When it comes to succession planning for your business, are you engaging in a sustainable long-term strategy, or just looking for a quick fix? In my experience, the best succession plans are those that take a proactive long-term view. I’m sure from the outside, the grand finale of my own succession plan—the sale of our car dealership business—looked easy. But the reality is it took eight years of planning and growing the right parts of the business before I finally sold it to another dealer group. Eight years of planning and hiring the right people in the right places, followed by nine months of negotiating.
Set some time aside to think about your goals not only for the present year, but also your longer-term succession planning and how you can integrate it into your daily business operations. Ideally, this process should become an essential component of your own self-evaluation as a leader and how ready are you today?
In my time on the succession planning keynote speaker circuit—as well as my travels through 28 years of professional experience—I’ve identified some essential areas in which you simply MUST be prepared. Answer these 10 business succession planning questions to get a clearer picture of where your business falls on the readiness spectrum.
1. Do you have a succession plan for each member of your senior team?
In my car dealership business, we made sure that each department head had a designated number two. This was the person who would step up to be deputized whenever the manager was absent due to vacation or illness, or offsite for a meeting with an important customer or supplier. Doing this not only provided cover for the business activity, but also allowed the successor for this role to gain valuable experience and gradually take on more responsibility.
2. Are you preparing successors for success BEFORE they are promoted?
As an add-on to the point above, a huge part of succession planning preparedness is advance training for your rising leaders. I’ve found that giving more junior employees the opportunity to shadow senior team members is one of the easiest and most effective on-the-job training methods there is. It not only allows more experienced mentors to pass along their intellectual capital—one of your company’s most valuable assets, in my opinion—it offers your mentees the chance to take risks and “fail forward,” in the security of a guided mentorship.
One of my biggest wins here was Louise. She started with us as a car sales executive, with no experience, and through on-the-job training, rose to become the sales director of three different car franchise brands! Not only was she well respected by our staff and customers, but also by the car manufacturers who knew that she was one of the best in the country.
It was incredibly satisfying to watch her progress over the years and support her on her leadership journey. She also played a massive role in developing future leaders on the sales side of the business, through her mentorship.
3. Are your succession candidates aware of their leadership potential?
It’s no use having a list of high-potential leaders if you keep your intentions a secret! If there are employees you have earmarked for greatness—by all means, tell them! Communicating the fact that you see them having a bright future with your company, potentially including a leadership role, is highly motivating and also acts as a retention tool to prevent them from looking elsewhere in order to further their career. In a competitive labor market like the one we are experiencing today, making your intentions clear in this way can also help to fend off approaches from competitors looking to poach your highest performers.
4. Are your candidates evaluated based on current AND next roles?
In my travels on the succession planning keynote speaker circuit, this is always one of the biggest missed opportunities identified in my clients’ businesses. Even when you’re hiring for a more junior role, it’s important to evaluate your candidates not just on the role they might fill today—but also on future roles they might occupy in your company. Taking the long view with regard to ALL of your new-hires will help to identify any training required to bridge the gap in knowledge or experience…so that when the time comes, they are fully prepared.
5. Are you hiring for “mindset diversity,” or just cloning the boss?
It’s a classic hiring mistake to hire someone simply because they resemble the boss in some way—and this is particularly easy to do when the boss is you. Earlier in my career, I unwisely chose one of my senior leadership team members largely because they attended the same business school that I did. Had I looked a little deeper, though, I might have seen that this was the only area in which they were a good fit.
It’s natural to look for affinities during the hiring process. This is a deeply ingrained human trait, and sometimes it can be a good thing. But in the succession planning process, affinity hiring can make you blind to deficiencies in other areas, and lead you to overlook a candidate who might do things differently—in a good way.
6. Are you using all the tools at hand to determine the best fit?
While traditional candidate evaluation methods—CV review, references and 360-degree interviews, with multiple levels of employee—are essential, why not ALSO reap the rewards of living in the digital age? Online assessment tools are an easy way to get a more complete picture of who your candidates really are, both as people and potential team members.
Over the years, I have learned a lot about myself—and my employees—with personality assessments. The three I’ve gotten the most from are the Myers-Briggs Test, the DISC Profile and CliftonStrengths Assessment. All are easy and and inexpensive ways to flesh out your candidate vetting process.
7. Are you looking for future leaders within the company first?
As I’ve alluded to in #3 and #4, I always try to hire with future leadership potential in mind. While it may be tempting to infuse the company with “fresh blood,” so to speak, I have found that it’s far easier to promote someone you know, like and trust from your own team.
Chances are, these employees have already proved themselves; they also understand the culture of your business. And, speaking of blind spots, new isn’t always better! Sometimes a top performer at one company has gotten to where they are using methods that don’t align with your company’s culture and values. It’s smart to look within your company first.
8. Do you invest in your employees with in-house training?
The key word here is “invest.” I once had a CFO who thought we were spending too much money on training, both internally and externally. He saw training as a short-term cost rather than a long-term investment in our talent pool. I finally won him over when I was able to show him the potential cost savings if we reduced our employee turnover from 30% to 20% per year. We actually managed to get it to 15%—a huge win for the company in terms of talent development, cost savings and time saved through hiring internally.
Having a good pipeline of talent is a major competitive advantage. However, you must have the staying power to live with the costs in the short term before you start to see a return on your training investment. In my experience, it’s worth waiting for if you want to build a high-performing team and foster a strong, healthy culture among your employees.
9. Are you challenging your most promising MVPs?
I mentioned “failing forward” earlier in this article, and I wanted to come back to it for a bit. While mentorship and training are no doubt important, there is simply no better way to challenge your A-players than letting them get their feet wet with a big project. I never missed an opportunity to do this, even when the employee in question wasn’t sure they were ready for prime time—after all, there’s only one way to GET ready, and that’s by gaining more experience. As long as they have clear guidelines and support, there’s not much downside.
10. Are you following best practices for retention in 2022?
With massive competition to fill key positions following the pandemic, Millennials comprise half the current U.S. workforce and are expected to reach 75% over the next five years, I’ve been thinking a lot about what it takes to retain employees from this generation. But as a succession planning keynote speaker, I’m also advising my clients to think quite a bit further ahead! With the oldest Millennials nearing 40 and already exploring the upper echelons of leadership, Generation Z is quickly coming into its own as well.
So, in addition to providing development opportunities, cultivating a strong company culture and other employee retention basics, be sure you’re following CURRENT best practices for the two generations that will matter most to your company’s future. Get more information on retaining Millennial employees, here—and retention must-dos for Generation Z, here.
In my travels on the succession planning keynote speaker circuit, I meet so many people who are putting off the inevitable: thinking about their own mortality. And who can blame them? Personal estate planning is nobody’s favorite subject—less than half of Americans have gotten around to creating their own will, ensuring that the next generation has a plan for the future.
And according to the National Association of Corporate Directors, the succession planning situation is even more dire in the business world. Studies suggest that fewer than one in four privately held company boards say they have a formal succession plan in place. And the rest? They’re focused on growing the business and proceeding with the details of the present, assuming—incorrectly—that the future will naturally fall into place. If succession planning questions are on their minds at all, it’s a distant, abstract concern rather than a pressing matter.
Are You Ready for the Mass Exodus?
As I tell my clients, while having a strong succession plan is always of great importance, it’s even more critical in today’s complex business climate. In addition to what Forbes magazine has called the “Silver Tsunami” of Baby Boomers poised to age out of the workforce over the next few years, we’re also dealing with the “Great Resignation”—in which people quit their jobs for better-paying roles, more flexible working hours, better benefits, or all of the above.
Without being the slightest bit hyperbolic, we’re potentially looking at a mass exodus for the global workforce. This has created added pressure on companies across the U.S. and around the world to step up their succession planning process—not just for the CEO, but also for ALL the senior roles throughout their organizations. If you are not already incorporating succession planning into your board meetings and reviews, now is a good time to start.
Long-Term Outlook, Short-Term Benefits
So how does one begin? In my own commercial real estate business, I have accelerated my succession planning over the past 12 months—not because I am planning on retiring in the immediate future, but because I recognize that this is a dynamic planning process that takes years, not months, to come to fruition. Discussing the details with my advisors—my accountant, lawyer and financial advisor—all have a role to play in helping to create a succession plan that is practical, achievable and as seamless as possible.
My personal experience of succession planning is this: if it is done well, your long-term plan will make your business stronger immediately, as you will be more profitable and have a deeper pool of talent to draw from every day. Ultimately, it also makes it easier for you to exit at some point in the future, by (1) passing it on to a family member; (2) selling to a business partner or management team; (3) selling to a strategic buyer or investor such as a private equity firm; or (4) selling to an industry buyer, which is what I did with my car dealership business.
This might be a great time to rate your company on its readiness by taking the following Quiz.
Business Succession Planning Questions – Are you Ready?
Please rate on a scale of 1 to 5 (1 = Never; 5 = Consistently)
1) The owners and senior management see succession planning as a priority and it is part of our strategic planning process.
2) The board of directors regularly discuss leadership succession planning with the CEO.
3) The CEO encourages open communication about leadership succession planning initiatives with senior management.
4) Succession planning discussions include management roles beyond the CEO position.
5) Senior management and HR are actively involved in the succession planning process to help identify potentially suitable candidates for their roles.
6) The organization has a formal way of evaluating employee performance and identifying possible future leaders.
7) The organization identifies high-potential employees and develops staff at all levels, as part of an ongoing succession planning process.
8) Senior members of the team have access to coaching, education and mentoring to develop their leadership potential.
9) Management are held accountable for coaching, mentoring and developing their direct reports.
10) The board reviews and updates its succession plan annually as part of its governance.
11) The board involves impartial outside advisors to evaluate its own leadership succession.
12) The board engages in regular self-assessment of its performance.
13) The board measures the CEO’s performance with regard to succession planning as a key metric in an annual performance review.
14) The board has a plan in place for the recruitment, orientation and development of new board members.
15) The board has a disaster recovery plan in place which includes key person insurance for top executives.
20 points or less: urgent action required, 21-40 points: you have a basic plan but it has some serious gaps, 41-60 points: you have a solid plan but need to focus on communication, 61-75 points: your plan is well thought out but still needs annual updates.
Feel free to reach out to me directly if this raises specific questions about the succession planning process. I’d be happy to help! The key thing is to get started as soon as possible.