Management succession planning is a critical task many organizations will need to accomplish in the next few years. In the next decade, many baby boomers will leave the workforce. In addition, as the US economy improves and the unemployment rate goes down, employee turnover is likely to increase for many organizations. It is imperative that organization leaders proactively work to minimize the risk of key employee retirements and turnover.
In addition, many middle market organizations rely extensively on a selected group of key employees/executives. For some middle market organizations, this reliance results in a significant risk to continuing the success.
Organizations with significant key employee retirement and turnover risk must pursue some level of formal management succession planning. Logical initial steps might include the following:
- Identify key employees that are close to retirement age or seem to be at risk of leaving for other reasons
- Inquire about each key employee’s retirement intent (carefully so your actions are not interpreted as age discrimination) or satisfaction with their position
- Develop or update a list of duties that each key employee identified performs for your organization
- Have the involved key employee document how their complicated tasks are currently performed
- Identify existing employees that have the capabilities, drive, commitment, and interest to be promoted into key positions as they become open
- Identify key employee positions that do not have a likely internal candidate to replace the departing key employee
- Recruit new employees to fill projected vacant positions – either to replace the existing departing key employee or the employee that will be promoted
- Plan for an adequate, but not excessive, time overlap to ensure the departing key employee duties are successfully transferred to the new employee
- Continually revisit and restart the above process as necessary
Additional succession planning complexity can exist in family-owned businesses. Careful consideration should be given to the evaluation of next-generation potential leaders to determine the best fit for their and the company’s future success. An outside independent perspective of the next generation’s potential, capabilities, drive, and desire can be very helpful. Sometimes the mix of a family and a business’ needs can result in a more difficult, but critically important, succession planning process. History has shown that business failure rates can increase with the transition to family generations subsequent to the founding entrepreneur.