Succession planning for the CEO and small businesses: Part 1
Succession planning in small businesses often takes a back seat until it is too late. Undoubtedly, you have heard the “what would you do if you were hit by a bus” analogy, unfortunately, the tendency is to just acknowledge it and go on with the business at hand.
Until….you realize it might be too late.
If you find yourself making decisions because you are reacting to a situation or trying to mitigate risk, then you are not doing succession plan management. Call it what it is – you are in the mode of replacement planning.
What constitutes a good succession plan?
It is a systematic approach to identifying critical management positions while balancing the needs of the organization.
It is a thorough plan that is written down, debated, revised and committed by the CEO and management team.
It does not sit on the shelf. It becomes a living document where decisions are made with forethought.
What happens after we create a succession plan?
Managing succession plans comes after the document is written. When you manage a plan, it serves as a guideline because changing business needs require flexibility.
Another factor is that employment contracts affect a succession plan. The employment contract may be implicit or explicit with your employees.
The majority of employees have an implicit or nonbinding employment contract with their company. They are able to leave at a moment’s notice.
The implicit nature of the employment relationship is if the company provides leadership and management, fair wages and a good working environment, employees will stay. If these are not present, expect them to leave.
An explicit contract is a legal agreement that spells out the conditions of a working relationship between the employee and the company. Examples of conditions may include term of service, wages, benefits, bonuses and potential ownership.
Why do CEO’s fail with succession planning?
The business owner or CEO who wears too many hats impacts how talent is grown internally. “Letting go” of responsibility can be a challenge for the CEO and is one of the reasons why succession planning fails.
When is the last time your organization took a critical look at its long term plan for survival? Ask yourself these questions to assess the current situation:
- Do you have an exit strategy planned for your business?
- Have you defined your successors?
- What is your time line for readiness?
- What steps have you taken?
- Is your plan formalized? (Written down, not in your head!)
- How successful has your plan been to date?
- What unexpected situations have you encountered?
If you are feeling a bit uneasy, then chances are your organization is at risk and is missing out on some key benefits from the planning process. Some of them are:
- Focuses leadership
- Prepares for the “passing of the reins”
- Identifies promotable employees and their successors
- Identifies the poor performers
- Establishes a direct link between talent and organization capability – focus on one to increase the other
- Assesses people challenges you to be clear about what and who is important
- Identifies what capabilities need to be tested and developed
- Improves morale when leaders focus on their people
- Essential roles hit the radar screen and highlight the risk profile
- Provides a road map for restructuring or realignment activities
Think about if the benefits out weigh the cost of time and energy to put together a plan. If so, catch the next article about succession planning approaches, effective program characteristics, pitfalls and how to measure success.