Investing Now in Tomorrow: Why Small Businesses Should Prioritize Succession Planning

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By Steve Saah, Executive Director of Finance and Accounting Permanent Placement, Robert Half

Staff departures, including at the highest levels of a business, are inevitable — and often come with little or no warning. Yet, many companies push succession planning to the back burner, or don’t take a formal approach to the process. Some organizations don’t even bother to plan: In a recent Robert Half survey, nearly one-fifth of managers said their companies do not have a succession plan in place.

Succession planning should be considered a crucial elements in the strategic management of any organization, and your small or midsize business is no exception. Prioritizing succession planning can help you improve talent management practices while building a sustainable future for your company. Critically, it can help you make better hiring decisions when the time comes to replace key personnel, and also take a more proactive approach toward:

Protecting business relationships: When you practice formal succession planning, you can gradually introduce up-and-coming leaders to individuals outside of the organization who are important to your business, like contacts at strategic partner firms or long-standing customers. This provides time and space for relationships to grow organically and trust to be transferred.

Preserving institutional knowledge: Your most experienced employees possess valuable knowledge that is hard to replace, such as client histories and preferences, industry nuances and best practices, and more. But with succession planning, you can make sure vital information and insights are passed along to emerging leaders instead of seeing it walk out the door.

Retaining your best people: Succession planning demonstrates a commitment to the professional growth and development of your staff members across all generations and experience levels in your workforce. Employees are more likely to stay with an employer who invests in their future and provides a clear pathway for career progression.

Importantly, succession planning helps you identify which team members don’t want to take the helm one day, but would still like to demonstrate leadership in other ways — such as by managing teams or top accounts, or spearheading innovation initiatives.

Succession planning process can be a powerful tool for attracting top talent as well. High-performing professionals are often drawn to organizations that exhibit stability and a clear vision for the future.

Now that we’ve examined some of the benefits of engaging in formal succession planning, let’s look at how you can jump-start the process at your small or midsize business and make sure it is successful.

This is not as simple as it sounds. You can’t just look at an organizational chart and assume the next person in line for a crucial role is the right person to hire for it. Again, that individual may not even want the job. Robert Half’s research found that for 34% of employers, the lack of employees interested in leadership roles is a significant hurdle in their succession planning efforts.

So, as a starting point, conduct a thorough assessment of internal talent to identify individuals with the potential — and desire — to assume leadership roles. This involves evaluating technical skills, leadership capabilities, and how a person navigates and contributes to your firm’s unique workplace culture.

While internal candidates are often preferred for succession, consider evaluating external talent who can bring fresh perspectives and new expertise to your company. You may need to do that anyway: In a Robert Half survey, 38% of managers said their greatest succession planning challenge is the lack of succession candidates within their organization.

If you take the time to identify successors, then you will want to ensure those employees are ready to step up to leadership positions when tapped. It might be years before that happens, so you will need to create development and training programs that can keep those staff members engaged and help them to continuously build relevant skills and knowledge.

Mentoring, job shadowing and job rotation opportunities are ways to help future leaders build their confidence and knowledge, while giving them both a broader and deeper view of your business. They are also cost-effective options for your firm to set up and manage.

Also, consider what types of skill sets your future leaders might need to help your organization stay competitive and adapt to changes in the overall business landscape. For example, could these employees benefit from expanding their understanding of specific compliance topics, increasing their knowledge about a specific industry, or building up their AI and analytics skills?

The decisions you make today about who is best to lead your small or midsize business in the future may not be relevant a year from now. That is especially true if identified successors decide to move on from your organization. That is a risk to keep in focus: According to data from the Bureau of Labor Statistics, the voluntary quits rate for workers climbed to 2.1% in October — the highest level since May 2024. This uptick suggests more professionals are feeling confident about their prospects in the job market and are ready to seek new opportunities.

It is good practice to regularly review and update succession plans to reflect the dynamics of your internal talent pool, as well as changes in market conditions and your company’s strategic direction. Your succession plan should be flexible enough to adapt to unforeseen circumstances, such as the sudden departure of a top executive or changes in client needs.

You’ll also want to document the proposed succession plan in writing to help ensure clarity and accountability. Outline the processes, timelines and responsibilities involved. And be sure to address any legal considerations, such as partnership agreements, nondisclosure agreements and noncompete clauses, to avoid potential disputes during transitions.

Finally, make sure the current leadership team at your company is fully committed to the plan and the activities around it. This includes allocating the necessary resources and prioritizing succession planning as a strategic initiative. Be sure to involve key stakeholders in the planning process, such senior managers and human resources professionals, to gain diverse perspectives and buy-in.

Your employees aren’t fixed assets — and changes in your workforce lineup at every level are inevitable. It’s not always possible to know when a valued employee will leave your organization. But through effective succession planning, your small or midsize business will be better prepared to make every critical staff transition more seamless.

Follow Steve Saah on LinkedIn.

The original version of this article appeared on the CPA Practice Advisor website.

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