In recent months the headlines have been filled with speculation as to whether the world economies are headed for full blown recession or a ‘slow down’. Whatever the conclusion signals of a financial crisis are here with oil and food prices rising in the US, Europe and in Barbados; also there have been significant Fed rate cuts, seven since September 07 when the rate was 5.25%, bringing the rate to a record low of 2.00%.
Economic movements like this make shareholders nervous as they opt for a ‘wait and see’ approach before determining their next move. In addition, it can trigger a slow down in consumer spending at best or consumer panic at worst. For businesses cost containment and cost management strategies start to come into play, re-defining and re-classifying ‘critical spend’, there are even those who opt for a more drastic approach reviewing headcount numbers.
In uncertain times if a leader is seen to leave an organisation unexpectedly the backlash from a PR perspective alone can be unforgiving, fuelling further uncertainty amongst current and future shareholders and subsequent calls for action. Furthermore it is not altogether unusual to see leaders abandoning ship or even switching allegiances and heading for the competition. But the damage doesn’t end there, invariably what transpires is they convince their star players to join them and they do so with valuable networks and business in tow!
The ability then to be able to smoothly transition another leader into a role recently vacated will do much to quell fears, whilst demonstrating vision and more importantly will likely reduce the overall negative impact to productivity. In essence it is those organisations with an effective succession plan in place that will be able to withstand the rigours of an ever-changing economic landscape.
So what is succession planning and how does it benefit organisations?
Succession planning can be broadly defined as identifying future potential leaders to fill key positions (Source: CIPD).
Succession planning is a critical strategic tool in the fight to attract and retain talent. The benefits are numerous including:
– ensuring the right people are moving into the right roles at the right time
– sending a strong message to employees that the organization prefers to look within to fill critical roles that become vacant
– enabling organisations to identify talented individuals and provide opportunities to develop them for future higher level and/ or broader responsibilities
– promoting greater transparency, openness, fairness and objectivity with respect to discussions centred around performance
Succession planning is not a quick fix to the leadership ails of an organisation. It takes a leader with long-term vision to recognise the benefits of an effective succession planning programme. Great leaders do not just turn up at the doorstep on demand, and, whilst some of your current employees may show a natural aptitude for leading and inspiring others, the development of their leadership potential is just as crucial as the development needs of other employee within the organisation.
Our regional market consists predominantly of small – medium sized enterprises; (SME’s); many of these being small family-run businesses. Succession planning for SME’s is challenging because frequently ‘the Board’, if there is one, consists of family members and there is usually an inherent assumption that someone in the family will take up the reins once the incumbent leader has retired their post. With increased flexibility in the labour market, both international and regional opportunities abound, and these are often more attractive to the potential family successor than inheriting the family business. In such cases organisations are often vulnerable to stagnation as the incumbent leader, perhaps a father hoping his son/ daughter will succeed, often has unrealistic expectations that they may still change their mind so fails to plan for the inevitable.
Even where there is willingness on the part of family members to be considered as a successor the question is ‘are these individuals equipped with the skills necessary for creating and sustaining success’ in what is now a very competitive environment?
So what are the consequences of failure to plan for SME’s? They are left with the dilemma of either: entrusting the running of the business to a General Manager, and subsequently risking the possibility of causing offence to the ‘family’, or acquiescing to family and leaving the organisations in the hands of an ill-equipped family member to satisfy tradition. The remedy to all this is taking a long-term approach to leadership and planning the development of the prospective successors over time. These individuals need to have their skills and understanding of the business, and its history, honed over time, being gradually exposed to all aspects of the business.