strategy.
Three Ways Organizations Get Succession Planning Wrong
Failure #1: Too Narrow — The "CEO-Only" Trap
The most common misconception about succession planning is that it is synonymous with CEO replacement. In many organizations, especially those with strong founders or long-tenured executives, the entire succession conversation revolves around a single role at the top. This creates a dangerous blind spot. When a VP of Operations, a Director of Engineering, or a key sales leader departs unexpectedly, organizations without a broader succession framework scramble to fill the gap — often defaulting to whoever is available rather than whoever is capable.
Effective succession planning is not a single-role activity. It is a leadership pipeline strategy that identifies critical roles throughout the organization — typically any position where a prolonged vacancy would meaningfully impair operations, client relationships, or revenue — and develops talent to fill those roles over time. Byham, Smith, and Paese (2002) describe this as building "acceleration pools" rather than anointing a single successor, an approach that increases organizational resilience while reducing the political dynamics that surround heir-apparent designations.
Failure #2: Too Late — The Crisis-Driven Approach
The second failure mode is timing. Far too many succession plans are created in response to an event — a health scare, a surprise resignation, a founder announcing retirement at the annual meeting — rather than as a proactive strategic initiative. Crisis-driven succession planning compresses timelines, limits options, and creates enormous pressure to make decisions that should unfold over months or years.
This pattern is particularly prevalent in family-owned businesses, where the emotional complexity of transition amplifies the tendency to delay. Founders often struggle to envision the organization without their leadership, adult children may not have been systematically developed for senior roles, and the intersection of family dynamics with business governance creates a thicket of interpersonal considerations that make "later" feel safer than "now." Lansberg (1999) identified this as the "succession conspiracy" — a tacit agreement among family members, employees, and even advisors to avoid the conversation. The result is that when transition becomes unavoidable, the organization is profoundly unprepared.
The evidence strongly favors early, deliberate planning. Research by Gandossy and Verma (2006) found that high-performing organizations begin succession planning three to five years before anticipated transitions, allowing time for candidate development, role exposure, and iterative assessment. For family businesses, TeamLMI's experience suggests that five years is often the minimum effective planning horizon — a timeline that allows for thorough assessment of next-generation candidates, structured development, and the emotional adjustment required of both the departing leader and the incoming one.
Failure #3: Too Subjective — The Gut-Feel Problem
The third failure is the one most likely to produce a confident but wrong decision. Many organizations select successors based on subjective impressions — who the current leader likes, who has been around the longest, who "feels" ready, or who reminds the founder of themselves at a younger age. This approach is riddled with cognitive biases: the halo effect (assuming someone who excels in one area will excel in all areas), similarity bias (favoring people who share our style or background), and recency bias (overweighting recent performance at the expense of long-term patterns).
Decades of research in personnel selection demonstrate that structured, data-driven assessment dramatically outperforms unstructured judgment in predicting leadership effectiveness (Schmidt & Hunter, 1998). Yet most organizations apply rigorous selection methodology to external hiring while relying on informal reputation and tenure for internal succession decisions. The result is predictable: promoted leaders who were excellent individual contributors or technical experts but who lack the interpersonal, strategic, or change-management competencies required at the next level. Silzer and Church (2009) found that organizations using validated assessment tools for high-potential identification significantly outperformed those relying on manager nominations alone.
A Systematic Approach to Succession Planning
Step 1: Identify Critical Roles and Define Competency Requirements
Effective succession planning begins not with people but with roles. The first task is identifying which positions in the organization are truly critical — roles where a vacancy of more than 30 to 60 days would create significant operational, financial, or strategic risk. For most small and mid-sized businesses, this list extends well beyond the CEO to include key functional leaders, senior technical contributors, and roles that serve as linchpins in client relationships or operational processes.
Once critical roles are identified, each should be defined by a competency framework that specifies the knowledge, skills, abilities, and behavioral characteristics required for success. This is fundamentally different from a job description, which typically focuses on tasks and qualifications. A competency framework articulates how someone needs to lead — not just what they need to do. TeamLMI's approach draws on the AL360 framework, which organizes leadership competencies into six domains, providing a structured and measurable foundation for assessing readiness and identifying development needs. This alignment between role requirements and assessment methodology is what transforms succession planning from a guessing game into a strategic system.
Step 2: Assess Internal Talent Against Competency Benchmarks
With competency frameworks established, the next step is an honest, data-driven assessment of internal talent. This typically involves multiple sources of information: 360-degree feedback instruments that capture how an individual is perceived across the organization, behavioral and personality assessments that illuminate leadership style and potential derailers, and structured interviews or performance data that document track record.
The key word is multiple. No single assessment tool provides a complete picture. A 360-degree assessment like the AL360 reveals how effectively a leader is currently demonstrating target competencies in the eyes of supervisors, peers, and direct reports. A behavioral instrument like the DISC profile illuminates communication and decision-making style, which is particularly valuable in understanding how a potential successor will interact with the existing team. A personality assessment like the ELLSI can surface deeper dispositional patterns — resilience under stress, openness to change, interpersonal sensitivity — that affect long-term leadership effectiveness.
The output of this step is a talent map: a clear, evidence-based picture of who is ready now, who could be ready with targeted development, and where gaps exist that may need to be filled externally. This map becomes the foundation for all subsequent development and transition decisions.
Step 3: Build Development Pipelines, Not Replacement Charts
A replacement chart names a successor. A development pipeline creates one. This distinction is essential. Naming a successor without investing in their development is a recipe for failure — both for the individual, who inherits a role they are not fully prepared for, and for the organization, which has placed an enormous bet on a single person.
Development pipelines involve creating individualized development plans for high-potential leaders, structured around the specific competency gaps revealed during assessment. These plans typically combine formal learning (workshops, certifications, executive education), experiential development (stretch assignments, cross-functional projects, increased scope of responsibility), and coaching (one-on-one work with an experienced coach to build self-awareness and accelerate behavioral change). Research consistently shows that experiential development — learning through doing, reflecting, and receiving feedback — accounts for the largest share of leadership growth (McCall, Lombardo, & Morrison, 1988).
For organizations serious about building a leadership pipeline, TeamLMI's leadership development programs offer a structured framework for moving high-potential leaders from assessment through targeted skill-building across all six domains of the AL360 model. This creates not just individual readiness, but organizational depth — the ability to absorb leadership transitions without disruption.
Step 4: Create Governance and Review Cadence
Succession plans are living documents, not filing cabinet artifacts. Organizations that treat succession planning as a one-time event inevitably find that their plans are outdated within a year — people leave, performance changes, strategic priorities shift, and the roles themselves evolve. Effective succession planning requires a governance structure and a regular review cadence, typically annually at minimum, with quarterly check-ins for roles in active transition.
This governance structure should include clear ownership (typically the CEO or business owner with support from HR or an external advisor), defined criteria for updating readiness assessments, a process for discussing development progress and adjusting plans, and transparent communication with succession candidates about their trajectory. Transparency matters. Research by Corporate Leadership Council (2005) found that high-potential leaders who were aware of their status and had visibility into their development path were significantly more engaged and less likely to leave the organization.
From Practice: When Data Changed the Conversation
A construction and trades company with approximately 80 employees and $18 million in revenue faced a familiar scenario: the founder was approaching retirement and three internal candidates were positioned as potential successors. The founder had a strong personal preference for one of the three — a loyal, long-tenured project manager who had been with the company for nearly 20 years. The other two candidates were younger, had less tenure, but had demonstrated strong results in their respective areas.
Rather than allowing the decision to be made on tenure and personal loyalty, the organization engaged TeamLMI to conduct a structured assessment process. All three candidates completed 360-degree feedback assessments, behavioral profiles, and personality inventories. The assessment data told a different story than the founder's assumption. The long-tenured candidate was deeply respected for technical knowledge and work ethic, but 360 feedback revealed significant gaps in strategic thinking, team development, and communication — competencies essential for the CEO role. One of the younger candidates showed a markedly different profile: strong across all six leadership domains, with particularly high scores in building talent and driving results, and a personality profile suggesting resilience, adaptability, and comfort with ambiguity.
The data did not make the decision, but it fundamentally changed the conversation. Instead of a binary choice driven by assumption, the founder could see — in concrete, behavioral terms — where each candidate stood relative to the demands of the role. The result was a two-year development plan: the strongest candidate received targeted coaching and increased operational responsibility, while the long-tenured candidate was positioned in a senior technical role that leveraged his strengths without requiring him to take on a role that would likely have overwhelmed him. The transition ultimately succeeded not because the "right" person was named, but because the organization replaced gut feeling with evidence, giving every stakeholder — including the founder — confidence in the process.
Succession Planning Readiness Checklist
For organizations that recognize the need to move beyond ad hoc succession planning, the following checklist provides a practical starting point. These are not aspirational goals — they are foundational elements that distinguish systematic succession planning from wishful thinking.
- Critical role identification: Has the organization identified all roles (not just CEO) where a prolonged vacancy would create significant risk?
- Competency frameworks: Are the leadership competencies required for each critical role clearly defined and documented — not just tasks and qualifications, but behavioral expectations?
- Assessment data: Has the organization used validated, multi-source assessment tools (360-degree feedback, behavioral profiles, personality inventories) to evaluate internal candidates against role requirements?
- Talent map: Is there a current, evidence-based picture of who is ready now, who could be ready with development, and where external hiring may be necessary?
- Development plans: Do high-potential leaders have individualized development plans with specific goals, timelines, and a combination of formal learning, experiential development, and coaching?
- Governance and review: Is there a defined process for reviewing and updating succession plans at least annually, with clear ownership and accountability?
- Timeline: Is the organization planning three to five years ahead of anticipated transitions — or reacting to events?
- Communication: Are succession candidates aware of their status and development trajectory, with appropriate transparency and expectations?
- Family business considerations (if applicable): Has the organization addressed the intersection of family dynamics and business governance, including estate planning, role differentiation between family and non-family leaders, and the principle that "fair does not mean equal"?
- External advisory support: Is the organization supplementing internal perspective with objective, external assessment and facilitation to manage bias and emotional dynamics?
If an organization can confidently check fewer than half of these items, the succession planning process is likely vulnerable to the failure modes described above. The good news is that any organization, regardless of size, can begin building these foundational elements — and the return on investment, measured in reduced transition risk, stronger leadership depth, and organizational continuity, is substantial.
Moving from Planning to Action
Succession planning is not a document. It is not a spreadsheet naming replacements for key roles. It is a sustained, evidence-based process that develops organizational capability over time. The organizations that get this right — that invest in competency frameworks, use assessment data to drive decisions, build genuine development pipelines, and maintain the discipline to review and adapt their plans — are the ones that navigate leadership transitions smoothly. They retain institutional knowledge, maintain stakeholder confidence, and emerge from transitions stronger rather than diminished.
The organizations that get it wrong — that wait too long, plan too narrowly, or trust instinct over evidence — face a predictable pattern: scrambled searches, unprepared successors, cultural disruption, and in the worst cases, existential threats to the business itself. For family-owned companies, where the founder's identity is often inseparable from the business, the consequences extend beyond the professional into the deeply personal.
The difference between these two outcomes is not luck, and it is not the size of the organization. It is whether leadership treats succession planning as a strategic priority deserving of the same rigor they would apply to any other major business decision. Assessment data, competency frameworks, and structured development processes are not luxuries reserved for Fortune 500 companies. They are available, scalable, and essential for any organization that intends to outlast its current leadership.
TeamLMI works with small and mid-sized businesses to build succession planning systems grounded in assessment data, competency frameworks, and practical development strategies. Whether the organization is five years from a transition or already feeling the urgency, the first step is the same: an honest, structured assessment of where things stand. To learn more about how TeamLMI approaches talent management and succession planning, or to schedule an initial conversation, visit the contact page.