When going through the process of succession planning in a business, the most important part of the exit strategy process lies back before the process begins, in the actual planning phase itself. When business owners come to the point in their lives where it is time for them to find a potential successor to pass the torch, it is often an emotional and stressful time that can catch them off guard and be hard to navigate. Solid succession plans with measurable KPIs are key to transferring ownership to the future leader. Furthermore, the CEO succession planning document is just as important as the original business plan.
Document your succession plans.
A succession plan can and should be viewed as a living document. It should match the context of the business and lay out answers to various questions that can come up. A solid succession plan handles the different situations that could lead to the succession of an owner or owners not named as possible successors. Taking the time to have a solid business succession planning program is insurance to help underwrite the future of your business. A succession planning strategy is not just for the expected times of transferring ownership during retirement or growth but also in those unexpected times of being unable to lead any longer through disability, change in priorities, or something unexpected.
Focus on professional development.
In order to drill down to the most important aspects of succession, we should consider those universal across all scenarios of leadership transition. The focus must be on the potential leaders involved in the succession process, how we measure their performance and how we must build leadership role accountability along the way.
Every employee is a potential successor.
On a macro level, every employee hired is part of the talent pool and considered a part of the succession plan. Every employee employed in a business must be a deliberate hire, qualified, and committed to the business’s future success. From day one, every person is an internal candidate; thus, given a complete and accurate job description, the tools needed to perform their job, the skills and ability to do the job, and they should be measured for growth and consistency from the beginning to end of their service.
Introducing KPIs into effective succession planning.
The reason that it is important to lay the groundwork at a new employee’s initial hire is that healthy businesses promote and encourage employee development from within, besides attracting and acquiring human capital from outside resources. This process creates the funnel that guides great people to key leadership positions. If a business begins with a pre-made model and has organized measurable KPIs for each role, owners can track data over time, and when the opportunities arise through growth and reorganization, an internal candidate can take the position. After all, how often have we heard of an executive with ownership started on the ground floor?
While readily accepted in many internal subsects of business, such as inventory, finance, sales, and others, KPIs are often overlooked and underutilized in managing a business’s human capital.
So how does this relate to succession planning?Â
Adopting a model of immediate and consistent tracking of each person’s performance within a company provides necessary historical data. At the time of succession planning, this information answers challenging questions not found in a sales report or financial document. Supervisors rate their subordinates with a standard practice applying equally to all employees on a scale of one to five. Once tracked for a substantial period, these KPIs provide a non-emotional collection of data. When in need of people for promotions, this data is searchable all the way up to executive leadership and ownership.Â
KPIs give a point system to rate from weakest to strongest for individual performance and employee development in non-numeric performance categories like leadership ability, attitude, consistency, self-development, teamwork, communication, professionalism, technical capability, eagerness, respect by peers, and more. All values assigned provide the business with an accurate scorecard for accountability and enrichment and are also used as the talent pipeline to find qualified successors. Using KPIs consistently allow companies to see the story behind a person’s journey through their organic ascension in a business.
KPIs safeguard the succession planning process.
At the same time, using KPIs in context with effective succession planning also helps bring to light nepotism, stop popular but unqualified candidates, and recognize overlooked talent that are good choices for successors. Businesses run into succession management issues due to our cognitive distortions that affect how we perceive others. These misconceptions can lead to considering popular but unqualified candidates to assume ownership and not weighing under-acknowledged high-potential employees.
Frequently, “soft sciences” of tracking workplace performance without KPIs can be misleading and full of distorted information contaminated with personal bias, fear, overlooking flaws for an entertaining personality, and even inappropriate relationships in the workplace. When these situations present themselves, having documentation available backing up choices for the selected candidates for succession is verifiable and has supporting collateral for the decision. Conversely, it also creates documentation for supporting collateral when someone should be removed from their position or realigned in a new role. These KPIs and the documentation they provide should ensure the ascension of a good choice for a potential leader taking a critical position or becoming your successor, as well as stop poor choices.
Avoiding the successor discussion stalemate.
Too often, succession planning meetings over who gets the leadership position get stuck in a stalemate over a difference of opinion, nepotism, unintended personal biases, or honest disagreement over who should take over ownership. Using a model of integrated standard KPIs throughout an employee’s career allows succession meetings to have reports and documents with actual data that, when deliberated, provide objective results that keep the discussion moving forward. An exit strategy without this data is like a “shoot from the hip” with a “gut feeling” on who would be best to ascend to the successor. In business, this can be the kiss of death for its future and destroy years of hard work and accomplishments along with your legacy. There are no shortcuts in the succession planning process, only careful planning and honest deliberation based on current data.
Choosing the correct successor with KPIs.
Adopting a leadership development model of using and tracking KPIs for human capital in your business from day one of employment tracks employees’ careers through measurable, comparable, documented aspects. It ultimately simplifies complicated exit strategy situations and leads to great qualified candidates in the talent pool for succession, protecting the future longevity of your legacy.