• Smart Succession Planning

Smart Succession Planning

Your business can't afford turmoil at the top. Act now to make sure you can handle personnel shifts in stride.

Succession. Stop for a moment and look at that word; "success" is a large part of it. And it's what a succession plan is about too. For a company to thrive, it can't suffer sudden talent shortages, especially at or near the top. If a key player retires, gives notice, or takes a lengthy leave, there needs to be a strategy in place to fill the void quickly and seamlessly.

So what's your plan for when MVPs go MIA? Don't feel ashamed if you don't have one. According to a recent study by human capital and management consulting firm Aon Hewitt, only 88% of top firms, and 53% of all others, think that their CEO pipeline is sufficiently developed to ensure future success. Imagine how much less well thought-out most companies' succession plans are for other crucial roles.

If your business lacks a clear protocol to handle high-level turnover, there's no cause for panic--but there's every reason to take action. "The time to start making a plan is right now," stresses Linda Henman, Ph.D., author of Landing in the Executive Chair (Career Press, 2011). Henman, who has helped major companies such as Tyson Foods with succession planning, has heard her share of excuses from clients: "They'll say, ‘But we've got a really good CEO,' or ‘Our CEO is young and healthy,'" she says. "My response is ‘Well, when would you buy an insurance policy--when it's already too late and there's a flood?' You can hope to never use your insurance policy. With succession planning, you know that at some point it's going to be put into play."

The following are tips from the pros to ensure that shifts at (or near) the top don't shake up your company.

Decide whether you'll set your sights inside or outside your organization.

Says Derrick Handwerk, a managing partner and financial planner at Handwerk Multi Family Office, in Lansdale, PA. Even if you prefer to promote from within as a matter of principle, "you have to make sure that someone within the organization is capable and willing to fill the job in question," Handwerk points out. Think about your firm's key positions, and decide on a case-by-case basis whether each would be most effectively filled from within or outside when the time comes. It can lessen your efforts and search time considerably.

Monitor your competitors continually.

"If you look at major league baseball, each team manager knows who the good players are on the other teams," points out Henman. "Adopt a similar strategy--who might you want to lure over from the competition if you have an opening?" Read industry publications and scan LinkedIn to spot the movers and shakers. (For other talent-hunting tips, read "5 Easy Ways to Snag Top Talent".) Maintaining a short list of outside talent can help keep you from coming up short in a pinch.

Don't overlook the impact that a rank-and-file employee's departure could have.

Key positions aren't always at the ownership or C-level. "You could have a receptionist who knows how to get things done and solve a variety of problems," Henman says, to cite one example. Would you know how to replace such a person in a pinch? You could keep a staffing agency on call, have the employee compile a problem-solving manual for his or her replacement, or explore other options. Another smart strategy, Henman adds, is to create an orderly way for these unsung heroes to transition to other roles over time. "Sometimes people just get bored with what they're doing, especially if they're in a lower position in the company--their duties can be very repetitive," Henman explains. "If, say, you run a salon, your star stylist may be tired of standing on her feet all day. Would she be interested in becoming a manager?" You can begin training her, and in the process, retain her and her expertise. Speaking of which...

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Amp up your cross-training efforts across the board.

The Society for Human Resource Management (SHRM) reports that cross-training not directly related to an employee's current job has been declining for several years. It's an unfortunate trend. Cross-training initiatives create valuable internal redundancies--ones that can blunt the chaos of employee turnover. (Such turnover, by the way, is all but inevitable: Another SHRM study found that more than 40% of workers will soon go job hunting. The most popular reason, cited by a third of that restless group, was a desire for better career advancement opportunities.) Cross-training not only keeps employees content and engaged, it yields a pool flexible talent for when openings arise in the upper ranks. So why don't more companies invest more in their employees' development? "The fear is always ‘What if we put all this time and money into the employee and he leaves?'" Henman says. "But what if you don't, and he stays? You'll have wasted an opportunity to increase his value to your company."

Don't think of who can fill a job's current needs.

Instead, think of who can meet its future requirements, advises Henman. "A common mistake is basing succession plans on what the company looks like today, rather than what they think it will look like five years from now," she explains. One automotive firm Henman works with, for example, was traditionally a brick-and-mortar firm. Now, though, it conducts most sales via the web. Clearly, its future workers will need extensive digital skills. Sketch out your company's own expected evolution and keep it in mind when identifying and/or training its future leaders.

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Recognize and engage your employees with up-to-date technology tools, such as Myron's Emergency Chargers Gift Set. It keeps tech devices powered during training sessions, conventions, and other employee-development events.

Get buy-in from the decision-makers.

Another mistake Henman cautions against is not introducing an heir-apparent to the company's powers that be. "A boss may think a certain employee would be great to take over for her in the long run, and trains him accordingly, only to find that the top management or owners don't get along with or have the same confidence in him," she warns. To head off this scenario, give would-be successors a chance to interact with the highest echelons: "Take them to the bank; introduce them to the business owners. Let the person know that this opportunity is theirs to lose," Henman says. It will give you a chance to identify and coach the candidate through possible problem areas--or move on to another candidate if coaching doesn't resolve the issues.

Make sure your succession plan takes money as well as management into account.

Family businesses in particular should heed this advice, says Benjamin Sullivan, a certified financial planner with Palisades Hudson Financial Group in Scarsdale, NY. He's seen family companies reluctantly liquidate after an owner's death in order to pay the ensuing estate taxes. He's also seen families have the foresight to avoid that sad scenario. "One way is by making sure the owner has enough additional life insurance to cover the estate taxes after he passes away," he explains. Sitting down with a qualified financial expert and creating an action plan is a smart way to ensure the next generation achieves succession--and has its own shot at success.

Above all, don't be complacent: The one thing you can count on in business, as in life, is change. According to the U.S. Bureau of Labor Statistics, the median tenure of an American worker is 4.6 years. By making sure that you have a way to fill each critical employee's shoes, you'll ensure that your company keeps putting its best foot forward.