Small Business Succession Planning

Succession Happens

It is either planned or forced. All people move on. If you’re not planning for succession, you’re not running your business.

Succession planning is simple in theory but takes EFFORT in the application. Succession Planning is a Critical Business Practice part of your Companies Human Capital Management Program. The actions you need to take are listed below:

1. Build an Organization Chart
2. Assign Roles and Responsibilities
3. Ensure people are counseled annually
4. Identify people for higher responsibility and tell them.
5. Make trial runs
6. Make succession planning part of your human capital management plan
7. Check the program and make changes as necessary.

Build an Organization Chart

An Organization Chart not only defines who is responsible for who, it identifies a “Chain of Command” and gives every employee a pathway to promotion. It also allows you to identify people who can take on more responsibility. Here are some rules for an Org Chart:

1. It doesn’t have to be what you have now, but it does have to be an efficient model of operation.
2. Use the Rule of Four when building the Chart. A Department Head (including the owner) should have no more than four people reporting to them. Sometimes, you can go to five, but never above.  
3. No “dashed lines” reporting to other Managers (including you). An employee cannot have two bosses. Avoid double headed monsters at all costs.  

If the people you have in positions cannot perform at a higher level, you have two choices: train them up or get rid of them. When you build this chart, evaluate the people you have in the position. 

We will discuss this topic under Counselling.

Assign Roles and Responsibilities

People will perform to the level that you expect them to. When you give a person a job, tell them what is expected of them, and give them a piece of paper, a Position Description, that outlines their roles and responsibilities, nine times out of ten, they will perform.

Position Descriptions should follow three clear rules:

1. Be clear, quantitative and specific to the position it is written for.
2. Act as a guide for the employee for their career progression
3. Be aligned to the Companies Org Chart.

If you cannot define what makes a good employee, then you cannot develop a good employee, and you cannot hire a good employee. If you cannot challenge your employees, they cannot grow and develop professionally. 

If they do not grow professionally, you end up with no succession planning and you are working harder putting out fires that competent people should handle.

Ensure Employees are Counseled Annually

If you don’t tell people how they are doing, they just assume they are doing fine. Here are some rules for annual counseling.

1. Be quantitative based on the employee’s position description.
2. Be tied to raises and promotions.
3. Have a Senior Reviewer approve or disapprove the review, and comment as necessary.

The importance of the Senior Reviewer option cannot be stressed enough. Not only does it act as a buffer for favoritism, but also alerts the next level of Managers on who to be watching.   

As an owner, you should ask three questions of your HR Manager (if you have one) each year:

1. Is everyone’s review complete?  
2. If not, why not?
3. Who are our “shining stars”.

You cannot have a viable Succession planning program if you do not have an active counseling program. 

If you do not believe reviews are important and identifying “shining stars” is not important, stop here. But if you think you have a responsibility to ensure your organization’s success, then ASK each quarter, semi-annual period, or annually. Show interest and let YOUR subordinates know it is crucial. Hold them accountable for holding their subordinates accountable.

A secret: Make the reviews due at the end of the employee’s birth month and give the manager the two months prior to the employee’s birth month to get it done. For example, if the employee’s birth month is in September, the Manager has July, August, and September to get it done. If the Manager can’t get it done in that time frame, then have his boss come to explain to you why it wasn’t.  

Identify personnel that warrant greater responsibility and tell them.

As you identify personnel for greater responsibility, TELL THEM. Put it in writing. Each counseling period, they are being evaluated on their performance to perform at a higher level. Tell them when they are doing good and tell them where they could perform better.  

Make Trial Runs

Trial Runs are an important part of professional development. Manage them at stages of professional development, and they will pay off early. Examples of trial run schedule is:

1. Assign tasks that the manager does, and then evaluate the employee at the task.  
2. Assign short term duties of the manager during periods of peak performance.
3. Assign duties when a manager is out sick or on vacation.  

Note that it is a progression of responsibility. The New Leader assumes authority while their manager is gone, but you are still close enough if there is a problem. Gradually work your way up to an automatic succession when the Manager is out. If there are problems, address them in a mentoring sense verse a kick in the gut. 

If it goes well, tell them it is going well, and you appreciate their effort.  

Now the inverse. If you walk into the department and monkeys are swinging from the lights, dogs are marrying cats, and chaos is abounding; don’t throw the plan out, throw the candidate out. It is ok if they are not the right person for the job. It is not ok for you to give up.

Make Succession Planning Part of your Human Capital Management Process

People move on. Every person you hire should be evaluated for their potential to move up. Personnel needs to be reviewed annually for their potential and challenged to achieve and grow. Your managers deserve to go on vacation and not be bothered with work issues as much as you do.

Employees are assets, not overhead. You invest time, benefits, pay taxes on them, train them and nurture them. They are your business family. Treat them as an asset and give them the time and respect they deserve. At the very least, you should be asking quarterly:

1. Status of reviews due that quarter.
2. Fill rate of personnel.
3. “Shining stars” input.
4. Personnel challenges managers are facing for the upcoming quarter.

There will be times when the “right person” is not in the company, that is OK. Have a plan to recruit those people, but in the meanwhile, have a plan to manage the department in the event a manager leaves unexpectedly.

Check the program and make changes as necessary.

Ask yourself the following questions regularly:

1. Am I developing the future leaders of the company?
2. Is this program working?
3. Are managers developing their replacements?
4. If not, what tools do they need to train them?
5. Are we (as a company) developing the future leaders of the company?

Even a locomotive makes direction changes. Implementing the Plan, Do, Check, Act (PDCA) model will make tremendous changes in your Human Capital Management Program and ensure the long-term success of your company, and help mitigate succession.

Conclusion

Succession planning is business planning. It starts with an honest evaluation of the personnel you have on hand and determining if they meet the future needs of the company. The impact of a loss of a person can be greatly minimized with planning and training. When done correctly, you remove choke points and allow the company to continue functioning at peak performance.  

Critical Business Practice – a practice that, if not actively managed, can lead to short-term failure and degradation of the company’s daily operations.