Succession planning is, to some, an admission of their own mortality. Understandably, many CEOs put it off. But without a plan, business owners miss out on being able to ensure business continuity and future direction. CEOs also risk creating extra trauma for their businesses when there could already be trauma due to some unexpected accident or event.
Whether you're the spry young age of 28 and just starting up or 55 and looking for early retirement, a succession plan should be on your mind if you want to see your business succeed. "I'm 38 years old, and I have a succession plan already," says Robert Bradford, CEO of the Center for Simplified Strategic Planning (www.cssp.com), a consulting firm focusing on strategic planning for small- and mid-sized businesses, in Ann Arbor, Michigan. The time to start planning is now.
But where do you start? Bradford suggests starting with the understanding of two things about the CEO role: balance and function. "A CEO needs a sense of balance," Bradford says. The CEO role balances finances, marketing and operations, and depending on what background the potential successor is coming from, the CEO should evaluate what the person's perspective is - i.e., sales, finances, etc. - and discover ways to give the candidate the perspective that will allow him or her to balance their history or career with the new role.
Second, the CEO's function is often that of visionary. CEOs spend a good deal of their time deeply involved in strategic thinking, and therefore, a CEO needs to involve a potential successor in his or her strategic thinking process. "Give him or her a chance to learn by doing," Bradford says. You need to be able to grow the next CEO into the job as your company grows, which entails knowing the business's direction as well as CEO responsibilities.
Once you've understood the role, you're ready to begin putting a plan into place. Bradford offers these steps to get you started.
- Evaluate the resources you have at your disposal. "The most important resource for this is time," says Bradford. How much time can you devote to this? Is this something you should be spending 15 minutes a year on or a half a day every quarter on? If you're in start-up mode, then you probably shouldn't be going through a series of three-day meetings on succession planning, says Bradford. But sitting down and writing down your thoughts about the company, where it's going, and what will take it there would be instrumental.
It's also important to know whether you or others in your company have the skills to assess potential successors. Most CEOs should have this skill inside the company already since it's a skill many CEOs themselves possess, but if not, you may need to seek an outsider to help in the assessment.
Lastly, money may be an issue. If you want outside help in assessing candidates or drawing up a succession plan, you'll need money. For smaller organizations, it might not be wise to spend money on this type of development unless you entirely lack the in-house resources to successfully assess candidates and put a plan in place. "For larger companies, it could be money well spent, as you won't waste time reinventing the wheel," Bradford says.
- Analyze and record what your function in the organization is and the value that you create as CEO. Start by writing down your own job description. Think about what you spend your time doing and what do you do particularly well. If you have a lot of time to devote to this, you might want to keep a log of what you do from week to week, suggests Bradford. You might even want to consider bringing in an outsider to assess what you do if you have adequate resources to do so, he adds.
- Look at people in your organization and figure out which people could do your job half as well as you. "I don't believe most managers believe anybody could do a job as well as they do," Bradford says. He suggests looking at the three or four most critical elements of the CEO's job and picking out the main skills required to be successful in the role. "For example, in my company, the CEO has a big marketing function that involves combining an understanding of the customer, some statistical analysis, and a vision for what the company will do to create value for our customers," Bradford says. "I need to be able to look at the individuals in my company and ask myself, 'Could this person do well at what I do?"
Most CEOs will need to examine a candidate's skills in the following areas: leadership, marketing, finances, and operations. "The leadership skill is probably the most important," Bradford says. "It involves a difficult balance of knowing when to push, to check, to actively manage people, and when to step back and let them do things they can already do very well." "In many senses, leaders have this paradoxical combination of leading with vision and following their people," he adds.
- Take the people you think could do the job and have them do a self-assessment. "You want to look for someone who can be honest with him or herself," says Bradford. The assessment should include questions that help the individual evaluate his or her weaknesses in key leadership areas. According to Bradford, the assessment should include questions like:
- What are my strengths and weaknesses as a manager? What tasks do I perform well, and what tasks should I delegate to others? (In most organizations, you will want to break this down into the following categories: Leadership, Financial, Sales/marketing, Operational/technical, and Strategy.)
- Do I have the perspective (operational, financial, market) to drive a balanced vision for the company? If not, what perspective do I need to add to my current level of experience?
- What would I need to learn if I were going to become CEO?
- What kind of help will I need to be a good CEO?
When Bradford succeeded his father in business, he evaluated his skill set and compared them to his father's. It turned out that he had work to do, and they created a plan to ensure he received the skills. "I looked at what he was doing and asked him if he felt I could do those tasks," Bradford says. "I would put time on my calendar to participate in any activity where I felt I needed to learn something." Encourage your potential successor to become actively involved with the learning process, evaluating his or her readiness, and then offer him or her paths to take to acquire the necessary skills.
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