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Four steps to developing a succession plan
Tue 13 August 2019 - 10:48 amEntrepreneur | Leadership
In part one, we spoke about the importance of succession planning. Now, we will look at the four steps you need to take to develop a successful succession plan.
Assuming you have a strategic plan, the first step in succession planning is to project when you will need people with certain kinds of knowledge and skills to execute this strategy. Second, you need to assess which current employees could do those new jobs and decide how you will get them ready, as well as identify when new employees will need to be hired. Third, you need to create management development plans for staff with management potential so they have the knowledge and skills required to continue growing the company. Lastly, you need to decide when to recruit new people, and when to let current employees go.
- Succession planning is part of strategic planning
Succession planning is not just about identifying the CEO’s “successor.” A succession plan should identify the full array of knowledge, skills, and resources needed to grow the company, as well as the management roles and responsibilities that will be required over the next 3-5 years to implement the company’s strategic plan. It needs to be developed in response to the “people requirements” of the strategic plan.
2. Assess current employees and develop them for future jobs
After identifying the future knowledge and skills required, the next step is to assess the knowledge and skills of current employees, compare this to the competencies that are going to be needed, and determine what kinds of education, training and coaching will be required to get your employees ready for those new roles and responsibilities, within the required time frame. You also need to identify the knowledge and skill requirements that no one is likely to have, and make plans to recruit new people.
- Purposeful development of management knowledge and skills
After identifying the management roles and responsibilities needed for the future, make a list of every executive team member and key manager in your organization. Ask yourself, “If that person were to be promoted (or were to leave), what are our options for replacing them? Are there internal candidates who could step up? Step up with some training? Or will we have to go outside and recruit a replacement?”. Once you’ve done this, you’ll need to implement management development plans for each key employee. Create a list of courses, workshops, secondments, and international business travel that could be useful in getting them ready for the potential new roles you want them to play.
- Decide whether to recruit new people, and let current employees go
Long-term succession planning favors internal candidates because they are a “known quantity”, have organisational knowledge, and believe in the company’s mission. The succession plan assumes that managers are already addressing employee performance issues, are ensuring that everyone in the company has the functional competencies to do their current job and are a good fit with the company’s values. After identifying successor candidates, managers should give them a variety of tasks and roles to test them out, then mentor them over a period of time. The expectation is that when the manager is promoted or leaves, the protégé will be ready to step into the manager’s shoes.
If you are accelerating rapidly and don’t have time to develop people, or if you need people with particular knowledge and skills, you will need to hire new employees. Select people on the basis of functional competence and fit with your values, then start them off right, delegate properly, and manage their performance closely. Unlike your current employees whose performance is known, your only data-points for new employees are their references and experiences in other companies, which may or may not set them up for success in your company. Past performance may be the best predictor of future performance, but it is definitely not a guarantee of success!
If you have a values issue with a manager who has left – regardless of whether that person “jumped” or “was pushed” – you may want to consider bringing in someone from the outside to “assess and shape up” that unit. In the case of a sudden departure, weigh up the value of bringing in “new blood” with the time lost and disruption created by bringing in an outsider. Consider the pros and cons of providing accelerated coaching, training, and other support to enable a current employee to move into that role vs. hiring a new person in the role. And regardless of whether you are considering a current or new employee, think beyond your immediate needs, consider future needs, and look for someone who can be promoted at least two levels beyond this current position.
Review your strategic plan before doing performance reviews. Competition, new technology, and changing customer demands may require you to close offices, change marketing strategies, or stop manufacturing products. This means that you may need to let people go because your company no longer needs their particular skills and knowledge. If there are no other roles these employees can perform, you will need to terminate their employment, but do so with dignity and respect, and thank them for the past contributions they have made to your company.
Even though your succession plan is designed to be a long-term employee plan, it can also serve as an emergency back-up plan. You should review your strategic plan and your succession plan at least twice a year. You can never predict when a key employee will take maternity leave, take another job, or when you yourself might have an accident or a health problem. A succession plan that’s regularly updated helps future-proof your business, reduces the risk to the company of not having the leaders it needs, and enables your company to continue growing and be successful.
Dr Jana Matthews is the ANZ Chair in Business Growth, Professor, and Director of the Australian Centre for Business Grow that the University of South Australia’s Business School. She has a doctorate from Harvard, has founded five companies, and was on the founding team of the Kauffman Foundation’s Centre for Entrepreneurial Leadership. Matthews is internationally recognized as an expert on entrepreneurial leadership and business growth, has written eight books, and has designed award-winning programs that teach CEO’s and executives how to lead and manage growth. In 2018 AFR identified her as one of the 100 Most Influential Women in Australia.