Succession planning 1

Succession ManagementSuccession Management

Could you walk away today Could you walk away today and your business be OK?and your business be OK?

Mobile Chamber of Commerce Mobile Chamber of Commerce

January 11, 2011January 11, 2011

Rick MillerRick Miller

www.pro356consulting.comwww.pro356consulting.com 22

Start a diet or a succession Start a diet or a succession plan?plan?

According to Dec 2010 Korn Ferry Survey¹According to Dec 2010 Korn Ferry Survey¹ 98% of companies believe a succession plan is 98% of companies believe a succession plan is

important.important. Only 35% of those companies are actually Only 35% of those companies are actually

prepared for the unexpected or planned departure prepared for the unexpected or planned departure of their CEO.of their CEO.

Harris/Decima Nov 2010 survey²Harris/Decima Nov 2010 survey² 46% are thinking about a succession plan. 46% are thinking about a succession plan. Less than 20% have identified a successor.Less than 20% have identified a successor.

1 – Korn Ferry Institute Global Executive Survey, December 20101 – Korn Ferry Institute Global Executive Survey, December 20102 – Harris/Decima survey of 650 business owners in US and Canada, November 20102 – Harris/Decima survey of 650 business owners in US and Canada, November 2010


Succession PlanningSuccession Planning

Why is it necessary?Why is it necessary? 90% of all businesses are small 90% of all businesses are small

businesses. businesses. Only 30% of those survive to the second Only 30% of those survive to the second

generation.generation. Only 15% survive to the third generation.Only 15% survive to the third generation.

Source: SBASource: SBA



What is the track record?What is the track record? 75% failure rate¹75% failure rate¹

Big Dog SyndromeBig Dog Syndrome What got you here won’t keep you here.What got you here won’t keep you here. Gene Pool BluesGene Pool Blues

Failure to plan really is planning to fail.Failure to plan really is planning to fail.

¹ ¹ Jim Collins – Jim Collins – Good to GreatGood to Great 1991 1991


The Great Balancing Act:The Great Balancing Act:Ego vs. OrganizationEgo vs. Organization

Nothing succeeds like success.Nothing succeeds like success.OROR

Nothing leaves like success when a leader Nothing leaves like success when a leader leaves.leaves.

““It’s amazing what you can accomplish It’s amazing what you can accomplish when you don’t care who gets the credit.”when you don’t care who gets the credit.”

John WoodenJohn Wooden


Succession Planning Succession Planning HistoricallyHistorically

Source: Google Ngram ViewerSource: Google Ngram Viewer



Working your way out of a jobWorking your way out of a job When it is C level – Succession When it is C level – Succession

ManagementManagement When it is everyone – Workforce When it is everyone – Workforce

PlanningPlanning


Who should be involved?Who should be involved?

Current ownership or board-(Current ownership or board-(Critical)Critical) Existing key managersExisting key managers Family, if appropriateFamily, if appropriate Outside experts – (Outside experts – (Tax, Financial, LegalTax, Financial, Legal)) Vendors/key customersVendors/key customers

Treat this like another component of your Treat this like another component of your strategic plan.strategic plan.



How do you define success (ion)?How do you define success (ion)? Passing on the business to familyPassing on the business to family Passing on the business to new CEOPassing on the business to new CEO Selling outSelling out MergingMerging

Depends on your Strategic Plan.Depends on your Strategic Plan.

Key: Key: Include people in your strategic Include people in your strategic plan!plan!


Family BusinessFamily Business

Succession Planning is really pre-paid Legacy Succession Planning is really pre-paid Legacy Insurance.Insurance. 70% of family businesses fail in the second 70% of family businesses fail in the second

generation.generation. Only 15% make it to the third generation. ¹Only 15% make it to the third generation. ¹

Staying in the game takes more than a Staying in the game takes more than a name:name:

August Busch IV.August Busch IV.

¹Source: SBA.GOV¹Source: SBA.GOV


Traits of Enduring Family Traits of Enduring Family Businesses¹Businesses¹

Strong sense of purpose – Clear mission Strong sense of purpose – Clear mission statementstatement

Active board participation, but professional Active board participation, but professional managementmanagement

Ownership control maintained by dynamic Ownership control maintained by dynamic portfolio evolutionportfolio evolution

Wealth management officerWealth management officer Foundations for family member participationFoundations for family member participation

¹“The five attributes of enduring family businesses”, McKinsey Quarterly, ¹“The five attributes of enduring family businesses”, McKinsey Quarterly, January 2010January 2010



What’s involved in a succession management What’s involved in a succession management plan?plan? Where is your company in its strategic journey?Where is your company in its strategic journey? Where is your business going?Where is your business going? Current skills assessment vs.Current skills assessment vs. Future skills assessment =Future skills assessment = Skill Gap Analysis Skill Gap Analysis Workforce Development Plan Workforce Development Plan ImplementationImplementation Follow up and manage – The hard part! Follow up and manage – The hard part!


Where is your company in its Where is your company in its strategic journey?strategic journey?

Product Life Cycle?Product Life Cycle? Industry Life Cycle?Industry Life Cycle? Customer Demographic?Customer Demographic? Competitive Trends?Competitive Trends? How do these fit with your existing culture How do these fit with your existing culture

and mission statement?and mission statement? Are these factors likely to motivate or de-Are these factors likely to motivate or de-

motivate the next generation of motivate the next generation of management?management?


Skills AssessmentsSkills AssessmentsProduct Life Cycle

Your product

New Technology or

Product

Competitors/Other Products

0%

20%

40%

60%

80%

100%

120%

2007 2008 2009 2010 2011 2012 2013 2014 2015

Time

Mark

et

Sh

are

Competitors/Other Products

New Technology or Product

Your product

What are the skills necessary to adapt to a What are the skills necessary to adapt to a changing market for your company?changing market for your company?


Where is your business Where is your business going?going?

What is your business strategy?What is your business strategy? Product lines, business markets, etc.Product lines, business markets, etc. What changes are in your plan for these What changes are in your plan for these

components?components?

What changes will this mean for your What changes will this mean for your business?business? CEOCEO Other officersOther officers Managers and staffManagers and staff

What is the expected rate of change?What is the expected rate of change?


What management skills will What management skills will be necessary?be necessary?

What organizational structure will be What organizational structure will be necessary to support the strategic necessary to support the strategic plan?plan?

What new positions are needed?What new positions are needed? What existing positions need phasing What existing positions need phasing

out?out? Which positions are mission critical?Which positions are mission critical?


Skills AssessmentsSkills Assessments

What skills will be necessary to successfully market What skills will be necessary to successfully market to a changing demographic customer base?to a changing demographic customer base?

Customer Demographics 2016 By Age

65-8041%

18-2614%

26-4818%

49-6427%

Customer Demographics Today By Age

49-6450%

26-4830%

18-2610%

65-8010%


Skills Necessary for SuccessSkills Necessary for Success

What are they What are they now?now?

What will be What will be necessary for the necessary for the future?future?

Can they be Can they be trained?trained?

Who has them?Who has them?

Who has them and Who has them and what is missing?what is missing?

What skills need to What skills need to be acquired?be acquired?


Assessing Current Staff Assessing Current Staff

Behavior fit for future jobs?Behavior fit for future jobs? Future skill sets required?Future skill sets required? Internal talent demographics?Internal talent demographics?

RetirementRetirement AttritionAttrition


Step _ Identify Your Key Step _ Identify Your Key TalentTalent

CEO

CFO Production Sales/Marketing Administrative/IT R & D

Quality Mgr. Marketing Mgr. Sales Mgr Top Engineer

# 1 Sales Person

Production Mgr.

Floor Leader

Identify your Identify your critical critical players. players. Identify your in-house Identify your in-house potential successors.potential successors. Both require succession plans to insure Both require succession plans to insure

successful transitions.successful transitions.


Planning ToolsPlanning Tools

Personality AssessmentsPersonality Assessments DISCDISC MBTIMBTI TK ConflictTK Conflict FIRO B LeadershipFIRO B Leadership

360 Assessments360 Assessments Specific Skills AssessmentSpecific Skills Assessment Executive/Business CoachingExecutive/Business Coaching


Identify Talent GapsIdentify Talent Gaps

What positions need to be filled?What positions need to be filled? When will the positions need to be filled?When will the positions need to be filled? How?How?

Internal talent – requires a plan.Internal talent – requires a plan. Redeployment – requires a plan.Redeployment – requires a plan. Outside talent – requires a plan.Outside talent – requires a plan. Project alliances – new paradigm for risk Project alliances – new paradigm for risk

management.management.

Don’t leave the planning entirely up to HR!Don’t leave the planning entirely up to HR!


InventoryInventoryPositionPosition CurrentCurrent

SkillsSkillsFuture SkillsFuture Skills SkillSkill

GapsGapsDISCDISC

Work StyleWork Style

CEOCEO Strategic Strategic thinker, thinker, customer customer relations, relations, negotiating, negotiating, financefinance

Alliance Alliance builder, people builder, people motivator, motivator, cloud cloud marketing, new marketing, new product product developmentdevelopment

CFOCFO Analysis, Analysis, presentation, presentation, risk risk assessment, assessment, industry industry knowledgeknowledge

People skills, People skills, customer customer interaction, interaction, broader visionbroader vision

Executive Executive coach, coach, customer customer satisfaction satisfaction survey,survey,

outside board outside board

Problem solver Problem solver and pace and pace orientedoriented


ImplementImplement

Owner/Board/Family/Stakeholder Owner/Board/Family/Stakeholder support upfront – CRITICAL!support upfront – CRITICAL!

Hands on programs designed to Hands on programs designed to demonstrate skill gap acquisition.demonstrate skill gap acquisition.

Interim evaluations to keep progress Interim evaluations to keep progress manageable.manageable.

Focus on mission critical skills only at Focus on mission critical skills only at first.first.


Succession Performance Succession Performance PlanPlan

Give successors a plan for them to Give successors a plan for them to demonstrate skill development.demonstrate skill development.

Let them “self identify” by THEIR Let them “self identify” by THEIR actions not your expectations. actions not your expectations.


Plan the work and work the Plan the work and work the plan.plan.

PositionPosition Skill Skill Development Development ObjectiveObjective

TrainingTraining

ProgramProgramResponsibilitResponsibilityy

Measurement Measurement MetricsMetrics

ReviewReview

DateDate


Potential Planning Pitfalls¹Potential Planning Pitfalls¹

Trying to plan in secret.Trying to plan in secret. Underestimating existing in-house potential.Underestimating existing in-house potential. Lip service commitment.Lip service commitment. Lack of individualized development Lack of individualized development

programs.programs. Failure to prune while fertilizing.Failure to prune while fertilizing. Not linking subordinate development to Not linking subordinate development to

supervisor evaluations.supervisor evaluations.

¹ Lin Grensing-Pophal, “Who Are Your ‘Next Generation’ Leaders? SHRM White Paper, ¹ Lin Grensing-Pophal, “Who Are Your ‘Next Generation’ Leaders? SHRM White Paper, www.shrm.org, ,

July 2000July 2000

http://www.shrm.org/


Even the best plans don’t Even the best plans don’t always work?always work?

Texas LonghornsTexas Longhorns Will MuschampWill Muschamp

GEGE Jeffrey ImmeltJeffrey Immelt

FSU SeminolesFSU Seminoles Jimbo FisherJimbo Fisher

MicrosoftMicrosoft Steve BalmerSteve Balmer


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