Click here for this episode’s show notes.

This transcript was created using an automated transcription service and may contain errors.

Susan 0:10
Welcome back to the JoyPowered Workspace Podcast, where we talk about putting humanity back into HR. I am Susan White, a national HR consultant, here with my good friend and co host, JoDee Curtis, owner of Purple Ink, the author of JoyPowered, the inspiration for this podcast series. Today’s topic is succession planning.

JoDee 0:30
So Susan, what does that word even mean, succession planning? When when I hear that it takes me back years ago, when I joined an organization and I asked our CEO, during my first week or two of employment, I said, do we have a succession plan? And he said, Oh, yes. If something happens to me, we have named a successor and it’s confidential information and myself and the successor are the only ones that know about it. So we’re in good shape. And he turned around and walked away. And I just stood there with my mouth open thinking what? But in his mind, they had done all the succession planning they needed. So how would you define that?

Susan 1:19
What scares me about your stories, I keep picturing the two of them getting hit by the same bus at the same time. The two people who know what’s supposed to happen. You know, succession planning is really where a business takes time sits down and figures out who is going to replace everyone in our key positions. So that if that, you know, bus does hit somebody that we know immediately, who is on the radar to replace that person, and I do, I do really believe that. Businesses need to be very thoughtful about it. very intentional about it. Even if there’s no bus hitting, if it’s somebody quits, that you didn’t expect to quit, and maybe you hadn’t thought about well, who’s on the bench for that particular role? So it is a, I think, a very important management discipline that companies need to spend time and really think through.

JoDee 2:09
So does it have to be a formal plan? Or what’s the difference between a formal plan versus an informal one? Obviously my example was very informal.

Susan 2:21
You know, I don’t, I wouldn’t tell you that it has to be formal. I think it can be informal. You just have to have a plan. And there was a study done in 2015 by the Hanover research group, and they actually interviewed over 1000 businesses across 54 countries, because this is not just a US issue. It’s really a global issue. anywhere that you have a company and you have key players, you need to make sure that that company is sustainable. If one, two, or all of the leaders for some reason would depart. In the study that they did. They reported that only 53% of organizations actually take the time to identify candidates who are ready now for promotion into specific key roles. So we think about that – kudos to half of the population of the businesses in this study, but the other half I think, should be concerned.

JoDee 3:12
Is there a size where it only makes sense to do this if you have X number of key leaders? Or is there any kind of magic number on when you should have one or shouldn’t?

Susan 3:24
You know, I think if you’re a sole proprietorship, forget about it. The business is done when you are done, okay? But I do believe that if you are a business leader, and you have… I would say even a handful of employees that you want to think about what if something would happen to you? You know, what, what’s going to follow? Is this business going to end when I end? Or do you want it to to be sustained? And then clearly, if you’re a company of any, you know, size, you know, fifty, hundred and fifty, four thousand, two hundred and seventy-five thousand, you really do want to figure out what are the key roles that this business is dependent upon having filled by somebody of really, you know, strong talent, high quality. It may not be just the CEO or the C suite, you know, it may, it could very well be maybe your head of sales is a couple layers down in the organization. Well, that role might be a really pivotal role for that company’s strategic objectives. You know, if you’re a manufacturing operation, it could be that your plant manager could be the person that if that person, that spot was left open very long that you could have dramatic impact on your profitability.

JoDee 4:37
You know, I recently heard a story about a small company’s technology person left and left with all the passwords and codes and no one else had access to that information and he did not leave on good terms. He did not supply that. So that can be another that can be certainly a key position in the organization too, that someone may be the only person who understands how to use equipment or technology or has access to certain key elements of the business that other people don’t know.

Susan 5:15
Absolutely. Well, you know, I you can tell I’m a big fan of having a succession plan, you know, a thought out one, but I will tell you there, you know, there are some drawbacks, I always think we should look at the pros and cons of of any topic. You know, I’d be interested in some drawbacks that you see, one that I see is sometimes I’ve seen companies have a succession plan, and they go through a lot of effort to identify what are the key roles that could really impact us if it’s left unfilled for very long? And they spend good quality time looking at all of their internal staff to figure out who here could actually replace Joe or Cindy or Mary. And they think about what does that person you know, still lacking? Let’s spend some time some money and get you know, Cindy or Mary or Joe really developed so they’re ready, but then they do it one year, they put it on the shelf, and then they never look at it again. And then Cindy leaves, you know, eighteen months later, two years later, they’re in a panic, they go out, they try to recruit, and the work doesn’t really become a living viable organ. It became an exercise they did years ago that that has dust on that binder.

JoDee 6:17
Right? Or on the flip side, maybe at the company experiences significant growth or a particular role becomes more important in the organization for whatever reason, and then that identified candidate maybe is no longer the right person, if it’s not kept updated and kept viable throughout the process.

Susan 6:39
That’s a great point because the skills needed in a changing, you know, industry changing environment could very well have changed and the person you’ve got slotted is not the right pack.

JoDee 6:47
So how often do you need to update the plan?

Susan 6:52
You know, I would say no less frequently than annually. And I’ve seen companies that will every quarter, they pull it out, dust it off. They first look to see do we have the right skills identified for that particular role? Because things are changing. But secondly, they take a look at who do they have identified to be on the bench for those roles? Have any of those people left? Have any of those, their performance level maybe dropped or maybe improved? So do we need to make changes? So I’ve seen it happen quarterly. But I would say for most businesses, I think an annual talent planning process that includes succession planning is probably appropriate.

JoDee 7:29
And that doesn’t have to be a real time consuming process. I would suspect it’s a less time consuming process. If you keep it ongoing, updated, or if you’re looking at it every quarter just to do a check and review, as opposed to redesigning it every five years.

Susan 7:48
Absolutely.

JoDee 7:48
So you’re not starting from scratch again.

Susan 7:51
Absolutely.

JoDee 7:52
How do you get started with a succession plan and who… if you have a company or a client, who has not done anything formal for sure, and maybe even informally, where do you start?

Susan 8:07
You know, I would start at the top of the house, and I probably would sit down with the CEO or the owner, or whoever the leader of the organization is and spend time thinking about who are his or her direct reports. And let’s think about this, you know, first of all have, have you thought about who’s going to replace you? And if you have a board of directors, is the board asking that question? If they’re not, they should be, you know, asking who’s going to replace you should something happen, and then sit down with that CEO and talk about their direct reports. Then I would ask about who are the key pivotal players in the organization that are deeper, and really have an understanding of those roles. And it might take some time to really understand, you know, first of all, what are the leadership factors that are necessary in your organization, that we want to make sure that we evaluate any future successors against, and then for those key pivotal roles, what are the technical competencies? So if if you decide that your CFO is a role that you could be real risk leaving that uncovered or unoccupied? What are the technical competencies that your organization needs to have in that role? So that’s step one.

JoDee 9:14
Right. And so it doesn’t have to be… the entire organization doesn’t have to be done at one time, right? Which would be great, but it can be a slow starter, it can be starting with the CEO and a few key positions and over time, add on more roles and more positions.

Susan 9:33
Absolutely, and I would start at the top. Because, you know, I think that’s probably gonna have the most impact should a job open up there in the sustainability of the business, but you could certainly go all the way deep into the organization. If you’re a manufacturing firm, and you’ve got somebody who is a specialist in a particular role, and maybe you only have one or two of them, you definitely would want to have a succession plan around that particular function at the right time.

JoDee 9:59
Yeah. Susan, can you share any experiences of companies you worked with that had a succession plan Or were building a plan and have results that surprised them?

Susan 10:13
Yeah, you know, I can think of one, we had a really well developed succession plan that we built. And it was, you know, we thought it was working really, really well, because we’d had a couple of people turn over, and actually one retire and one move on to another company. And we were able to go to our succession plan, and the people that we had been readying for the job, they were ready. And it was just a very nice, easy transition. And the individuals felt good about it, the organization really benefited. But I can also think about that same company, where we were confident that a particular person who was going to be the right person and be ready for it. We went to them, we said, aha, it’s your time has come. And the individual said, you know what, since we talked about this, I’ve changed my mind. I’ve got a couple grandkids now, and I really don’t want that kind of responsibility. And you know, shame on us because we had… we’d had the conversation when we’ve done the plan year earlier, and 11 months had passed, and we had not really kept the conversation alive.

JoDee 11:14
Yeah. That I think that’s a great example of at times, and companies can make assumptions about who is even interested in the role or who might want to grow within the organization, but not in the obvious role that you’re thinking of them for. They are looking at taking a different path in the organization.

Susan 11:39
You know, that’s fair. You know, you’d ask like, where would I start? And of course, I said, for building a succession plan, I would start with figuring out what those key roles are. I think the second really critical action item is to figure out who do you include in the population of people that you want to consider as potential successors. You know, you have to decide if you’re willing focused initially on your CEO, and then all that CEO’s, direct reports. You know, clearly any of those direct reports potentially could be replacements for each other. So that might be the population you start with. But then everyone who reports to those direct reports, you might want to go through a process of figuring out Should I include them in the population that we need to assess to see if they’re ready for either their bosses job, should something happen, or for maybe any of the other bosses, maybe not their direct boss, but anybody else who’s at that senior table. And then you have to stop and also think about who are the high potential people that are deeper in the organization, because you really want to figure out who is going to be ready to assume a role should someone walk out – either they’re going to be ready now if someone left tomorrow – or maybe somebody, you know, in a year from now could be ready with some additional development, or even then maybe someone three to five years would be a good choice to be a potential successor. And there’s so much wonderful development work we can do to help someone get ready. But we want to make sure that you are really thinking broadly at first, as potential successor candidates.

JoDee 13:09
Right. So let’s talk a little bit more about that development piece. So if your succession plan is in place, and you’ve defined a person or a couple of people who are in line for that, taking on that role, what can what do you do with this information now? What can you do to continue to grow and develop those people to prepare them for that next role?

Susan 13:40
You know, I think it’s important, first of all, to sit down and talk to them about their potential candidacy, to be a successor to make sure it’s something that you know, is in alignment with their own career path and planning. But let’s just say it is, and most the time people are like, oh, gosh, who me? Sure, I’d love to keep growing. But then I think you really need to do an individual development plan. And talk about, obviously, you’re really good at these three things or five things, how many ever there are, or else you wouldn’t be considered for this. But here are the one, two, maybe three things that we really need for you to work on, so that you are ready for that next role, and then outline in an individual development plan. How are we going to equip you with those, those particular competencies or strengths? You know, I would love to talk about maybe a few of them because I know, JoDee, you’ve got experience in helping people develop. Any examples you might have, if somebody is really competent in a particular area, let’s say accounting or finance, and we look at them maybe as a potential successor for the CFO, but maybe they’re not a great communicator, or maybe their people skills aren’t as strong. What are some types of items you’d put on that development plan?

JoDee 14:48
So I would first start as you mentioned, in not just creating a development plan around where they need further help or assistence. In other words, we tend to look at what are their weakest areas and get focused on those as opposed to building on their strengths. And what are they doing really well, where they can have the biggest impact on the organization? Not to say that we wouldn’t have to raise the bar on communication skills or people skills and continue to assist them in those areas as well. But my primary message would be to not forget about what got them where they are, and how to allow them to focus on what they do well first, and then is it more training? Is it individual coaching? Is it going to lunch with someone, an internal mentor, who can talk about the importance of those two skills or give them tips on what they’ve done in those areas in the past? Is it a really good book that they might learn from? Lots of different things.

Susan 16:04
Oh, that’s great. I’ve seen people being sent to conferences where they thought that perhaps they could build some skills. I love all the ones you’ve you’ve come up with. Sometimes it’s letting that person who you’re trying to assume a higher level role. Maybe you start inviting them to participate in meetings at the higher level, so that they get some exposure. If it’s a position that’s going to be interacting with the board, maybe they start going along to board meetings. There’s a lots of things that could be on an individual development plan to really help that person be ready when the call comes that the job is open.

JoDee 16:37
So what about when that call comes, Susan? Aren’t you kind of setting people up to expect the call then or if you tell me I’m in line, to become the CFO, and I think I’m ready now or I think I’m ready a year from now and the CFO decides to work another 10 years, haven’t you just made that more frustrating for me by telling me I’m the successor?

Susan 17:07
You know, I love that question because I think it’s really important. You never tell anybody that they are the successor. I do think it’s important that you let the person know how highly they’re thought of, and that we would like to consider you as a potential candidate to be a successor for so and so. And I always would use potential, I would always say that when that job opens, we’re going to run a search internal or external search, internal and external search, but we want to get you ready so that you’re a viable candidate to be a successor. And so I would, I’d be very careful. And I think that is a real risk. Because if someone thinks that, you know, I’m just biding my time until so and so, leaves, it can be very frustrating. Especially if they’re going to be a talent or else you would not have have them on your potential successor list.

JoDee 17:51
I actually just had that question last week, Susan, what the client I was working with who… one of their directors. is leaving the organization and the manager under her feels very strongly that she’s ready for the role, and the CEO isn’t quite so sure. And they do not have a succession plan in place. And he was asking me, does he need to do an outside search for the position? And if he does, does he risk losing the manager he has? Or should he just give the manager a chance to try the job and see? Have you come across that before? Any thoughts on that?

Susan 18:40
Yeah, you know, you really do want to be careful if you’ve been working with someone and really grooming them and helping them understand the value of taking on additional development opportunities so that they can be considered a potential successor. Then when the opportunity comes you kind of like, at that point, I think need to give them an opportunity to show what they can do, if it doesn’t work, then the good news is that they’re with you, you may have the opportunity to let them go back to their old role. But if not, I sort of I feel like that would be the right thing to do. But you know what, there’s a lot that can go into individual situations.

JoDee 19:13
Right, right, right. Actually, that was my advice in this situation, that the person be given a promotion, I didn’t actually recommend that they take on the title or exactly the role the person has who is leaving, but that the the manager be given some opportunities to grow and, and take on some new assignments.

Susan 19:38
You know, I think that’s smart.

JoDee 19:38
I think she was ready. And she was very passionate about taking it on and trying it.

Susan 19:46
My guess is they would have lost her if they had done an external search.

JoDee 19:49
That was exactly my recommendation that I said, I think she will leave in a minute and she has too many skills and strong history in the organization to risk that at the time. And again, that was that particular situation. Other clients of ours, they just consistently always do a search so they have a comparison. And I think that’s not a bad idea, either.

Susan 20:18
And if that’s in the culture, and everyone knows that, then that’s not going to be offensive.

JoDee 20:21
Right, right.

Susan 20:22
I think that’s great.

JoDee 20:23
They make that clear.

Susan 20:24
You know, an element of succession planning that I’ve seen a lot of companies do that I really like is, you could certainly have a CEO really sit down and map out with a consultant or with their HR director or whoever, you know, what the succession plans going to be and talk to individuals and build development plans. But what I really like is where the senior leadership team gets together, and as a group, they really assess the talent for all the critical roles, because as a leadership team, that’s part of your responsibilities is to ensure the ongoing success of the entity. So this is such an important factor to your ongoing success, I would have the senior leadership team really come together and do calibration discussions.Where if we believe that these two people could be potential successors, or three people, or whatever the number is, let’s get together and talk about those people. And let’s look at their past performance. Let’s look at their potential. And let’s decide of those three, you know, who’s number one, number two, number three, at least in this moment, recognizing things could change. And then let’s figure out what do we want? What kind of development do we want to do of all of them. I do think it’s a leadership management team initiative to do a really strong and powerful succession plan. And not just, you know, as your example, you started this morning, the managing partner and the person is gonna be the successor knew it, nobody else did. I think this is a real business management issue to do a good succession plan and to do it as a team.

JoDee 21:51
Right. I agree. And I think it’s important to think in succession planning that even if you have a very strong successful person in the role, the person that follows them doesn’t have to have all of those exact same skill sets and strengths. And we’re working with a different client right now who’s retiring from an HR director role that she’s been in for 30 years. And I’ve encouraged them to think about the replacement for the role that might bring something different or that might not… to not just look for someone who looks exactly like she does, even though she’s been very successful and very well liked and a key part of the organization to try and find someone to come in and think that she’ll bring exactly the same skills and style is almost a setup for failure, I think, to compare everything the new hire might have.

Susan 22:59
You know, I worked with a not for profit, and they were looking to replace their executive director. And this executive director was so well loved. And I just could not help but love this person, they helped bring the organization through very difficult times, really got money in the bank and made them a real positive brand in the community. But we got to the point in the organization where we needed a different type of leader, we needed somebody who brought different types of skills that were going to take us to the next level. And it really, it caused us, and I was on the search committee, to think about – let’s get a successor who not only builds on the strengths that we’ve got, but how do we get to that next point? So it’s very relevant to what you were doing with your HR director.

JoDee 23:40
Right? So the actual position might evolve a little bit. Even the title of the position actually even could change in thinking this doesn’t have to be the exact same role that someone had before.

Susan 23:56
It’s funny in succession planning with some of my clients I’ve seen where we’ve had a particular role that had, you know, XYZ included in it. And as we were starting to do the succession planning and figuring out the real competencies we needed, we started to do some organization structural changing, because we realized that probably nobody out there is going to have this unique, you know, skill set that’s going to be able to do X, Y and Z, but we could get somebody really good who could do X somebody else who could do Y and Z. So it’s a great opportunity, succession planning, especially with the whole leadership team around the table to think through… if we replace Susan, you know, would we replace her as is or in a very different way?

JoDee 24:33
Right, right. We did get some listener mail on this topic this week, Susan, Tony from Cincinnati wrote in. I have been working my way up at the large company for 10 years, and although I don’t manage others yet, I believe I may get a chance to do it in the near future. I’ve heard my manager make a few comments about talent planning and succession planning when an opening occurs, but he’s never talked to me about it directly. How do I find out if I’m part of the discussion and if I’m on the radar for promotion? Is it fair for me to just ask him directly?

Susan 25:14
Tony, I would. I would sit down with my manager. And maybe if you’re doing regular performance check ins, or if you have an annual review process, or however it is that you sit down and get a chance to talk about your own career, I think it’s more than fair to say, you know, I know the company has a succession planning process in place. And I’d love to know, am I on the chart? Am I somebody that you are grooming for the future? And if your manager says, gosh, Tony, you know, I hadn’t even thought about that. Tony, you get a chance to say I want to be part of it. Let’s talk through what do I need to do? How can I really build my skill set so that I am in line for future promotions?

JoDee 25:53
And that’s… I mentioned earlier, Susan about the company can make assumptions. I think that happens sometimes that we assume, or I’ve heard other people say before oh, I don’t think she’d want that. I don’t think he’d be interested in that. But are we really having those conversations with people to find out? Or in the case with Tony, are we as individuals, forcing those conversations by asking the question?

Susan 26:23
That’s great. I used to work for a large global organization and I would often hear in these type of discussions. Oh, she wouldn’t move. And I’m like, have we talked to her about that? Maybe she would for the right job.

JoDee 26:33
Right. And maybe if she wouldn’t move two years ago, something in her family situation is changed now that would, she would be interested now. We have another letter on this topic from Deborah in Indianapolis. She said “I work in a family owned business and the owner is reaching an age where I think she is getting ready to retire. My fear is she will sell the business and we may all be out work. How do I get her engaged and thinking about having a succession plan put together?”

Susan 27:06
Wow, Deborah, you know, it could be she’s got a succession plan, but you don’t know it. I’d schedule time with her, bring her a cup of coffee, sit down and say, “Listen, I love my job here. And I know I love this company. And I want to talk about the future. Do you have a succession plan in place? What are your thoughts for the long term?” And, you know, see what she says. And that might just be what prompts her to start thinking about it. My guess is she probably has, but maybe hasn’t done it formally. And clearly, there’s a whole world of consultants out there that can help you with this topic if it’s a small company, or maybe the HR director there has some experience or expertise in it.

JoDee 27:49
Right. In our in the new segment, a bill was introduced in Congress in early February to amend section 127 of the Internal Revenue Code to enable tax free employer repayments of student loans.

Susan 28:04
Wow, that’s that would be a terrific benefit.

JoDee 28:07
The bipartisan bill has 23 co sponsors. The law is written that if offered, it must be offered to all employees and not just highly compensated workers. Stay tuned to see how this bill progresses.

Susan 28:21
That could be a terrific add hasn’t meant to your benefit package wouldn’t it?

JoDee 28:25
Certainly a different type of benefit to offer.

Susan 28:29
Yeah. All right. Well, hey, thank you for listening today. If you have questions or feedback, please follow us on Twitter @joypowered, or on Facebook @joypowered. Please tune in next month as we talk about wellness in the workplace.