Succession planning

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In organisational development, succession planning is the process of identifying and preparing suitable employees, through mentoring, training and job rotation, to replace key players (such as the CEO) within an organization as their terms expire. From the risk management aspect, provisions are made in case no suitable internal candidates are available to replace the loss of any key person. It is usual for an organisation to insure the key person so that funds are available if he dies and these funds can be used by the business to cope with the problems before a suitable replacement is found or developed.

A recent example of sound succession planning is the case of how General Electric found a successor to its CEO Jack Welch. The Board of Directors engaged in a lengthy and systematic review of the potential successors prior to his retirement.

With the Sarbanes-Oxley Act of 2003, succession planning in the USA has risen in importance as a corporate governance issue.