Monthly Business Insight, from Gregg Anderson @ VisionQuest
The recent wave of high-profile executive departures from government and some of its statutory authorities highlights the need for boards to regularly review succession plans and develop future leaders in an environment where it is getting increasingly difficult to find well-trained talent.
Planning and managing succession is a crucial element of the wider integrated human resources and business planning process. A gap analysis may reveal a number of key areas, one of which may be succession planning. Other key areas may include recruitment, change management and employment equity. Succession plans should therefore be an integral part of your HR and business work plan.
Effective succession planning cannot succeed without commitment from leaders at all levels, beginning at the top. The process involves an integrated, methodical approach to find, foster and retain talent for key positions and areas aligned with current and planned business objectives. The focus needs to be on developing employees so that the organisation has a group of qualified candidates who are ready to vie for key positions and areas when they become vacant.
Since succession planning is crucial for any business, I recommend that it start at least two to five years prior to the transition. Failing to put a well thought out succession plan in place is the primary reason why some organisations and small and medium-sized businesses don’t succeed into the next generation.
Fortunately, there are steps organisations can take to ensure that they have successors for key positions and also to retain their best talent as they develop their succession plan. One way to succeed is to make value creation part of succession planning. This is “an integrated planning process” that evaluates the efficiency of the business, the calibre of the human resources and how the business value can be amplified before it transitions into new ownership.
Emphasis should be on the healthy furtherance of the organisation and an important part of that involves company staff. A good idea is to create a transition plan for key employees and the next generation of management. If too many exit at once, it can create a huge void in the business. If an organisation loses its key people, it will also lose the corporate knowledge and the blueprint of why the business functioned, and this should be avoided.
Furthermore, talent development need not be complex or costly but does need a real commitment. Cross-training is crucial and could encompass subjecting high-talented people to different areas of a business’s operations so they develop a firm grasp of the entire organisation’s competencies.
For small businesses with limited employees and resources, it may be hard to move key people around. One solution is to have emerging stars work on special projects or assigned to committees to increase their knowledge. Training could also involve employees attending industry conferences or providing a coach to help them become better managers.
Such steps can help a business develop better internal candidates. Recent studies have shown that companies that promoted from within often outperform those that recruit outsiders, and that it is also cheaper than hiring outsiders. However, there are still benefits to recruiting outside candidates as this gives confidence to directors that all the optimal matches have been evaluated. Hiring external candidates could also expose businesses to new ideas and innovative ways of product/service execution and delivery.
Larger businesses should have the board of directors and C-level executives actively involved in the succession planning process. It is advisable that the criteria for selecting rising leaders should originate from the highest levels of the organisation.
Top management, beginning with the CEO, should be tasked with preparing their replacements. This should include emergency replacements should the executive be temporarily disabled or exit the company suddenly. It is critical that a key executive always have at least one – and preferably more – assistants fully informed of his or her projects and activities.
Succession planning is going to be a continuing major concern for many businesses in the next decade. It is a key factor in lessening a company’s risk exposure, improving morale and productivity and planning for future growth. Succession planning resonates right across nations and finding a way to do it so that it benefits both the business and the wider community is essential.
Gregg Anderson, MBA, CMC is managing director of VisionQuest Management Services Ltd., a boutique management consulting company that provides strategy, business transformation, governance, risk and compliance consulting services. He can be reached at firstname.lastname@example.org