He’s a great employee with a good head for business. You’ve hired well over the years, but he really stands out. As you watch him deal with your clients and analyze his numbers, you’re confident that, when the time is right, he’ll be ready to take your business’s reins. But if you had a crystal ball, you’d know that he’s going to take a job with one of your competitors in two years. When it happens, that news is going to stun you and the rest of your staff. Down the road, when you look back over your month-to-month results, you’re going to see a significant dip that followed his departure. Not only did you lose his revenue, but the rest of your team lost their way for a while, because they saw the concern and uncertainty in your eyes.
You thought you were doing all the right things. In your mind, you had a timetable for your retirement, and knew how you would handle succession when you were ready to pull the plug. There were three problems with that approach. First, the plan was in your in mind, and you hadn’t shared it with anyone else who had a role. Second, you didn’t have any kind of a fallback position. You were so busy grooming your expected replacement that you neglected the rest of the team. Finally, you never asked what it would take to keep him happy. Your competitor did, and look what happened.
It’s your responsibility
If you have a plan for the future of your business (at least more than just a vague idea), good for you. You’re already ahead of many of your peers. But if you don’t also have a plan to mold and prepare the people who make that future happen, you’re just gambling.
If you’ve planned properly, you should be able to identify everyone who will play a leadership role in the future of your company and where you may have gaps that you need to fill. But identifying your future leaders is only the first step. You also need to help them develop the skills and knowledge they’ll need to serve in those roles, and have a way to monitor and track their progress. After all, you don’t want to ride off into the sunset if your team is only 85 percent ready.
In addition, you know that turnover is costly and want to identify ways to encourage top employees to stick around. The most effective retention strategies are those that focus on developing career paths that keep employees challenged and make them feel like important contributors to the company’s success. Team members like to know where the business is headed and the role they’ll play, and those who see their part as important are less likely to be pulled away by an aggressive competitor.
Using data to track
Adding a rigorous data-capturing element to your personnel management process can play a critical role in the leadership development aspect of your succession planning. By quantifying and tracking your team members’ levels of skill and knowledge, you can immediately identify gaps you need to address. Just as important, a good data-based system will allow you instantly determine how many potential candidates will be available for each role within the next year, the next five years, and so on. That way, you can clarify whether you need to perform any outside hiring and exactly what those new team members will need to bring with them.
To determine what data you need to measure and manage, start by identifying the job skills and leadership characteristics that you view as most important to the future of your business. Look at your current performance assessment tools to ensure that you have a way to measure those factors. You’ll want to be able to address categories such as experience, strengths, weaknesses, and career goals, so you can quickly see what kind of training, mentoring, and experiences each team member needs to bring them to your goal.
What do they want?
Many business owners believe that they know what their employees want from their jobs and careers. Those are the business owners who become surprised when those employees move to a competitor or different career. It’s important to talk with your employees on a regular basis (at least twice a year) to understand their own career goals and level of satisfaction with their positions.
They may be hesitant to share this information at first – especially if there hasn’t been an opportunity to do so in the past – but when it becomes a habitual practice, they’ll begin to open up. For one thing, it’s not the same as a performance review. Instead, you’re discussing opportunities and helping the employees identify what both of you will need to do to prepare them for those opportunities. You may be surprised to discover that an employee who seemed content to perform a lower-level job may actually be quite ambitious.
As you develop a roadmap for that team member’s future, be sure to include measurable objectives, so you can share their progress. And, in future conversations, ask them to assess their own progress. “Jane, when we met earlier this year, you expressed a desire to get better at sales, and we sent you to classes. How did that affect your confidence with your sales skills?”
Business owners that take the time to learn what’s important to team members, and then invest in helping those team members enhance their skills and abilities will strengthen loyalty and create a psychological “debt” on the part of employees. Most will feel that they owe their allegiance in return for the investment that’s been made. If this is an ongoing process, you’ll simultaneously be able to improve their skills and shape them for the needs of the positions you have in mind.
At the ready
Businesses that take the time to handle succession planning and leadership development in this manner create a strong pool of candidates who have the right skills when positions become open. Because they’ve built leadership development around the business’s strategic planning, they don’t have to settle for candidates who offer just some of the desired qualities, but that offer all of them. Just as important, they don’t have to resort to bringing in outsiders who may not be compatible with the company culture. The internal candidates have been steeped in that culture, so clients are assured of consistency.
Another benefit of this type of analysis and reporting is that it gives you options if an employee leaves unexpectedly, dies, or encounters significant health issues. Instead of being left in a lurch, you can quickly determine which current team members are best suited for the vacated role – along with specific areas in which they will need to sharpen their skills. In the meantime, other employees who have those skills can fill any gaps.
This approach to leadership development is especially valuable for the employees who may ultimately serve in the company’s top role. We’ll use CEO for that term, although it could just as easily be something like General Manager or Managing Agent.
When a CEO retires, dies, or otherwise steps out of the role, the immediate temptation is to find a replacement whose style and approach are similar. That’s why it makes more sense to use the business’s strategic planning as a foundation for leadership development. The person who will serve as the next CEO should be the individual who has the best skills for the business’s strategic needs. It may be that the current CEO reached success through sales skills, but now that the company has multiple strong producers, it may make more sense for the next CEO to be more of an administrator or a visionary.
One thing to keep in mind when developing a plan to replace a CEO from within the company is that the promotion will cause a ripple effect through the organization chart, opening a series of positions. The plan should consider each vacancy that will be created and identify candidates to fill it.
Successful business owners are given to saying their businesses’ best assets are their employees. As the industry becomes more competitive in the coming years, top-quality talent will be in high demand. By developing a leadership development program based on the business’s strategic goals, you’ll not only prepare the business for growth. You’ll also reduce the chances that key employees will depart for what they perceive as better opportunities. Having a clearly defined succession plan and supporting it with leadership development makes the uncertainties associated with a job change less appealing. In fact, you could call it a form of insurance.