The Human Side of Succession: Why People Matter
Human capital — a company’s human workforce — is often a business’s most valuable and important asset, especially in succession planning. It is people who do the work and play a key role in transitions. This is why a strong and successful succession plan considers the impact on all workers, from senior leadership down to the newest hire.
PBO Advisory Group’s Consulting Chief People Officer, Nicole Devine, helps businesses develop succession plans by working with owners/leaders to identify the exit goals and then build the people strategy piece of the plan. Just as we’ve discussed in part 1 and part 2 of this series chronicling PBO Advisory’ s own succession journey, any type of transitional planning must start early. This could mean as far back as five years from the handover target date, especially when hiring and training new leaders is required.
In this third installment of our succession planning series, we take a closer look at human capital and how it can influence the succession planning process.
The Leadership Element
Nicole works with current leadership to identify the critical positions within the company. She starts at the top with the CEO and defines the key characteristics of what a successful CEO for the company “looks like.” This exercise helps inform what skills and capabilities the future leader will need.
She suggests focusing on current employees first to see if anyone fits the CEO profile. If someone has the potential to take the CEO role, an internal leadership training program is developed and implemented. (This is a good example of why planning should start as early, as effective training can take several years.) If it is determined that hiring from outside is the best option, these key characteristics and skills are used for the talent acquisition process.
The same evaluation is used for all C-suite positions to ensure the company is turning out successful leaders ready to tackle the future. Nicole recommends applying the same program to middle management and then individual contributors to chart career paths, allowing employees to see multiple avenues for growth within the company, which is an excellent retention strategy.
Succession planning for middle management is vital but can be difficult because it often requires a big step from that level into a director-level position. Moving up means training and mentoring someone to take over the manager’s current responsibilities. It also means a mindset shift from handling day-to-day problems to taking on a more strategic role. Training is critical for the middle manager to effectively transition from one role to another.
The Emotional Element
Business leaders often have a hard time talking or thinking about succession planning, Nicole has found during her many years helping companies with transitions. For family-owned businesses, where the emotional ties can be especially strong, the discussion is often more difficult. Bringing in a professional to provide advice and guidance, and who doesn’t have emotional connections to the business, is an effective way to embark on succession planning.
A good succession plan serves as the framework for change management. It trickles down from the senior-most levels to the entire company. Leaders must view the plan from the employees’ perspective, as they are — in effect — asking them to work for a new company.
This is why strong communications and relationships are important aspects of the succession process. Often, leadership isn’t transparent because there is concern about creating internal turmoil that will cause key people to depart. However, being tight-lipped can backfire, as it leads to a lack of trust in the leadership and, inevitably, employees do leave. It is mission critical that the plan addresses transparency, communications and internal relationships to insulate from the damaging risk of personnel jumping ship.
The Financial Element
As we’ve discussed in our previous articles, a major part of succession planning is the value of the company. The human and financial elements intertwine when a company has — and is —developing good internal leaders. A solid senior management team and training programs based on the company’s future success are proven ways to increase a business’ value. The CFO can help ensure that the financial and people aspects of the succession plan go hand-in-hand. The company’s current CFO is often the best choice, but an external, fractional CFO who specializes in this area can be called upon if necessary.
The Individual Element
Because every company is different, Nicole stresses that the cadence for developing a succession plan can be the same, but the process and timeline is going to vary for each organization. For large companies, she recommends a formal process. Smaller companies can take a more organic approach — but there still needs to be a framework and a timeline.
For more information on succession planning, please contact Nicole.
Nicole Devine
Consulting Chief People Officer
[email protected]
858-622-1681 Ext. 287
