SUCCESSION PLANNING for SMALLER BUSINESSES Part 2

Five Key Steps – and Five Recommendations
Part 2


By Jeremy Thorn
Jeremy@qedconsulting.co.uk

In the first part of this article, we looked at three case-studies. These offered compelling reasons why, after starting a business, there may be no more important an issue for owners to address than planning the succession of their senior managers, with as long a time-scale as possible.

I also suggested that an exit strategy without a succession plan might be like a car without an engine. Both might only have scrap value, because neither will take you very far…

More Reasons to Plan for your Succession.

In Part 1, we looked at the importance of succession planning from an owner’s angle: enlightened self-interest. But what about the interests of the successors?

It isn’t just that any new owners of your business will need to know the business can be run independently of you, to optimise its worth. Your own senior colleagues will also.

As reported by Henley College of Management in ‘Managing Talent – Exploring the New Psychological Contract’:

“Senior managers will stay with an organisation if they feel it has the right culture and provides them with self-fulfilment, a sense of accomplishment and fun.”

Wouldn’t you ask for no less yourself, as an employee?

There is a real shortage of ‘oven-ready’ senior managers, and great competition for them. So anything you can do to ‘grow your own’ must give you a head-start. You may feel that recruiting your successors can only be achieved externally? This may be so. But do not rely on this.

In a new-comer’s favour may be:

By contrast, in an internally-promoted manager’s favour might be:

There may be no one right answer to this choice, but for sure you need to plan your way forward early.

Five Key Recommendations

I have found the following advice has more than stood the test of time. I hope you might?

  1. Give yourself plenty of options
    Having no successor at all is sheer folly. Having only one is rarely much better. It may be you have a specific candidate in mind for your succession, but you may still be more than pleasantly surprised at how others, whom you never considered before, may also step up to the plate.
  2. Set yourself a timescale for your succession
    Rome wasn’t built in a day! The longer you can give to your planning, the more options you will have.
    My experience is that many great successors take a while to shine. Give them a chance to do so?
  3. Be prepared to invest in your options
    Successors to great business-leaders rarely just ‘appear’. Their talent needs identifying, nurturing, testing and developing. (So also does the talent of all your other prospective managers by the way. Not everyone can be ‘top-dog’, but every new leader needs highly accomplished supporters!)
  4. Be quite clear on the talents and core skills you seek in your successor
    The greatest temptation may be to find someone ‘in your own mould’. Please try to resist this! The skills your business needed ‘yesterday’ will almost certainly not be the same required ‘tomorrow’!
  5. Choose your successor openly and fairly
    There is nothing more demotivating for current managers than secrecy or a lack of transparency of process.
    As a wise leader, you will know that most of your staff will guess what is going on if you don’t tell them what you are planning and how. (Of course they may well be wrong! – but at what damage to you?)

Five Steps

All of these recommendations – and the following steps - could have been useful lessons for Allan, in Part 1 of this article. What a pity he ignored them! But Liz and Neil didn’t.

Note that most teams fail through a lack of shared objectives, a common vision and a shared set of values. Your successor will need to be the guardian of all of these. The following steps are no different from any other critical recruitment process - but are even more important.

  1. Determine what you think your business will need from your successors.
    Don’t do this on your own! Ask your Non-Executive Directors, shareholders, professional advisors and anyone else who might guide you. This can be a tough message for any business owner, but whatever you have achieved, remember that others might – and should! - do even better.
  2. Draw up a clear Job Description.
    Whether you will finally select an internal or external candidate for your succession, as one job or more, this is a really critical step. I find this is quite a challenging step for many owner-managers - they have never had to formalise what they ‘do’. But if you can’t specify this, don’t be disappointed if your candidates can’t?
  3. Establish your ‘Core Critical Competencies’.
    This step is rather subtle and may need external help. It is about defining what makes an exceptional performer – not just the core skills in your business at this level but the personal qualities a successor will need to deal with new opportunities, difficult people and even new threats, that might differentiate an ‘OK candidate’ from the excellent.
  4. Declare i) to iii) openly to your team and any outside candidates.
    If they don’t know what they have to achieve to win your Board’s approval as your successor, how might they ever demonstrate their suitability?
  5. Assess your candidates independently through i) to iv).
    It is amazing how many experienced managers claim to ‘just know’ a good candidate through an interview. They can’t believe their judgement could possibly be flawed! – until asked their success-rate.
    Long-standing research shows that interviews alone are so wide of the mark, they are frankly embarrassingly unhelpful. DON’T depend upon them! Interviews inevitably involve all sorts of covert issues for the interviewer, such as ‘halos and horns’, ‘leading questions’, ‘attribution theory’ and the rest. Their score for predicting success is very poor.
    Professional psychometric profiling can certainly enhance your success rate in determining your successors, but do beware of un-researched and unvalidated profiling tools? You are dealing not just with the future of your business, but of your applicants. Professional candidates at any level need dealing with equally professionally.
    Best of all, I would recommend a formal assessment centre which might include competency based interviews, ethical and validated psychometrics, and some observed, work-based, practical exercises.

Professional assessment of candidates is not cheap, done well. But as a yardstick to compare this with, it is widely reported that the cost of a failed appointment is at least one year’s salary. This is not just in the cost of lost opportunity and additional re-recruitment costs, but the untold damage to their colleagues’ morale and motivation.

Conclusions