It is with some measure of irony that I now approach the prospect of updating an article I wrote about succession planning more than a decade ago, because some are likely to wonder how the espoused merits of succession planning could still be relevant today in light of how much business has changed in recent years. How can something on this topic from a previous era still be important in today’s fast-moving, dynamic business environment, you wonder? I too embraced the same question and the irony comes, at least in part, from the answer. I found that despite the massive changes in global business culture over the last ten to fifteen years – there is still substantial merit to the notion of intelligent succession planning for companies to consider. Yes, things have changed substantially, yet some of those changes only serve to underscore the importance of having a well-conceived and executed succession plan. It may also seem somewhat ironic that an executive search firm professional is vocally endorsing the advantages of intelligent succession planning. As a result, I offer the following brief sketch to explain my rationale on both of these accounts.
Largely speaking, the corporate mindset in the 1980s was to presume a certain measure of anticipated stability and proceed with the belief that there was ample time to groom people. This was a time when a greater number of people stayed with a single firm for longer periods of time. However, this paradigm was broken by the rise of Silicon Valley and the increasingly fast pace of technological change, circumstances which led to the rapid creation of numerous start-up companies and the emergence of many young millionaires.
As a result of this and other modern business developments, today’s corporate environment is characterized by more rapid change including merges, acquisitions and movements from start-up technology companies. Mergers and acquisitions, or M & A, are increasing because there is a lot of cash in today’s market and firms are looking for ways to put their money to work as a way to impact revenue. Strategic companies are looking to bolster their stock price and achieve the highest possible valuations while at the same time financial firms with newly created funds can at times have trouble finding attractive purchases. Nevertheless, today’s hyper-competitive market often means that organic growth within companies becomes more rare, a scenario which often inspires firm leaders to think that the best way to increase revenue is to make an acquisition. Overall, these circumstances have inspired a corporate environment filled with increased personnel shifting and job changing than we’ve seen in previous economies over the years.
These phenomena are of particular relevance in the defense sector wherein the pace of technological change has required new upgrades and modernization initiatives on a much faster timeframe. It used to be that rotorcraft, ships and fighter jets such as an F-16s could be updated with new electronics, computers and other technologies every 15 to 20 years. Now, updates are much more frequent and platforms are specifically being engineered with what’s called modularity – the ability to rapidly embrace and integrate new technologies as they emerge. Consequently, the increased pace of technological upgrades for defense systems has unequivocally contributed to the creation of a more dynamic, fast-moving business environment wherein regular change seems to be the only constant. This pattern is only reinforced by the growing extent to which fast-evolving commercial technologies, especially in the IT sector, are integrated with military systems in development.
It is conceivable, to say the least, that you are wondering how the merits of succession planning might be applied in an organization in this new environment where there is much more shifting and movement among businesses and their employees. Why focus on succession planning when continued changing, shifting and uncertainty is likely to prevail in the near and longer term?
The answer is that there is indeed still great value in succession planning and creating the requisite corporate culture where employees and candidates for advancement will want to stay. Essentially there may be more nuances and avenues to through which to analyze and consider succession planning in today’s environment, but increasing change and instability further underscore the importance of attracting and retaining the best people. So – while there may be more routes through the increasingly turbulent oceans of today’s business climate, there is nevertheless still great value in maintaining focus upon what we could call the Northstar of proper succession planning.
A key element of this is for firms to develop a culture where performance and merit are substantially recognized and rewarded; this strategy will help ensure that talented performers will want to stay where they are and increase their prospects for advancement.
In some cases, small business leaders may resign themselves to not doing succession planning because they expect to be acquired in the near future. In my estimation, potential acquisition is not a reason to forsake needed succession planning but rather a reason to emphasize it to an even greater extent. Companies are unquestionably valued for their financial performance, however they are also assessed for their culture and relative ability to attract and promote the brightest people. It is important to have the ability to attract talent and shape a company in a positive way regardless of whether it is around for two years or ten years. A company with a deep bench is much more attractive as a potential acquisition. As a result, there is great business acumen in developing trust within an organization and developing people from within through mentoring. This is a point I emphasize in my earlier piece.
Therefore, it is within this broader, more modern context that I offer the following thoughts on succession planning:
How To Reduce Search Fees: Implement A Succession Plan
Your initial thought regarding the title of this article may be to ask why an executive search consultant is offering a way to reduce search fees. “Has he gone mad? Maybe he ate paint chips as a kid?” or “Perhaps this is just a joke. A funny article inserted into this serious publication to serve as a bit of humor.” I can assure you that the answer is neither. Succession planning, while reducing the frequency of need for an executive search firm, is a mutually beneficial decision to both search firms and companies who genuinely value long-term success.
Succession planning is the fastest and most cost-effective way to get a well-qualified person into an available position within a company. Unfortunately, very few organizations have a well-thought-out or well-executed succession planning program. Many believe succession planning is applicable only in family owned companies or large conglomerates. Other obstacles such as CEO egos, most people’s relative unease regarding planning for their inevitable departure from a role, fear of competition, and time pressures also work against putting solid succession planning in place.
Succession planning should be an integral part of every company’s strategic plan – this is a vision of where the company is headed with its most important asset & potential liability, people. The reasons to adopt and implement this type of planning are fairly obvious: Without the succession planning process, how will the company develop and nurture human capital? How will a continuing sequence of qualified people able to move up and take over be assured when the current generation of management is removed from the picture? It becomes difficult to plan for the future of the company without some assurance that key posts will be occupied with people able to carry on and succeed. Succession planning makes sense. People promoted internally have a visible track record to better gauge their ability to move up in the company and there is a first hand account via internal employees & management of an individual’s experience, skills, and competency. Strong internal candidates have more credibility with peers and bosses because they relate to the organization’s history and have shared common experiences. Weak internal employees are hopefully weeded out in this process. This is certainly not trivial, as often times, new hire failures can be traced to the lack of cultural fit and acceptance. Succession planning is certainly more important than the time many companies devote to it would indicate.
Although buy-in for this process must occur at the top of an organization, succession planning reaches beyond the C-level suite. Every key position in an organization ought to be a candidate for a succession plan, because it would not be wise to promote someone unless there is a trained person to take over the position being vacated.
To effectively implement a succession plan, consider and include the following elements:
- An Effective, Strategic Succession Plan – this plan will guide the course and long-term direction of the company because people make up companies. An appropriate question to begin with is “What do I need to do to obtain the best efforts from my people, to educate and position them so they may best contribute to the company’s success and their own, and to build a pipeline of adept, prepared, well educated and experienced people for the future?”
- Select Target Areas – Define the key areas within the company, which would derive the greatest benefit from continuity and development of human capital. Make succession planning in these areas a priority.
- Retrofit then Re-Engineer – First determine how the succession planning concept fits into existing corporate strategies and then be prepared to redesign parts of strategies to incorporate the concept to produce greater long-term returns
- Develop Talent – annually identify key people to develop and nurture for the future and, ideally, create paths that can be customized to fit the abilities and talents of these people. It certainly isn’t necessary to have a plan in place for every position but it is essential for every defined key position.
- Action over Reaction – formulate opportunities for each individual as they grow, thereby keeping them challenged, stimulated, and less likely to move to other companies
As a company considers strategies for the succession planning process they must realize that there is no silver bullet or universal plan that works for every company. The approach used depends on the situation of each company with variables such as the culture and processes of the company, the individual’s capabilities and competencies, and the structure and operations of the company affecting the succession plan being laid out. Before companies determine how they will approach succession planning, it is important to evaluate the current level of talent. The ability to educate and promote within the organization, to begin putting succession planning into action, will depend on the strengths and abilities of those currently in key positions as well as the course they have plotted out for the future i.e. being groomed for a bigger role, a newly created post, exiting the company, etc.
Not only should key positions be determined, but successors and potential back-ups should be identified early in the process. Once the bevy of talent has been evaluated, analyze and optimize each role to meet the needs of both the company and the individual. Develop a reasonable & clearly communicated time-frame as well as required milestones to groom successors for key positions. This will aid in removing disappointment and possible departures of key individuals who may become disillusioned due to lack of information regarding positioning for future opportunities or if candidates feel they are not moving upward rapidly enough. Be patient. There is no magic genie making this happen overnight!
As traction is gained in the succession planning process, be wary of possible pitfalls such as the lack of formal written plans for key persons & positions, plans that are too rigid & inflexible, unreasonably long timeframes to promotion, approaches that are extremely superficial (void of meaningful or definitive guidance and possessing no real understanding of the appropriate grooming processes for future roles), and inclusion of unqualified or unmotivated people in the succession plan. This last pitfall is particularly dangerous as the quality of the individuals chosen for development is paramount to the success of the process!
In an ideal world, succession planning would be enacted years prior to expected promotions or newly created roles during which time no key individuals would leave the company. Since this scenario is not reality, don’t expect to see a 180-degree turn in the short term. To properly train and prepare successors, the firm needs sufficient time to expose individuals to the full spectrum of activities within the firm, as well as any desired or required outside education/experience expected. Additional factors, such as past experience and current knowledge that the individual brings to the process, will also affect the succession time frame.
Don’t look at this as a project with a definitive end date. Realistically, succession planning is never finished. A company must evaluate with regularity its needs and resources to determine where to place successors, what requisite disciplines ought to be learned, and how long a candidate should be involved or exposed to the training needed. There should be a concisely defined path toward a set of goals for each individual, allowing reasonable flexibility in that path based on changing needs or unforeseen events.
Given priority in the overall corporate strategy and dedication to seeing a plan formulated and then acted upon, succession planning can bring confidence and peace of mind to senior management regarding future leadership and an enviable culture that fosters human capital development and attracts talent. In the long run, succession planning tends to build a development culture where people have a desire to help one another, because this commitment to grooming future leaders was how they moved into the senior ranks.
Companies with strong succession plans can still require the use of external search assistance for a variety of unforeseen reasons i.e. expansion into new markets with no expertise, a succession plan still in infancy, a board mandated search to satisfy stockholders, etc.
If it is still difficult to understand why succession planning would be beneficial to a search firm, imagine approaching a candidate concerning an opportunity with a company possessing the following advantages as a result of succession planning:
- An organization filled with and looking for well-trained, experienced, and motivated people who are ready and able to step into key positions as needed or be given the opportunity to create new roles based on their strengths and the needs of the company.
- A company with positive goals established for each person individually; a definitive career path, which will help the company recruit and retain better people.
- Recognition of talent early in a career with opportunities to flow through various departments in order to be immersed in the culture and processes of the company.
- Alignment of the future needs of the company with the availability of current appropriate resources such as continuing education, leadership training, employee recognition, etc.
- Positive rewards & recognition for key personnel & leadership, forging a stronger loyalty to the company and assuring an internally available list of worthy successors for each of the important positions included in the succession plan.
- It is very likely that the positive culture and loyalty built as well as the talent attracted through succession planning will lend itself to the continuous and eager input of ideas to improve the internal processes and procedures of the company, as well as the opportunities to improve the offerings and services of the company in the marketplace.
Simply put, it makes my job more exciting and generates greater candidate interest when the company is one that has the aforementioned characteristics! A company that has committed to an actionable succession plan becomes a training ground that attracts talent like a magnet because of the opportunities to grow and be constantly challenged. This commitment is also a catalyst for loyal employees, a cadre of back-ups for each key position, an energized & positive culture, and, subsequently, the need to retain my services on a less frequent basis.