By Denise Harrison, Vice President
Recently I spoke with a company Chairman who was frustrated with the performance of the company’s CEO, but there was little that could be done about the situation. Due to the ownership structure of the company, it was going to be difficult to make changes. How could this happen?
Often in small to mid-sized companies (and sometimes in large companies), succession often is a function of ownership in the company and/or a family tie. But firms, even family-owned firms, which do not develop clear criteria for selection, are often caught with much more difficult decisions to make down the road when a senior officer does not perform his/her function at the expected level. In one company, a son of the owner was moved to Vice President of Quality, parked there when he had not been able to do other VP jobs. Unfortunately he had neither the skill set nor the attention to detail that was required to perform in this position. The company’s product quality suffered as employees saw that family affiliation was more important than job performance and qualifications. In a family business, one of the most difficult things to do is to keep the distinction between family and business totally separated. By keeping the relationships business-based then objective criteria for performance are more easily used to judge how the individual is doing and to improve the likelihood of long-term success.
As you develop a succession plan for future movement into senior positions (for both family-owned and non-family owned businesses), have clear and specific criteria for what is required to perform the job effectively. Then evaluate candidates based on those criteria – notice I said candidates. If there are not multiple candidates within the company, consider people outside the company. You may or may not be able to hire people from the outside, but you will know what you are missing as you promote from within the company. What do you do when the “heir apparent” comes up short? If the shortfall is considerable, you may want to consider someone else for the job. If not, you will want to work on the weaknesses. Remedial options to consider include:
1. Training and education
3. Complementary hires (you can not be good at everything, having a good #2 who complements the senior person often works)
In addition to considering outside candidates for a position, it is also important to have some outside input for what the criteria should be for the job. These criteria should be for the job today and, just as importantly, for the job of the future. Your strategy should help you identify characteristics required for your senior management positions. For top jobs, board members can be a good sounding board.
Once your candidate is selected, have some performance criteria and processes in place so that you have a way to remove an individual if necessary. Performance metrics should include achievement of strategic goals for the business. These performance metrics and processes prevent the person from thinking he/she is entitled to the job for life. Sometimes you do not see the issues until the person actually takes the job, and in those cases, performance metrics often help identify problem areas. Have frequent interventions early in the tenure so that you can get the person back on track or so that you can take corrective action early – before a real crisis erupts.
Succession planning is key to any business’s longevity; don’t take the easy way out:
1. Develop criteria for key positions
2. Evaluate multiple candidates
3. Train and mentor candidates (where applicable)
4. Get outside advice and evaluation
5. Have performance metrics for job performance
6. Evaluate regularly, making course corrections early
It will take time to develop a good succession planning process, but this time will be well spent; a bad hire or promotion takes far more time and can have far reaching consequences. The time working with a bad hire or bad promotion is not time not well spent, but rather a distraction, an unnecessary one in today’s competitive marketplace and potentially a costly one at that.
Denise Harrison is Vice President of the Center for Simplified Strategic Planning, Inc. She can be reached at firstname.lastname@example.org