Thursday, March 08, 2007

Do You Need Succession Planning?

Do you need to do succession planning? Of course, the knee-jerk answer to this question is "yes", but let's take a closer look.

Companies that do no succession planning usually survive the transition period from one CEO to the next. There is no clear data on the correlation between profitability and succession planning, but research on market leaders versus laggards in various industries do note some correlation between market leadership and certain succession planning practices. Those practices are:

1. Management development programs
2. Early identification of successors
3. Mentoring of identified successors

All of these take time, and they can cost money, as well, so it's a good idea to understand why you are doing succession planning before you start. Also, you want to match the investment you make in the process with the outcomes you expect. It's quite possible for a smaller firm to spend tens of thousands of dollars on the succession planning process with little measurable output on the bottom line.

I'm not saying that you shouldn't do succession planning, but I am saying that you need to choose an approach that will match your organization's resources, and the value that you will get from a successful transition. If you are already doing strategic planning, there are some specific steps you should consider adding. Over the years, I've noticed companies doing well with succession when they have undertaken projects to do the following:

1. Inventory strengths and weaknesses of the management team
2. Assure the management team has easy access to a wide range of development opportunities (eg seminars, conferences, coaching, etc.)
3. Involve possible internal successors in the strategic planning team and the action plan teams
4. Discuss possible successors with a knowledgeable outsider who is familiar with your organization
5. Arrange opportunities for non-task oriented interaction between possible successors and those who might mentor them

It's clear from available research that some succession planning activities pay off handsomely, so you may want to examine this activitiy as a possible strategic initiative for your organization. Here are a few items that suggest a high value for succession planning that may come up in your strategic planning:

1. There are predictable reasons to expect an ownership transition, such as impending retirement of the founder/CEO, or health issues
2. Succession questions are making your team reluctant to commit to a clear strategic vision
3. There is an identified weakness in the next level of management or the pool of likely successors

No comments: