Succession planning is also usually conceived as applying just to the CEO and maybe a few other key people. But given that employee ownership companies often expect employees at many levels to take on formal or informal leadership roles, it is important to do succession planning very deeply throughout the organization in such companies. Ideally, succession planning is internal. But that is not always possible; the needed talents may just not be in your company. This issue brief examines best practices in developing new leaders and succession planning, drawing on the experiences of highly successful companies and expert advisors.
Table of Contents
Leadership Development and Succession in Employee-Owned Companies
Why Succession Planning Matters
Going Deep with Succession Planning
The Leadership Development Process
The Succession Planning Process
Common Questions About Succession Planning
Leadership Development and Succession Planning in Employee-Owned Companies
Appendix: BL Companies Competency Model as of August 20, 2007
Succeeding at Succession
Commitment to Culture
Succeeding at Succession
Defining the Organization's Culture: Hoar Construction
Initiating Straightforward Conversations: CH2M Hill
Being Personally Responsible: Recreational Equipment Incorporated (REI)
Custom-Building a Recruitment and Training Platform for Leaders: Radio Flyer, REI, and NetApp
Why This All Works
Business Succession Planning at SRC Holdings
Building Bench Strength with Succession Planning
The Basic Structure of Succession Planning
From "Leadership Development and Succession in Employee-Owned Companies"
BL Companies provides integrated architecture, engineering, environmental, and land surveying services to public and private clients in the Northeast and Mid-Atlantic states. BL's founding CEO left the company in 2006 after 20 years, selling 70% to an ESOP trust. BL became 100% employee-owned in 2011.
There had been no formal succession planning process leading up to the CEO's departure. The new president and the senior leadership team had limited executive experience. Schooling for architecture and engineering professionals does not generally include significant focus on business, management, or leadership skills.
As the founding CEO was departing, it was apparent that the senior leaders and others would benefit from leadership development. Until that time, leaders in the company had had very limited exposure to and development of "softer" leadership skills. Communication and working relationships among some members of the senior team were strained and were tested with the change in leadership. When differences arose among team members, they struggled to speak to one another directly about them, leading to some acrimony and confusion in decision-making. Moreover, silos separated the various disciplines, challenging BL's ability to optimize the provision of integrated services to clients.
Following a strategic planning meeting that surfaced many of these issues, BL undertook a leadership development process designed to strengthen the team of employee-owners running the company; develop leadership capacity at multiple levels of the company; develop a culture of ownership, employee participation, and accountability; and prepare a next generation of leaders to succeed into top positions.
From "Succeeding at Succession"
What can be done to avoid a leadership succession failure or simply boost the speed with which an effective transition occurs? The leadership succession practices found in the Best Companies to Work For provide valuable guidance for ensuring a successful leadership transition at any level within your organization. The guidance may be somewhat surprising, for it is the tremendous amount of work done before specific succession activities even start that guarantees smooth leadership transitions.
The three key activities that founders/leaders need to engage in to support the smooth implementation of leadership development and succession plans promote cultural congruity between current and future leaders. A fourth key activity—structured succession-specific activities—keeps things moving forward yet varies significantly depending on the type of organization, its history, and its resources.
From "Business Succession Planning at SRC Holdings"
In January of each year, the whole HR team meets with division general managers and company executive vice presidents. We conduct succession planning and skills competency reviews, identify and discuss talent, collaborate on the future direction of company's organizational structure, and assess human capital readiness to achieve our sales and marketing plan.
During this process, we rely on organizational charts that offer a snapshot of where each division of SRC is and where it is going. To do this, we identify all key positions. For us, this typically includes positions such as executive leaders, managers, key technical roles, and key associates at all levels. From there, we gather information about the employees who currently hold those positions (time in the company, time in position, etc.). We then build off of that information to understand how the company will look when aligned with our five-year sales and marketing plan and make note of how we plan to add, modify, or omit positions as we grow.
Once the current organizational charts are developed, we begin to drill down by creating replacement charts that list three candidates to fill each of the key positions we recognized earlier in the process. Generally, individuals are responsible for developing the replacement chart for their current position as they most clearly understand what is needed to be successful in that role. Participants are asked to specify in a few lines the kinds of skills necessary to complete their job. After the candidates are identified, we use a "method summary" for assessing who is ready now, who might be ready in one to two years, and who might be ready in two or more years. We also begin the process of reviewing (if already in place) or creating an individual development plan (IDP) for each candidate. This includes recommending training or other objectives they must complete before they are fully prepared for the role. Throughout the year, we monitor the candidate's progress and continually reevaluate their readiness as a succession candidate.