We recently started working with a new client precisely because there was confusion over what kind of succession planning was going on.

The current leadership team (the original founders), felt that they already had a succession plan in place, but the next leaders who were ready to move up and take over some C-suite roles kept saying, “No, there's no plan here, and we’re worried!”

So let's talk about three kinds of succession planning, and why there is confusion.

1)     The first is operational. It's about the business. It's about ensuring that the business has continuity and requires the leadership team to identify key roles in the organization. What I always like to say is, a key role is the kind of position that – if that person were to leave – you’d be saying, “Ohh, crap.”

Funny Story (not really) of Poor Operational Planning:

Many years ago, I was on a town hall conference call with a client. The CEO was going over financials and stated that the company had missed their mark for the third quarter, but he was confident that they would recover by the end of the year because the lead sales salesperson was coming back from maternity leave.

Did you just have the same reaction that I did upon hearing that?

What? The financial success of that company hinged on ONE SALESPERSON?!

2)     The second kind of succession planning is the one that I think most business owners think of as succession planning, and that's the transactional kind. How do I exit the business? How do I get it ready for sale? What's the value? What's the timeline? That’s what most business owners (and even attorneys) define as succession planning; and this is where our new client, mentioned at the intro, found itself stuck.  “We’ve handled the legal, the financial, and the timeline – what do you youngin’s mean we don’t have a succession plan?”

FYI: his is more accurately defined as exit planning.

3)     Finally, the third type of succession planning is what we – at The Training Doctor - do, which we can refer to as organizational succession planning. In organizational succession planning you focus on the people in the organization who have the potential to lead it in the future and together we create a pipeline of future leaders by designing professional development, giving them experiences, tasking them with increasing responsibility, etc.  Over time you should have a pipeline of people - at all stages of their careers – who are being prepared to lead departments, divisions, and even the whole organization at some point in the future.

In summary – there are really three types of succession planning and it’s important to know which type you need and when. Typically operational is first – this prevents you from having to deal with a crisis. Then organizational -  to prepare the company for growth and sustainability. And finally transactional to ensure all your hard work and planning pay off not only for you, but for the people you employ.

This article was originally posted on LinkedIn.