What to do to protect your company by planning now
You are the CEO, or you own a small to medium sized company.
You intend to grow your company over the next few years.
You have your plan in place – your product and service offerings, your geography, your financial resources. Yet, you may not have a clearly defined vision for how you are going to fill or keep the talent you need to reach your goals for success, but you don’t have the time to think about how a good succession plan can save your business from ruin.
A Forbes article (8-22-18) states that: “Succession Planning at its root is a business risk management tool. It protects the company from talent loss and aligns your people resources with your strategic goals and future.”
The Pain and Risk of Not Having a Succession Plan
Let’s say all of a sudden one of your key employees hands you their notice to leave. You are stunned. They were crucial to your current operations and business success. In talking with them, one of the reasons they are leaving is because they don’t feel there was any place for them to move up – they would be doing the same old job year after year. Although you felt you had a big place for them, there were never any discussions about their future. You don’t know where to start to replace them. It is a huge loss.
In our competitive economic environment, it is harder and harder to find and keep the talent you need. In 2018 The Work Institute did a major study and found that “employers will (have paid) $600 billion in turnover costs and can expect that number to increase to $680 billion by 2020.” Increasingly, workers have more career choices and they want a positive workplace culture where they can learn, develop, have a life/work balance and, yes, even have fun.
One of the most significant reasons for people to leave is lack (or their perceived lack) of development opportunities. And replacing people is taking more time than ever before. Training and Industry Quarterly identifies that it takes at least 1 to 2 years before an employee is “fully productive.” That’s a lot of time and money for you to deal with in not just keeping your business going, but moving your growth forward as planned.
In talking with Kathy Cavallo, PsyD, an organizational psychologist, and consultant and a specialist in leader and leadership transitions, she said:
“Having both an emergency and a longer-term succession plan is the single most important responsibility of both the CEO and the Board of any company. Small companies in particular rarely have the layers of executive level decision makers in place to steer the ship while looking for a new CEO, so it’s vital to have a plan in place in an emergency.”
All the more reason for you to have a succession plan and also provide a workplace where people want to stay and develop. I talked with Randy and Ellen Long of Long Business Advisors, whose company helps business owners build & sell elegant, profitable, and fun businesses through their unique process called BraveHeart Planning.
My question for Randy and Ellen was this:
What are the dangers for these businesses if the owner or CEO have no succession plans for themselves or their key people?
- “First, the company can definitely face the loss of clients. If they have not established client relationships with other key people in their company and something happens to them, that client may not have a big reason to stay if they build the business on only that one relationship.
- Secondly, the loss of a key employee or owner who has special knowledge makes the business unique. If that goes away and there is no backup, there is a real risk of losing the company. I have had a client where the owner died suddenly and employees left en masse, which forced the company to shut down within a week!”
I also asked them: What are the biggest obstacles that business owners feel are hindering them from having succession plans in place?
- They are too busy working IN the business and not ON the business for the future.
- They think it’s too expensive (successful companies spend 2% of revenues on working ON the business)
- They don’t want to deal with it emotionally, financially, time-wise, or put energy into this planning which can feel really upsetting.
So what, then, works? This straightforward process will maximize the success of your succession planning and future talent needs:
- A Clear Vision and Alignment
First of all, you must clarify and articulate your vision, for yourself and for the company. Then set a clear strategy and goals, and align the people talent and skills you need to get there.
2. Where’s the Gap?
After the first step, you must identify both the current skills you have and the future skills you need to meet your goals. You must know your industry and business, and conduct an honest and rigorous assessment of your current people and how they line up against the talent requirements for your growth. Where is the talent gap in your team?
3. Set a Plan to Develop, Attract and Retain
A Workplace of Choice is crucial for now and in the future. Be committed to a culture which values people. They are one of the most important factors in differentiating you from your competition. Respecting and valuing people is one of the biggest ways to keeping key talent – turnover costs are estimated to be between 100% and 300% of an employee’s base salary and 150% is the norm (SHRM study). Your workplace culture is not just the ‘soft stuff.’
What Do I Do Next?
This is not a short term, sudden process. If something unexpected happens, which does many times, and you are not prepared, it can be catastrophic to your company and family.
Dr. Cavallo also points out that it takes planning: “For a planned succession, it’s tremendously beneficial to have sufficient time, 3-5 years, for successor development and a gradual transition to ensure stability.”
As soon as a key position becomes open your company can lose momentum, progress, and revenue instantly. The longer the gap, the greater your results are at risk.
If you are a small or mid-sized company, make the decision to start, and keep it simple. It doesn’t have to be complex. It only needs to be a simple system, not a cumbersome process. Know where you are now. Get the dialogue and thinking started.
At its’ best, succession planning – or better yet, succession management, is an ongoing dialogue and an honest analysis of current talent and future needs of all key employees. It is not just an occasional process or just for the CEO.
Your past success does NOT equal future success. You know that in business and life, the only change is guaranteed.
‘Success’ is the first part of the word, ‘Succession.’
Be a true leader and maximize your chances of achieving your vision, your dream, and your legacy. Be committed to planning for your future needs and success.
Be ready to not only survive but to realize your dreams.
Marybeth Gregg, Founder, and President of Gregg Resources has been working with both family – owned and global companies for many years. She can help you determine what you need with your succession planning issues. Marybeth is a leader in her field. Perhaps that’s one reason why she’s so good at recognizing leadership skills in others. Marybeth is a firm believer that there is no challenge that is insurmountable, and it is this confidence she instills in the business leaders she helps. Throughout her career, she has designed and implemented leadership development, organizational structures, succession planning, compliance reviews, international staffing and performance management initiatives.
Contact her directly for an initial assessment of your needs: She will guide you quickly through the Succession Planning Gap Quiz so you can see where your needs and vulnerabilities are.
She can be reached at 732 245-4931, www.greggresource.com