Succession Planning: Expectations vs. Reality
Succession planning isn’t something that people like to think about, but it also isn’t necessarily what people believe it to be.
The Cambridge Dictionary defines succession planning as: “The process of finding suitable people and preparing them to replace important executives in an organization when these executives leave or retire.”
Interestingly, the definition is followed by: “A lack of succession planning is the main reason so many family businesses break down.”
Isn’t it odd that the definition focuses on replacing “important executives” but then follows with the thought: a lack of succession planning is the main reason so many family businesses (ie: smaller businesses) break down? This is a good example of the profound difference between the expectations businesses have about succession planning vs. reality, particularly when it comes to small to mid-sized businesses.
Succession planning should not be limited to the C-suite. It should be about identifying all the KEY positions that keep your company growing, and then developing a contingency plan should those positions suddenly need filled. This is especially important for small companies where key players often wear many hats. Just imagine what happens to the company that loses the one or two key people who handle things like payroll or benefits?
Who’s Making Plans?
The majority of large organizations (1,000 or more employees) have a formal succession planning/management process. Among large organizations, 58% have a formal succession planning process and a further 26% have an informal one. The percentage of organizations with succession planning is lower in smaller organizations, but even in organizations of less than 100 people, 29% have a formal program.
So, what about the other 71%? Is that where your company lies? Here’s what 29% of progressive and proactive smaller organizations know about succession planning that you should, too.
Where to Start?
Whether looking toward a nearing retirement or simply a position key to the company’s operations, the initial steps are the same. For those nearing retirement, start the conversation early, up to three years before an intended retirement date. This gives you plenty of time to address questions such as:
- What are the particular roles and responsibilities?
- Will the same competencies/skill sets be required in the future?
- What talent exists in house currently?
- Are there “high potential” employees already in your talent pool?
- Give those high potential employees the opportunity to express interest in higher level roles by discussing their short- and long-term goals and tying them into performance reviews.
- Provide high potential employees with opportunities to expand their skills and grow. Millennial workers especially DO want those development opportunities.
- Create development plans but don’t overcommit to future mobility.
- How is the current environment changing?
- When is a good time to revisit the plan on a consistent basis?
- When to create the transition plan?
Taking the time to formulate a succession plan is a balancing act between ensuring critical positions are covered and allocating time and resources to the process. Start where the risk is greatest.
Unfortunately, succession planning also comes into play when the unexpected happens, such as an illness, injury or death. Having a proactive plan in place lessens the negative business impact, but what about the emotional toll? It is best practice to be prepared with an established Employee Assistance Program for employees to access when dealing with the loss. A human resources professional can help to create plans to deal with these scenarios.
How to “Do” Development
Once you’ve identified a successor for a particular role, it’s time to think about their development. Create a plan to help develop the skills needed for the role. Here are some ways to tackle that, particularly in light of limited time and resources:
- Pair the ‘successor’ candidate with a mentor, which is a way to provide informal coaching
- Provide in house cross training opportunities when possible
- Consider leadership development courses, many of which are available online (see ConnectedHR’s training series for upcoming options)
- Give stretch assignments – your high potential employees will want those opportunities for development and exposure
Remember, it doesn’t have to be complicated or time-consuming, rather just planned for.
The same development tips can also be applied to planning to survive the exodus of the baby boomer generation. As they retire and their experience, knowledge, and intellectual property, (which can’t be downloaded) is swept away in the “silver tsunami.” Especially in the manufacturing sector, finding qualified candidates at every level is a big concern. Preparing for this with carefully thought out development opportunities can cultivate in house talent and attract outside talent.
Beyond Conventional Succession Planning
Succession planning can also help to streamline the priorities of business owners, who may individually have different goals for the company. Take, for example, co-owners who are at different stages in life. One is nearing retirement and looking to maintain a certain lifestyle and doesn’t want to upset the status quo. The other owner is younger, more progressive and growth-oriented. With these opposing strategies, a power struggle can result.
It can be extremely beneficial having an outside HR consultant to initiate and lead the conversation and ask the difficult questions. With a consultant, there is no agenda and complete transparency. Acquiring a good understanding of business priorities will be integral in determining your succession planning strategy.
It just makes good business sense to be proactive and have a succession plan in place. While what you set out in the beginning may change over time, you still have the foundation to build upon. Your plan will greatly lessen “flight risk” issues that come about when key employees leave your organization. And in the meantime, you’ll be giving existing employees the opportunity to develop their skills.
Referring back to the “The State of Succession Management,” 2019 study, take note: “Having a well-defined process is the single biggest difference between organizations with effective programs and those with less effective programs.” So what are you waiting for? ConnectedHR’s experienced consultants are ready to help you create your succession plan, no matter the size. Contact us to learn more.