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Succession Planning

How can a business identify potential business managers of the future?

Auditing the current situation is the key first step. Businesses need to build an understanding and perhaps more importantly a plan for succession. Many of those that already do, focus mostly on retirement whereas people moving on to careers elsewhere or internally are far more common.

The initial audit should look at the business and its strategic direction in order to build a profile or specification of what is required rather than simply replacing the incumbent.

Overall the profile needed for the top job has to be balanced. Broadly, the industry chief exec’s come from manufacturing or finance backgrounds, particularly in publicly quoted companies. In most cases however you will see that these individuals have experience or sound knowledge of all aspects of the business including manufacturing / operations, sales and finance. They will have experience of operating at a high level developing and implementing strategy rather than just tactical day to day management. Business planning ability is crucial; this should be based on a thorough understanding of market and technological trends and be backed with detailed (and realistic) financial plans / forecasts.

In recruiting a Chief Exec. or senior director / business leader there are two key areas to consider; firstly technical ability and then personal attributes often referred to as emotional intelligence or EQ as opposed to IQ.

Clearly when considering technical ability we are looking for the raw skills and experience covering the various disciplines. With EQ we are looking for strength of character, the ability to work under what can be extreme pressure, rational analytical thinking and image / interpersonal skills.

The top job means the buck stops here and can be pressured and lonely particularly when things aren’t going right. Having come up with a strategy it takes great strength of character to carry on doing what you know is right when results aren't coming as fast as you’d like and you are facing criticism.

The business leaders / Chief exec’s of Plc’s and Venture Capital backed companies need to understand the way investors think and be able to present to them convincingly; to be able to convey complex market and organisational issues in a digestible manner to justify strategy. This is crucial to get investors to buy into the strategy as the right course for the business and obviously the right way to spend their money! Conversely there is also the need to communicate the needs of investors to staff in a way which makes operational sense.

Diplomacy is also needed in balancing the rival priorities of the different areas of the business. With the best will in the world and the most cohesive team there will be a time when there is a conflict between departments, perhaps sales and manufacturing. In these situations a chief exec must choose the best option for the business whilst keeping all on side.

Communication and the ability to inspire and motivate are also a priority. Holding the respect of staff and inspiring them to go the extra mile for the collective good is vital in any leader.

In practical terms we would perhaps start with a simple checklist and consider whether the candidate is weak, has a basic standard, is competent or particularly strong in the following areas:

Qualifications:

First degree (preferably technical)

Professional qualification

Business Qualification

Background / Experience:

Manufacturing experience

Commercial (sales) experience

Other functional experience

Management of multiple groups or units

Profit accountability

Delivered significant change

Evidence of personal development

Skills / Knowledge:

Strategic Planning

Leadership / people management

Financial management

Project management

Knowledge of market dymanics and trends

Communication / interpersonal skills

Commercial acumen

Negotiating skills

Presentation skills

Foreign language

Behaviours / Character:

Strategic thinking

Results focused

Rational / analytical thinking

Influencing skills

Attention to detail without micro managing

Coaching / developing skills

Once you have a clear understanding of what is required you can then start assessing the capabilities and potential of existing staff. You have to be objective about this so using techniques such as balanced scorecards and or aptitude testing will help; certainly in assessing technical skills. For EQ you could consider using psychometric profiling with a focus on management and leadership styles, behaviours under pressure etc. If you do this I believe it is pretty much essential to evaluate the whole management team as you can build up an objective picture of how the team work together and potentially how they will perform if one of them is promoted above the others.

How do you develop skills, particularly leadership and people management skills within a company?

Having done the audit it is unlikely there will be a perfect individual internally – this brings us to the great debate of whether to train and develop internal candidates or recruit talent externally. Of course both have their advantages and disadvantages.

For internal candidates the checklist is a useful tool to consider potential candidates. It will highlight areas or weakness and can be used to create plans to develop those individuals. Usually a combination of formal training / qualification and experience will be required to develop the rounded individual.

Formal training takes many forms but often the interaction with other mangers, from different organisations, at a similar level is very positive in seeing a different perspective and different approaches to certain issues.

Clearly academic training on its own is not enough and so experience gained through planned career progression or secondments encompassing the various disciplines and roles is required. These real world experiences are the ultimate evidence of whether the candidate will be able to step up to the level required. However many companies make the mistake of taking someone from a junior position and putting them into this kind of process and using it as a test rather than a learning tool. Whether planned career progression or special projects / secondments each step should be challeneging so you should expect the candidate to make a few mistakes; make sure they learn from them and challenge them again. From a leadership point of view psychometric testing can be useful but is most powerful used in conjunction with the opportunity to observe internal candidates over an extended period in challenging situations.

Coaching and or mentoring can be used to maximise learning opportunities. Often situations arise and individuals immediately respond to them without taking a step back to consider them. The benefit of experience is in seeing that there are alternative. Coaching or mentoring these individuals can provide the discipline to ensure they learn from them by considering alternatives and seeking advice.

Where they are a weakness developing interpersonal and communication skills is more difficult and tools such as 360 degree feedback can be used to highlight to individuals how they, often unwittingly, come across.

When considering external candidates again the checklist provides a useful starting point. Again it may be that the perfect individual doesn’t exist and there are two ways of approaching the problem. If the time and resource is available hiring the most complete candidate in an assistant or designate role and then developing their range and skills as an internal candidate also allows them to learn the business.

Where time is short assessing the best candidate against the role will highlight areas of weakness. Consideration can then be given to ensuring there is sufficient support or delegating detailed control of the area may be the best way forward; allowing the individual time to improve their all round ability.

What steps should be taken to ensure a business is left in a fit state to continue after a director leaves?

There are effectively two elements to this. First is the planned succession resulting from retirement or the sale of a business and this really should follow the process of audit, understanding weaknesses or skills gaps and plan and implement a programme to develop internal or external candidates to the role.

Where you must replace a director or other key personnel leaving at relatively short notice, perhaps for career reasons, then it is about building cover or strength in depth on an on-going business. It’s something I refer to as two dimensional contingency it refers to cover and succession. The central principle of this is that in order to build security in the business you establish cover for all key personnel amongst their staff and peers; hence the two dimensions. Clearly as part of succession planning you will want to develop subordinates so that they could succeed their bosses. However in the majority of cases it is very difficult to have a subordinate at the same level of skill, knowledge and capability as their boss; not least because they would soon become frustrated and leave. What subordinates usually lack is the higher level understanding and strategic thinking and this is where peers come in. Ensuring that fellow directors or members of the senior management team have a good understanding of each others areas or at least one other area from their own gives the strategic cover to go alongside the operational and day to day cover of the subordinates. At the very least this provides and period of support for the subordinate as they move up into the role.

Succession planning needs to be an on-going and integral part of the business at virtually all levels. It was often said that many managers fear their subordinates becoming too good in case it puts them out of a job. The wise one understands that the better their team the more it frees them up to develop.

Do you think family run businesses are particularly at risk?

Yes but also many privately owned SME’s. They tend to be lean and therefore have less cover and also many have less focus on formal / academic training to build a rounded manager with knowledge of all aspects of business rather than their business.

These businesses can tend to be introspective; many are providing a decent living for the family and the family can become focused on maintaining the business at a level which supports this standard of living rather than a greater strategic goal for the business; so called lifestyle businesses. These often run into problems in the second generation because there has been no specific strategic focus or goal.

Family businesses run another very significant risk in attracting the very best talent particularly at senior levels. There is often the perception that not matter how well you do if you are to part of the family you can never reach the top. This can be a big negative and is often the reason for non-family senior managers leaving.

Should businesses start checking out their competition to see if they might want to poach staff?

Yes and no. Firstly businesses should always be keenly aware of their competition, understanding what their strengths and weaknesses are and what they are doing in the market. They should be aware of which ones customers prefer and why, what do they do that customers particularly like. And also of course who are key personnel.

However businesses shouldn’t look at poaching staff as the best route to strengthening their businesses on and on-going basis. It is clear that bringing in fresh a perspective can be useful but it is not practical to do this continually. The industry is very incestuous and this makes it worse; also recycling the same talent through every company within a sector exacerbates the skills shortage by failing to develop new talent, this in turn usually leads to salaries spiralling ever higher.

How does your company help in these areas?

Monitoring the key players is our stock in trade. In addition to the research when working on specific search assignments it is our business to monitor the industry. We will always be looking to see who is performing well or who was responsible for a particular success.

The specific help we give to clients starts with helping them understand and identify the requirements in terms of skills, knowledge and temperament. By focusing on the requirements, perhaps identifying other sectors / sources, rather than knee jerk poaching from competitors we can ensure the clients has access to the widest possible talent pool.

I mentioned some of the reservations candidates can have to family businesses and we can also make sure clients understand this and advise them on how to make themselves attractive. Of course when we get to the point of approaching candidates we will then look to identify and handle any objections / concerns candidates may have.

It can be a difficult thing for families to face, they have great pride in their business and the thought of bringing in an outsider in the top role is a big step. However if they aren’t continually looking to have the most talented people in place, family or not, they can face ruin.