If something happens to you tomorrow, is the future of the company assured? If you have a few key senior managers leave the company, are capable replacements ready to step up? These are real life occurrences and yet surveys show that fewer than 50 percent of companies are prepared for such an event.
Whether you are the owner of a privately held company, the head of a public corporation, or even a senior manager, you need to have a functional succession plan. And more important than a succession plan is a viable succession development program.
Companies that have to go outside to find replacements for key positions will spend on average 90 days or more in doing so. Can your business weather such an event without serious damage?
Beyond the delay in finding a replacement, a number of studies conclude that internal candidates are overall more successful than outside hires. A study by Matthew Bidwell, an assistant professor at the University of Pennsylvania's Wharton School, showed that external hires are 61 percent more likely to be fired and 21 percent more likely to leave a job on their own accord than are internal hires.
That does not mean that promoting from within is always the best option. You might find that you do not have suitable internal candidates. There are also times that a change in direction is needed and bringing in a different perspective from outside may be the best way to do that.
In any event, a development program that assures necessary experiences in developing suitable candidates is required. Be objective when you choose potential candidates. Not all senior level managers will be suitable candidates and the time spent in mentoring is not limitless. If your organization is sales driven and you have a senior engineering manager with no sales experience, you need to be objective in determining that manager’s true potential. If you cannot give him needed sales exposure, he is best not included in your selection.
Just as important in the selection criteria is desire. Many times owners want to turn over the management of the company to their progeny, but they have neither the will nor skills to successfully manage the company. Those are decisions you need to be painfully objective in making.
Investing in human capital is every bit as important as investing in machinery and technology. The future of your company depends on that investment. By considering and mentoring multiple candidates, you have the opportunity to evaluate their relative potential while they all grow. Only one ultimately will be chosen but all who are under consideration will grow from the process and the company is the beneficiary.
On occasion I have had owners push back on “human investment” with the argument that some will leave the company and walk out with the investment. Not investing in people comes with a more expensive option; they might stay.