172 corporate Vice Presidents perished in one day when the twin towers came down on Sept. 11, 2001. (1) This tragic event drove home to many CEOs and business owners that life is precious and that it is short. We can be here today and gone in a heartbeat.
Is the company that you run or own prepared for your sudden departure and if not, why not? Whether you are running a multi-billion dollar publicly traded company or a mom and pop dry cleaner on Main Street, USA, you’ve got to take succession planning seriously. Close your eyes for a second. Pretend that by the end of the week your life will come to an end: heart attack, car accident, or lightning strike on the golf course. Think of all the employees that depend on their jobs at your company; all of the families that you are helping to feed. Will you leave them in good hands or in a mess?
Executive coaching guru Marshall Goldsmith points out that we should really change the term “Succession Planning” to “Succession Development”. (2) He argues that plans are static, that they don’t develop people. Only developmental experiences develop people and get them ready for big roles with more responsibility.
Here are a few things to keep in mind when putting a succession development process in place:
Job description and annual goals: Take ownership for the succession development process by including it in your job description. Having it as one of your annual goals will link progress on succession development to performance compensation.
Key Stakeholders: Succession Planning / Succession Development should not be delegated to the HR department. It should be a continuous process that involves key stakeholders of your organization. If your organization has a board of directors or board of advisors, their involvement is key. See them as your ally in the process. Involve other trusted advisors from inside and outside the company.
Create the Model: There are many different succession planning/development models out there and it would be important to put some thought into what works best for your firm and company culture.
- Talent Pool: Depending on the size of your company the talent pool could be single digit in size or over 1,000 high potentials. Once identified, these employees receive different development opportunities that can span over many years. They may have an internal mentor or external executive coach. Some might be selected to participate in an executive MBA program or other external education. They might be put on a cross-functional project team or put in charge of their own project. This development is great for those who are asked to participate in the program but sometimes it can lead to jealousy from those who are not included. Problems can also arise if one of the participants is removed from the exclusive club. These employees will probably leave your organization.
- Job Rotation: Some firms believe that the best way to develop their top talent is to move them through different functions every 18 to 36 months. Moves can also include a foreign assignment. While job rotations can be very successful at developing top talent, there are possible complications that you should be aware of. Firstly, mobility might be an issue, especially if the employee is asked to move outside the country. One of the biggest problems that I’ve seen is that the trailing spouse has to give up a job and struggles to find something at a similar level / income in the new location. Also, a time period of 18 to 24 months might be to short to evaluate the employee’s performance. Lastly, moving people around so frequently can cause a lot of disruption and lead to morale issues.
- Bring in new talent: If a company has a gap in their leadership pipeline they may want to look externally for top talent. This can be costly and lead to issues around cultural fit. But sometimes there is no other option then to go outside.
- Hybrid: Combining the talent pool model with the job rotation model and reducing the number of participants, might also be an option. You’re putting all of your eggs in one basket so be careful if you choose this one.
- Welcome them back: Keep in contact with top performers who leave your company, even if they move to the competition. If they have left on good terms for a job they couldn’t turn down, don’t hold this against them. I know many employees who have left a great company, gained valuable experience at another great company and then find their way back “home”.
Know what you’re looking for: Markets change, technologies change, and companies change. The CEO or President that helped turn a company around and bring it out of bankruptcy might not have the skill-set or behaviors necessary to move into a new business model. If the leader of the firm never lived overseas then chances are he/she is not the right person to move the company into foreign markets. Invest time and energy in defining the experiences, skills, competencies and behaviors that are required for different key jobs in the organization. Then, communicate this information to the individuals who are seen as short, medium and long-term candidates for these positions.
Incorporate onboarding: Sink or swim is never a good strategy when it comes to succession development. It is not always possible but if there is some overlap between the incumbent and successor this can be a huge support to get the new executive off to a good start. Also, it is important that the new employee’s boss takes time for him/her and is available to answer questions.
Have a contingency plan: Having a plan and a process in place to identify and develop key talent for future jobs is important. But stuff happens and contingency plans need to be in place if a key employee dies, becomes ill or leaves the company. Create worst-case scenarios and think about your exposure.
Regardless if you are a CEO of a publicly traded company or the owner of a small family business, you have an obligation to your company to take succession planning seriously. It is a process that needs to be put in place, monitored and updated. It is on going. Don’t do it on your own but get the support of internal and external trusted advisors. There will be a last day that you enter that corner office. Leave it in good shape for your successor.
(1) Robert Guenther: Is It Time to Replace Your Replacement Strategy?, Harvard Management Update, 4, pages 3-6, 2004
(2) Marshall Goldsmith: 4 Tips for Efficient Succession Planning, HBR, May 12, 2009