Planning to Fail? Best Practices in Succession Planning
"When boards permit a happenstance approach to succession planning, they have effectively abdicated one their most crucial responsibilities."
Stephen A. Miles & Nathan Bennett
Nov 2009, Forbes.com
The same can be said of business owners. As a business, having a succession plan doesn't necessarily mean having an exit plan. Succession planning actually answers these three questions:
- What is the lifespan of this business?
- Who will keep the business running?
- How will the departure (or sudden absence) of key members/roles be managed?
Threat to the economy
It is in everyone's best interest -- the owner's, shareholder's, employees', customers', suppliers' and the family members of the owners -- for there to be a clear strategy for succession. It is in the best interest of the company's longevity. It comes down to this: if you don't have a plan, how can anyone have confidence in the longevity of your company?
Mike Thompson, CMC, Associate Professor, Management Consulting with the Faculty of Management at Royal Roads University at a recent Surge High Voltage Business Breakfast said, "I suspect that the key issues of succession planning and transition are not being addressed by many companies in B.C. I think that this critical demographic threat is going to have a profound impact very soon." Thompson raises a good point: that failure to plan isn't just a threat to the business, it is a threat to the economy should a lack of succession planning be as widespread as he suspects. Thompson is embarking upon an applied research into the issue of succession planning readiness within the small and medium size enterprise sector in the province of B.C.
I suspect that overwhelm and a lack of seeking support for the development process is what keeps most companies from preparing a succession plan. There may also be another compounding factor: a lack of an overall business strategy. Succession planning should be aligned with the overall business strategy taking into account the vision, goals and objectives. Ultimately it is difficult for a company to fulfill its goals without an effective succession plan. It is equally difficult to create a succession plan without a clearly developed strategic plan.
A savvy approach
Research shows that succession savvy companies use several best practices in their approach to succession planning and management.
- Their succession systems are easy to use and ensure consistent, objective processes.
- They proactively focus on attracting, developing and retaining talent, rather than replacing it.
- They have identified the gaps, as well as the key roles that are critical to the continued success of the company.
- They continually refine and redefine, if necessary, their systems based on new information, feedback, changes in the business environment and learning from other business leaders. They align their people strategy with their business strategy.
- The succession planning is an open system. Everyone is apprised and is able to give feedback.
A 'Plug & Play' candidate does not exist
Start your succession planning now by taking the time to answer these questions:
Analyze the situation:
- What are the most significant challenges the company and its industry are likely to experience in the coming years?
- What skills and experiences will key roles within the company need to effectively lead the company or department through those challenges?
Owners/directors may make the mistake of thinking a future leader should be a replica of current leadership. Consider that future challenges may require different skills/experience. Succession planning is a forward looking process, not an attempt to replicate the past.
Determine a process for development:
Consider that a 'plug & play' candidate does not exist.
Now, repeat the sentence above to yourself again, and again, until it has been fully digested.
If they do exist, they are likely far out of your reach and ability to hire. It is unrealistic to think someone can just jump in and run things successfully. Development is a must.
- Will you develop internal or external candidates?
- What do they need to know?
- How will you enable engagement and empower decision making?
- How will you ensure they understand the vision and culture and are committed to sustaining the culture?
- What are the relationships they need to develop?
Determine a process for transition:
- What will the on-boarding process look like?
- How will relationships be developed?
- What will be the plan for the first year? How will you engage the candidate in creating this plan?
- What will be their milestones and the metrics on which their performance is measured?
- What will ensure everyone is working from the same plan?
- What coaching will be in place to support successful on-boarding over the first year?
Managers are not leaders
While a company may think they have their succession planning under control, it is equally important to develop the leaders. Solid and successful succession planning is not a static plan. It is an integral part of a company's culture. Nurturing good leadership is an ongoing and active process.
Kevin Groves, in his research paper, Integrating leadership development and succession planning best practices concludes that the "analysis of interview data indicated that best practice organizations effectively integrate leadership development and succession planning systems by fully utilizing managerial personnel in developing the organization's mentor network...". In other words, succession savvy companies are those which actively establish a supportive organizational culture.
While a lot of the literature focuses on leadership development in success planning, I believe it is a mistake to think succession planning is just about the leadership. It involves the whole organization. The planning really should encompass all the roles or future roles needed to fulfill the operations of the company.
A senior consultant with Delta Partners, Delaney Tosh, CPCC, is a Certified Professional Coach working with teams and CEO’s on leadership, organizational management, innovation and succession planning challenges. She is co-founder of The Surge Strategies Group Inc. and facilitates the Business Innovator Labs™. Full profile on LinkedIn.