Succession Planning: What It Is and Why It Matters

• Succession planning protects business continuity by preparing qualified internal candidates for critical roles, before gaps appear

• AI and workforce intelligence strengthen leadership pipelines with objective skill insights, predictive readiness scoring, and visibility into risk

• A modern succession framework includes identifying critical roles, assessing skills, developing successors, and tracking readiness with measurable KPIs

• Key metrics include bench strength ratio, readiness scores, diversity distribution, and the percentage of roles with at least one successor

As business complexity grows and organizational structures shift, leadership continuity has become one of HR’s most strategic responsibilities. While companies recognize the importance of preparing future leaders, many still face persistent challenges: dispersed talent data, limited visibility into skills, and unclear pathways for internal mobility.

The gap is widening. By 2025, nearly half of organizations report they do not have ready successors for critical roles — leaving business continuity at risk. Leadership shortages, rising skills volatility, and ongoing digital transformation have made succession planning not just an HR initiative, but a core element of organizational resilience.

Succession planning has always mattered, but today it requires a more dynamic, skills-based approach supported by technology. This guide explores how HR teams can modernize their succession strategy, overcome common obstacles, and use AI-driven insights to strengthen leadership pipelines across the organization.

In this Article:

What Is Succession Planning?

Succession planning is the strategic process of identifying and developing internal talent and preparing them to move into critical roles. Traditionally focused on senior leadership, succession planning now extends across business units, technical functions, and emerging skill areas.

This proactive approach isn’t just about filling imminent vacancies, it’s about preparing future leaders to navigate both foreseeable and unforeseen challenges. 

Effective succession planning requires clarity on the organization’s goals, the skills needed to achieve them, and the internal talent ready to grow into these roles. It is a continuous initiative that evolves alongside business needs, making regular review and ongoing development essential.

How AI Is Changing Succession Planning?

AI is reshaping how HR identifies, develops, and evaluates future leaders by removing guesswork and exposing hidden potential. AI-powered tools like Phenom Succession Planning use skills ontologies, readiness scoring, and predictive analytics to surface successors who may otherwise remain overlooked, strengthening leadership pipelines with objective and transparent insights.

AI enhances succession planning in several ways:

• Skill intelligence: Understand current and emerging skill needs at a granular level

• Readiness scoring: Compare employee profiles with role requirements to identify fit and potential

• Risk visibility: Spot gaps such as single-successor dependency or concentrated flight risk

• Bias reduction: Evaluate candidates using data, not familiarity or manager proximity

• Personalized development: Recommend tailored learning journeys, mentoring, and gigs based on individual skill gaps

AI moves succession planning from reactive, manual, and subjective to predictive, transparent, and scalable.

What Are the Benefits of Succession Planning?

When implemented effectively, succession planning offers many benefits to both the business and its top talent. Here’s a closer look at some of the main benefits of succession planning:

• Minimal disruption to business operations: One of the most practical advantages is continuity. With identified successors already gaining experience and context, teams avoid sudden gaps that slow decision-making or derail key initiatives. Even during unexpected departures, work moves forward with fewer delays. That’s whyHR professionals consider business performance and organizational success the two most important factors to prioritize when developing succession plans.

• More opportunities for internal mobility: Employees value organizations that support career growth. When evaluating a job opportunity,65% of workers look for employer-provided upskilling. Succession planning naturally opens pathways for employees to move laterally or vertically, supported by upskilling and reskilling. This creates a culture where talent feels both seen and supported — something modern workforces increasingly expect.

• Reduced recruiting and hiring spend: The cost of replacing one employee can range fromone-half to two times the employee’s annual salary and often takes longer than anticipated. Developing internal talent significantly reduces these costs, while also shortening ramp time and increasing confidence in the person taking on the role.

• Professional development that fuels retention: Employees want clear direction for their careers. 86% of employees surveyed for a report said they would change jobs if they were offered more professional development opportunities. Succession planning gives high-performing talent visibility into what's possible and access to the development experiences that make advancement realistic. This clarity has a direct effect on morale, performance, and retention.

• Structured knowledge transfer and mentorship: When successors are identified early, current leaders have time to share institutional knowledge — everything from nuanced stakeholder relationships to operational insights. Mentorship becomes purposeful rather than last-minute, increasing the quality of leadership transitions. That’s why84% of Fortune 500 companies offer mentoring programs.

• Higher engagement and long-term commitment: Organizations that invest in their people naturally see higher engagement. Employees recognize that leadership is planning for their growth, not just the company’s, which results in stronger alignment and loyalty.

• HR processes that support the organization’s broader goals: Succession planning forces conversations about priorities, capabilities, and future needs. It brings HR and leadership teams together around shared objectives and strengthens the link between talent strategy and business strategy. That’s good news, especially since60% of HR leaders say that leadership development is top priority in 2024.

• A more resilient leadership pipeline: Research shows that companies with highly engaged workforces are21% more profitable than those with disengaged workforces.  With thoughtful preparation, new leaders step into roles with greater confidence because they already understand the culture, goals, and expectations. This reduces the adjustment period and preserves momentum on high-impact initiatives.

Related: Benefits of Succession Planning: Why Every Business Needs It 

Common Challenges in Succession Planning (and How AI helps fixing them)

Succession planning often stumbles not because teams lack intent, but because visibility, data, and processes haven’t kept pace with the organization’s needs. These are the challenges HR encounters most often — and the ones that weaken leadership pipelines over time.

1. Limited visibility into skills, aspirations, and movement

Many HR teams still work with fragmented talent data scattered across systems. With an incomplete view of skills, career goals, and certifications, it becomes difficult to identify high-potential talent beyond the people leaders already know. Using skills intelligence, consolidate scattered data into clear profiles, revealing strengths, interests, and emerging capabilities that may otherwise stay hidden.

2. Heavy reliance on subjective manager nominations

Managers often nominate employees they’ve worked with closely, unintentionally narrowing the pool and overlooking talent outside their immediate circles. This tends to reinforce familiarity, creating successor lists that lack diversity in skills, perspectives, and backgrounds.

AI compares employee skills and experience against role requirements, surfacing candidates across the organization who fit the criteria — not just those with visibility.

3. Talent hoarding and unclear mobility pathways

Strong performers are sometimes kept in place because managers don’t want to lose them. When mobility pathways aren’t transparent, employees may feel stuck, limiting their readiness for future roles and weakening the pipeline.

AI-supported career pathing and internal marketplaces make growth paths visible, encouraging movement based on readiness and skills rather than negotiation or proximity.

4. Outdated or siloed tools

Succession planning often pulls data from spreadsheets, HCMs, performance systems, and LMS platforms. Without connected information, plans become outdated quickly and HR spends more time gathering data than planning.

Using AI, bring data together in real time, enabling quicker insights into skill gaps, readiness, and bench strength — all in one view.

5. Limited DEI representation in successor pools

Without intentional design, leadership pipelines can mirror historical patterns instead of future needs, reducing representation and limiting the perspectives shaping key decisions.

AI helps standardize how candidates are evaluated, using skills-focused criteria to broaden successor pools and reduce subjective bias. Get consistent scoring, surfaces overlooked talent, and highlights diversity trends so teams can course-correct early.

6. No clear metrics or accountability

Without insight into readiness levels, risk exposure, or the number of critical roles without successors, succession planning becomes static rather than strategic.

AI-powered dashboards track readiness, bench strength, and pipeline risks automatically, giving HR a clear picture of progress and gaps.

These challenges compound quickly. AI-supported succession planning helps organizations shift from guesswork to clarity, creating pipelines that reflect actual capability, future needs, and the aspirations of employees who want to grow.

Related: Top 5 Succession Planning Best Practices for Future-Ready Leadership 

Succession Planning Framework: A Modern 5-Phase Model

A strong succession plan follows a clear, repeatable framework. The model below combines role clarity, AI-driven skill insights, and structured development into a process HR teams can apply year-round.

Phase 1: Identify Critical Roles

Start by determining which roles would create the most disruption if left unfilled. These often include senior leadership positions, specialized technical roles, customer-impact functions, and jobs tied to regulatory or safety requirements.

During this step, HR reviews the role’s influence on business outcomes, how scarce the required skills are, how long a successor would take to ramp, and whether any internal talent is close to being ready.

This gives the organization a grounded starting point for where to focus its succession efforts and highlights the roles most essential to continuity.

Phase 2: Assess Internal Talent and Skills Gaps

After critical roles are identified, the next step is understanding who within the organization has the potential to move into them — either now or with targeted development. HR teams analyze current skills, performance indicators, career aspirations, and past experiences to understand each employee’s trajectory.

Phenom Workforce Intelligence helps bring together skills data, experience, performance inputs, and interests to highlight high-potential talent and pinpoint the gaps between an employee’s current capabilities and what future roles require.

This phase clarifies where the organization already has strength, where additional development is needed, and which employees are strong candidates for long-term leadership pathways.

Phase 3: Develop Successors With Targeted Learning and Experiences

Identifying successors is only the beginning. Development is what turns potential into readiness. HR and managers work together to give employees a blend of coaching, exposure, and hands-on opportunities that help them grow into future responsibilities.

This may include mentorship, stretch assignments, internal gigs, and leadership training, supported by personalized guidance through Phenom Career Pathing. The focus is on building experiences that expand perspective, strengthen skills, and prepare employees to take on more complex roles over time.

Phase 4: Track Progress With Leadership KPIs

Succession planning becomes far more strategic when progress is measured. HR leaders monitor metrics such as bench strength, successor readiness scores, representation across leadership pipelines, the percentage of critical roles with a prepared successor, and the balance of internal versus external hires.

These metrics provide a clear picture of where the organization is strong and where future risk may emerge. Succession dashboards help HR and executives see pipeline health in real time, making it easier to adjust plans and investments as needed.

Phase 5: Refine Continuously

Succession planning is an ongoing cycle. As strategies shift, new skills emerge, and organizational priorities change, HR revisits earlier assessments to keep pipelines aligned with business needs. This includes reviewing critical roles, updating readiness scores, refreshing development plans, and watching for single points of failure.

When refinement becomes a regular practice, succession planning evolves from a static exercise into a dynamic system that supports leadership continuity year after year.

Succession Planning Must-Have Features

A modern succession plan is easier to maintain when it’s supported by tools that create clarity, connect data, and reduce guesswork. Core features include:

• Unified skills intelligence that brings employee skills, experience, and career interests into one view

• Skills gap analysis mapped directly to role requirements

• AI-driven successor recommendations that surface qualified internal candidates across the organization

• Integrated development workflows for mentoring, learning, and internal gigs

• Real-time succession dashboards that track readiness, bench strength, and role coverage

DEI-aligned evaluation methods that broaden access and reduce reliance on subjective selection

DEI in Succession Planning: Building Inclusive Leadership Pipelines

Diversity, equity, and inclusion need to be built into succession planning from the start. Without that intention, leadership opportunities often favor people with higher visibility or closer proximity to decision-makers — not necessarily those with the strongest potential. Over time, this narrows the range of voices represented in key roles and limits the organization’s ability to respond to new challenges.

A more inclusive approach begins with widening the lens through which HR and leaders identify future talent. That means looking beyond traditional pipelines, making growth pathways more transparent, and giving employees across teams, locations, and backgrounds real opportunities to build toward leadership roles.

This is where AI plays a meaningful role. When used responsibly, it brings consistency to how potential is evaluated and reduces the influence of subjective judgments. Instead of relying on familiarity or historical patterns, HR gains a clearer view of who has the skills and trajectory to step into future roles. AI-supported talent insights help by:

• Highlighting strong internal candidates who may not yet have visibility

• Revealing where diversity drops off in the pipeline

• Identifying barriers that limit advancement for certain groups

• Using skills-focused criteria to keep evaluations fair and comparable

A leadership pipeline built with DEI in mind is not only more representative; it’s also more adaptable, creative, and resilient. Organizations that make inclusion a core part of succession planning build teams capable of leading through change with a wider range of perspectives and ideas.

Related: “Success is a terrible teacher,” a VP of TA warns. So learn from mistakes and keep moving forward. 

Tools & Technology That Support Modern Succession Planning

Modern succession planning depends on technology that brings together skills data, talent insights, and readiness indicators in a way manual processes never could. AI and workforce intelligence allow HR teams to plan with greater precision, anticipate risks earlier, and support leadership development at scale.

• AI-Driven Skills Gap Analysis: Understanding the skills required for a role and how current employees compare is foundational to succession planning. AI-driven skills gap analysis helps HR see where employees already align with future roles and where targeted development is needed. Using unified skills ontologies and Workforce Intelligence teams get a clearer, more objective view of strengths, gaps, and potential, helping successors build toward leadership roles with purpose.

• Workforce Intelligence Dashboards: Succession planning becomes far more strategic when HR can see pipeline health in real time. Workforce intelligence dashboards bring together data on skills, mobility patterns, performance signals, and readiness levels. With this visibility, HR can track bench strength, identify roles with limited coverage, and understand where leadership risk may be emerging.

• Talent Marketplaces: Internal talent marketplaces help employees discover opportunities that build experience long before they’re formally considered successors. By showcasing projects, gigs, mentoring options, and open roles, these platforms reduce talent hoarding and create natural pathways for growth. Solutions like the Phenom Talent Marketplace make internal mobility more accessible, expanding the pool of employees who gain the exposure and skills needed to progress toward future leadership roles.

• Predictive Analytics for Leadership Readiness: Predictive analytics adds a forward-looking dimension to succession planning by identifying how quickly an employee may be ready for a critical role. By analyzing skills, learning patterns, and experience data, predictive tools estimate readiness timelines and highlight where additional development is needed. Phenom Succession Planning incorporates these insights to help HR anticipate future needs, strengthen leadership pipelines, and plan transitions with greater confidence.

Together, these technologies give HR a more grounded, data-rich foundation for decision-making. Instead of periodic, manual updates, succession planning becomes a continuous process — supported by real-time insights, objective skills evaluation, and clearer pathways for developing future leaders.

Measuring Succession Planning: The KPIs That Show Real Progress

Clear metrics help teams understand readiness, bench strength, and representation — and give leaders confidence that the organization is prepared for future transitions.

These KPIs are the ones most HR teams rely on to assess the health and impact of their succession strategy:

• Percentage of critical roles with identified successors: A direct indicator of leadership continuity and risk exposure across the organization

• Bench strength ratio: Measures how many potential successors exist for each critical role and how close they are to being ready

• Readiness scores: Often supported by AI, these scores reflect how well an employee’s current skills, experience, and trajectory match the expectations of a future role

• Internal vs. external leadership hires: Shows whether leadership development efforts are working and how successfully the organization is promoting from within

• Leadership diversity metrics: Tracks representation across successor pools to ensure future leadership reflects the workforce and avoids narrowing over time

Real-World Example of Future-Ready Succession Planning ft. Siemens Healthineers

Siemens Healthineers, a global leader in medical technology with 70,000 employees, faced a succession planning process that had become unsustainable. Annual talent reviews required 400-slide presentations, making it impossible to scale across the organization. Following their acquisition of Varian Medical Systems, the workforce was split across two separate systems, creating fragmented visibility. Leaders spent countless hours on manual talent discussions while lacking basic intelligence about their top potential employees.

With Phenom Succession Planning, the team gained unified visibility across their entire workforce and AI-powered insights to identify succession candidates organization-wide. The platform's configurable interface adapted to their complex matrix structure, enabling different teams to focus on relevant competencies while maintaining a complete organizational view. Real-time talent intelligence replaced manual documentation, automatically surfacing patterns like employees identified on multiple succession plans.

"Phenom was able to help us with a solution here to see everyone in one place. But also, it's a complete view. So, it's not just looking at one snippet of an employee's profile, but really a holistic view," said Cristina Dickins, VP of Global Talent Management at Siemens Healthineers.

The transformation shifted succession planning from reactive presentations to proactive talent development, enabling strategic conversations about where high-potential employees would best fit across the organization.

Results:

• 30,000 employees with potential ratings for unprecedented talent pipeline visibility

• 300+ talent reviews conducted with dramatically reduced manual effort

• 15,000 active succession plans built across the organization

Read the full story: How Siemens Healthineers Scaled Healthcare Succession Planning

Streamline Succession Planning With Phenom

Effective succession planning requires an in-depth understanding of its importance to the success of your organization and the factors to consider when creating your own. However, challenges like identifying the right internal candidates, evaluating and mapping their skills and experience, and creating tailored development and advancement programs can make it difficult to know where to start.

At Phenom, we understand these challenges and offer solutions to streamline your succession planning process. Our platform leverages AI to optimize HR workflows, focusing on enhancing the employee experience from the onset.

We simplify the process of identifying top internal talent by using AI to collect employee data and create skills ontologies that offer in-depth insight into their current skill sets and experience. Using this insight, you can effortlessly identify critical skill gaps, determine ideal roles for your employees, and provide them with personalizedcareer pathing, professional development, and upskilling opportunities.

This approach not only facilitates internal mobility, but also empowers leaders to make informed decisions about talent recognition, selection, and succession planning. By ensuring consistent access to real-time data, Phenom Workforce Intelligence ensures a robust foundation for nurturing potential talent and paves the way for long-term organizational success.

Get a clear view of your organization’s roles, skills, and career progressions with Skills Snapshot. Discover how the right tech drives your talent management goals.