Any business of any size needs a succession plan. In fact, a small business needs a Succession Plan in mind and on paper before it opens its doors.
Any Succession Plan involves personalities, promises, and premonition. And, that sometimes makes it difficult. But, the question remains, “Is it complicated?”
A Succession Plan is the formal process businesses use to assure the orderly and planned transfer of function, power, and accountability when executives or managers leave the company because of death, retirement, resignation, or other means.
Businesses succeed best when they have the right people in the right place. They have the talents needed for the company to meets its long and short-term strategic goals. So, planning for that continuity is vital.
- Anticipated continuity: Some vacancies can be anticipated. For example, some people are on track to retire or to change positions or locations. Although the company has time to replace the talent, they need a plan to optimize that replacement process.
- Internal continuity: If a business commits to promoting from within, it must have a process to identify and groom the potential talent. Any process should coach the candidates through training courses, skills seminars, mentoring shadows, and job rotations.
- Recruiting continuity: Best practices hire new employees with potential to match or fill needs. The business must recruit talent that can replace or be developed to replace an incumbent who leaves or is expected to leave.
- Financial continuity: Some businesses, like insurance, are built on financial structures that include equity and commissions. In such businesses, the Succession Plan must also spell out the process for resolving those contracted issues.
In the words of Carter McNamara, MBA, PhD, writing for Free Management Library, “demographic trends indicate that there are not sufficient numbers of next-generation leaders to replace retiring baby-boomers in organizations. Thus, succession management is an increasingly important priority.”
Succession Planning Process
- Start early: Succession planning should be part of your startup business plan. The presence of a Succession Plan will comfort lenders and investors from the start. It says you understand and support strong management practices. Absent a Success Plan, your business risks crisis management.
- Identify roles: You must do more than list the critical company positions. The focus first goes to the executive level titles, but any manager or supervisor plays a critical organizational function. In the face of a talent shortage, every position becomes critical, so you need deep knowledge of job descriptions, accountabilities, and specific talents needed. BizMerlin’s Skill Matrix is the kind of help that makes a difference.
- Partner with employees: Management benefits from a Succession Plan that reflects employee input on duties, performance, and priorities. Employees benefit from participation in futures planning.
- Consult stakeholders: You want to interview everyone who as an interest in or organizational connection with the role. You want to know what relationships they have with subordinates and peers, suppliers and customers, and teammates and bosses.
- Follow the rules: Management must abide by its own policies and procedures on new hires and promotions. Even in the face of an unexpected executive departure, you must follow policy, recruiting to the need and not to the personality.
- Study compensation: Compensation should not chase the job; it should not jump just to attract replacement. You don’t want to trash your compensation schedule and package, so you need to revisit the compensation structure periodically to affirm that your business positioned to attract and retain the necessary talent.
- Communicate plan: From the date of hire, employees need a career path. Some part of their annual performance assessment should review the business’s needs and specific ways employees can follow the advancement plan. BizMerlin offers such tools in its Goal Setting & Performance Review, “A comprehensive performance management system that will adapt to match and enhance the culture of your organization.”
What can go wrong?
Writing for Forbes, Stephen A. Miles warns of some common mistakes in succession planning.
- Few of the most senior appointments are made internally. Leadership may find outsiders more exciting rather than stick with a low risk internal appointment. It creates a damaging paradox between the promises made to employees regarding internal career paths and the change of course once the opening arises.
- It’s naïve to think there will be a successor “ready now.” If a successor is “ready,” s/he will likely jump ship and go to the competition. You can’t lock a “ready now” successor in place and waiting.
- Succession planning is not a set of dominoes falling from the top down. Leaders are not a sequence. Best practices involve seeing the organization as a dynamic assembly needing reassembly from time to time.
- Needs change as markets, products, and talent resources change, so you need to anticipate change. It’s counter-productive to think there’s no reason to re-invent the recruiting process. Fresh eyes may see new opportunities. The plan needs to anticipate appointing what it needs and not what it has had.
A Succession Plan aims to avoid the “sink and swim” approach to promotions and replacements. No one wins when someone is thrown in the frying pan to cook off the rough edges.
Ownership, leadership, and employees need to know how to succeed to a position. It’s in everyone’s interest that the processes, methods, and tools are established and clear. Employees appreciate knowing where they can be and how to get there.
So, the plan needs more than the sequence of steps. It must recognize the organization as an organism with ebbs and flows. And, it must provide the means to navigate the system.
Succession planning can be complicated if you let it be. There are templates, and principles you can follow. But, the real work lies in figuring out what you want and, to some extent, when you want it. Without a Success Plan, a business lacks some backbone and puts it and its stakeholders in jeopardy. In fact, planning succession is a great place to start planning the business.