Succession planning may sound like something a large company does, hopefully before the CEO retires. But that view misses its critical strategic need in companies of any size. In fact, when you consider the full ramifications of the concept, succession planning is as important, and maybe even more so, for a middle market company poised for growth. Whether looking for talent needed to take a company forward or even ensuring business continuity during an abrupt change in management, a mid-market business should have a comprehensive succession plan.
Too frequently, people assume that succession is about having replacements for people in management. And that is part of it. There is no guarantee that a key person might not suddenly have an accident, become ill for an extended time, become embroiled in a distracting scandal, or receive an irresistible offer to jump ship. In those terms, it is obvious that succession planning is not only about the CEO. What if your company depends on a brilliant vice president of marketing, operations expert, or other deeply experienced person? Lose him or her and the company could sustain serious damage during a search for an adequate replacement.
Furthermore, as HR consulting firm Aon Hewitt points out, succession planning should take place for middle management, not only at the top. A 2007 Ernst & Young survey found that 41 percent of respondents said middle management would be most affected by an aging workforce and a loss of experienced personnel. And yet, three quarters of companies said they were focused on succession planning programs at the senior level.
Succession is not about having a body in a position. It's about ensuring there is enough institutional knowledge and understanding to keep a company steadily moving. For a middle market company, however, the desire for growth likely means a need for additional expertise that might not already be available. If there are people in the organization who do not have the experience to help the company reach the next few levels, either you must find a way to help them quickly grow or replacements may become necessary. Both are aspects of a comprehensive plan. To put it differently, succession has far broader implications than the HR department.
Succession is more than having a list of candidates for a position. It is really a rounded approach to management. Personnel who show promise should get the training and experience they need. That could include sending people to classes or seminars as well as rotating them through different departments for a more organic understanding of the business.
Unfortunately, few companies have such a plan. According to a 2011 American Management Association study, when asked how well they were prepared "to deal with a sudden loss of key members of the senior management team," only 14 percent said "well-prepared" and 60.8 percent answered "somewhat prepared." More than a fifth - 21.8 percent - said "not at all prepared," with another 3.4 percent respondents saying that they didn't know. If a company is not ready for an unexpected loss of a key person, chances are it is even less prepared for strategic growth.
It may be because, in part, succession planning is like buying a burial plot and pre-paying funeral expenses. People might nod sagely and say, "Oh, yes, an intelligent move," but who likes to think about kicking the bucket, whether professionally or in a more encompassing form? Perhaps the trick to making headway is to change the focus to the growth the company wants to achieve, not to an end of possibilities. As Marshall Goldsmith suggests on a Harvard Business Review blog, change the name from succession planning to succession development. Only by having people in place who are ready for the future will that growth be possible.
Erik Sherman is an NCMM contributor and author whose work has appeared in such publications as The Wall Street Journal, The New York Times Magazine, Newsweek, the Financial Times, Chief Executive, Inc., and Fortune. He also blogs for CBS MoneyWatch. Sherman has extensive experience in corporate communications consulting and is the author or co-author of 10 books. Follow him on Twitter.