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The Next in Line

CEO Stack explains how a succession-planning program for all employees can help alleviate staffing shortages at a fast-growing company.
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Critical Numbers
Don't recruit outsiders to grow your company. You're better off filling the new positions with people you've trained yourself--provided you have a plan for replacing them

Last year our company began doing annual reports for our shareholders. Not your ordinary, garden-variety annual reports, mind you, but a type I've seen produced by only one other company in the world--from which I stole the idea. This kind of annual report doesn't follow generally accepted accounting principles. In fact, it doesn't even concern itself directly with the state of our business. Rather, its purpose is to update our shareholders, who are also our employees, on the state of their careers.

At Springfield ReManufacturing, we call it the employee annual report, and it's built around a four-page form that people fill out with their supervisors during personal-development interviews held at least once a year. We ask employees to write down the next job they'd like to have and tell them exactly what they must do to qualify for it, and then we track their progress. Just to make sure they get the point, we give them a list of all the jobs the company has to offer--from receptionist to president--prior to the meeting.

That's what I call succession planning.

Now, I realize that people generally think of succession planning as finding a replacement for the person at the top. To me, succession planning means finding replacements for every executive, manager, supervisor, and professional at every level of the organization.

That's not something most CEOs worry about, particularly when their companies are small. You don't have either the time or the need to worry about it during the start-up years, and then a thousand other concerns crowd in. You're fighting fires. You're chasing sales. Of your top 100 priorities, succession planning comes in at 105.

In that situation, necessity dictates how you run your business, including the way you find employees. Instead of systems, you develop habits, and some of them are bad ones. You don't really hire; you fill holes. You look at the gaps in your organization and try to plug in bodies.

But the day comes when that approach doesn't work anymore. You suddenly realize you have to change the whole way you think about staffing your business. If you don't, you simply won't have the people your company needs to grow.

We reached that point about five years ago. We'd embarked on a strategy of growing by spinning off new businesses, but it soon became clear that we'd never achieve our long-term goals unless we got our people ready to take advantage of the opportunities.

And believe me, we had plenty of opportunities. Everywhere I looked in the company, I could see a new subsidiary waiting to be started. That's what happens when your business moves beyond the survival stage and really starts to grow. Suddenly, you have more great ideas than you know what to do with. Capital usually isn't a problem, either. In most cases you're generating enough cash internally to finance your growth. If not, there are numerous sources of outside capital available to fill in the gaps.

At that stage, the only thing standing in the way of your growth is a shortage of people. We realized that if we wanted to start businesses, we had to have people ready to run them--people we had trained ourselves, people who knew our system and our culture, people who had grown up at Springfield ReManufacturing.

The alternative, of course, was to go outside the company to fill the new positions we were creating. But recruiting is a crapshoot, especially when you're looking for senior managers, and it's an expensive crapshoot at that. You spend all kinds of money on search fees and high salaries. Then, once you bring the people in, you have to teach them your way of doing business. That can take a long time, and the more responsibility someone has, the harder it is to do. You run into cultural problems, morale problems. You deal with all the excess baggage that people bring with them from wherever they've worked before. In the end you're lucky if one out of three outsiders makes the grade.

We figured we'd do much better with our own people. Besides, our whole culture is built around creating opportunities for employees. But how were we going to move people into the new businesses without disrupting the rest of the company? Clearly, we had to have their replacements ready to take over. That meant doing succession planning throughout the organization. We had to set up a process by which we would systematically move people from one job level to the next, allowing them to advance in their careers while the company continued to grow.

So we asked all our managers and professionals to give us the names of the people in line to take over their positions. Then we could look at the potential replacements and see what kind of training we needed.

That was an important consideration. When you don't do succession planning, it's very hard to provide the right training for people. If you do any training at all, the results are likely to be hit-or-miss because it won't be targeted toward the specific needs of particular individuals. It will be the sort of training that may benefit some people in a general way--but, then again, may not.

The best training is the kind you provide because people really want a job, really want the opportunity. You tell them what qualifications they need and give them the chance to go for it. Then they'll make sure the training dollars are well spent--assuming you have to spend anything at all. In many cases you can do just as well with informal, inexpensive, on-the-job training that prepares someone to fill in, say, when the boss is on vacation.

Frankly, I couldn't see any downside to implementing a succession-planning process. The idea made so much sense. It offered so many benefits to everyone and at so little cost. I just assumed the entire company would be eager to embrace the concept.

But a funny thing happened. People wouldn't cooperate. For three years we tried to get our managers to give us their succession plans--to no avail. I was dumbfounded. We begged, we pleaded, we cajoled. We told people they could never move up in the company unless they identified their replacements. Nothing worked. Finally, I said, "OK, I'm going to charge you. Any division that does not submit a succession plan will be assessed a corporate fee totaling 1% of its sales for the year."

That threat, coupled with the prospect of public humiliation in our staff meetings, finally did the trick. Around the middle of last year, the plans began rolling in.

Why were people so reluctant to do them? There were many reasons, I'm sure: inertia, insecurity, laziness, fear of hurting someone's feelings, whatever. But I think that, mainly, people weren't looking ahead. They weren't thinking about where they themselves wanted to go, and so they didn't feel any urgency about naming their replacements.

It's hard to think about the future, decide what you want, and commit yourself to a plan. It's much easier to focus on the day-to-day and forget about next year or the year after or five years down the line.

That's why you need a system. You need a regular routine that forces you to pay attention and do what's in everyone's long-term interest. It's a little like losing weight by going on a diet and starting an exercise program. The best way to get rid of bad habits is to replace them with good ones.

Our new habit is centered on the employee annual reports. If they work as we expect, they'll ensure that we all keep thinking about the future, making the necessary commitments and following up on them.

And then, I suppose, I'll have to get serious about my own succession plan.

Jack Stack is the president and CEO of Springfield ReManufacturing Corp., in Springfield, Mo., and the author of The Great Game of Business (Doubleday/Currency, 1992). Both the book and this column were coauthored by Bo Burlingham.


Resources
Readers who would like to see a copy of SRC's employee annual report can obtain one by sending a fax to 417-831 4260, an E-mail to info@greatgame.com, or a letter to the Great Game of Business, 3055 E. Division, Springfield, MO 65802.

Last updated: Apr 1, 1998




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