Who’s Next?

My process improvement friends like to say, “Improving the work is the work.”  There is some truth to that in HR as well.  But, I think that it is also fair to say that “Keeping the talent pipeline full is the work.”  I’ll admit that it’s less catchy.

Succession planning is a topic as old as business, so I will cut to the chase:  This may be an area where companies are getting better.  The data is interesting as well in that it shows (at least in this sample) that public companies are better at it than private ones.  I would be curious as to whether there is an additional split between family owned and other types of ownership among the private companies.

I think that transparency (welcomed or not) has a lot to do with boards (and, hopefully, HR) being more concerned about high level succession planning.  Part of what big investors are buying is the leadership team and the more focus there is on CEOs and their impact, the more concern investors will have in the less-than-famous leaders.

Good succession planning does not stop at the C-Suite.  It should be considered part of talent development for every position in the company.  Whether it is at the entry (where are we going to find new employees?) or management (how can we identify leadership potential?) levels, the work is ensuring that there is a strategy for identifying talent.

This process involves both valid assessment (who is interested and capable of doing what we need?) and development (what are the experiences that a person needs to be prepared for the next move?).  Keeping the pipeline full means focusing on both so that when a position comes open the question, “Who’s next?” can be answered quickly and reliably.

When the People in High Potential Programs Aren’t

At a recent professional conference I attended there was a lot of talk about high potentials.  Specifically, how to best measure potential versus actual performance (good luck getting managers to understand the difference).  The idea of identifying high potentials (HiPos) is critical for a couple of reasons:

  • If you are going to do good succession planning, you need to look at people based on their potential to be leaders at the next level (or for the first time) and not just how well they are doing in the current position.
  • Investing training dollars in HiPos will give you a much better return than the investment in lower performers. High performers got that way because they are continuous learners who welcome feedback.

But, do companies really do a good job of identifying HiPos?  This article suggests that they do not.  Using 360 feedback as a metric, the authors conclude that many of those selected into HiPo programs are not rated well on important leadership dimensions.  How does this happen?

  • Companies use the wrong data to identify HiPos. Our tendency is to use current performance to determine future performance.  And, if looking at a person’s potential in that job, this would be the best predictor.  But, it is not a good predictor if you’re trying to determine if a great individual contributor will be a good manager, or if a good manager will be a good executive.  The skill sets are too different.
  • I allude to it above, but companies place too much weight on factors that are not related to potential. I understand that it is hard to put blinders on and only focus on those attributes that would indicate success in another role (e.g., strategic thinking), but it is critical to do so in identifying HiPos.

The best way to combat this is to identify future success factors, such as strategic thinking and developing effective followers, in your organization.  If succession planners are presented with only this type of relevant data (as opposed to everything that might come out of a 360 or assessment center), it is more likely that those with the highest potential will be put into the HiPo pool.

Why Clarity in Family Succession Planning Matters

I have some family owned businesses as clients.  They do have an extra critical dynamic which makes them different from other businesses.  As one owner said to me when trying to make a difficult retain/fire decision about a family member, “If Pat goes and then works for a competitor that would make Thanksgivings very awkward.”

showbox iosThough the extra layer of family issues can be seen as a detriment, businesses that want to stay family owned and/or operated have the advantage of being able to plan succession well into the future (assuming commitment by younger family members).  This can include education, cross-training assignments, and working for other companies.  The important point is that family owned businesses should focus on succession planning in management as part of the ownership transition.gmail Login  Sure, deciding what it takes to be the next Director of Midwest Regional Sales isn’t as sexy as the next CEO, but it is a necessary step.

When I read about how family businesses conduct succession planning well, what strikes me is that additional role definition is a key.  This article provides some good examples.  The lesson is that governance and individual responsibilities need to be even clearer for family members in the succession path than for employees.  Besides giving confidence to investors and other stakeholders, this really tells brothers, sisters, nieces, nephews, etc. not to make assumptions about when they get to run the business, but rather what milestones to hit so they can earn the opportunity to run the business.

Of course, clear role definition and long term succession planning are great tools for any business.  Being clear about selection criteria, knowledge and skill acquisition, and experience set standards for all employees who want to advance in a company.  But, for family-owned businesses, they can mean the difference between transitioning a business to future generations or having them stop with the founder.

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