Middle-market companies, especially in the San Francisco Bay Area, may be prepared for leadership succession, but many still have work to do to attract and retain the best talent.
Middle-market companies, typically run by a management / ownership team of eight to 10 people, need a strategic plan to attract or develop people who are in line for a leadership position. This critical plan requires the entire organization’s input.
Companies may choose to invest in other areas, instead of building upon the executive talent required for the company to excel. Manufacturers, for instance, may invest in inventory rather than upgrading their head of operations, or a sales organization might think having a controller is better than spending on a skilled CFO.
Sometimes, an unintended consequence of a business expansion is the sacrifice of a training or advancement program. Companies may be attacking challenges as they arise so they’re not thinking about long-term business goals 10-20 years down the road.
Successful succession stems from a strong company culture, which itself is a product of the C-level team. They need to hire people who are more skilled than they are and provide leadership training to prepare the next-in-line to step into the new role. That takes commitment at all levels of the business.
Compensation is also a major factor. It’s not only about having the right leaders, but also ensuring that they are properly motivated. Companies that aren’t paying a competitive wage will lose their top talent, so it’s important to take a close look at the comparable positions and salaries in the market to determine the right compensation levels.Clearly, given the wage and salaries typically comprise at least 60 per cent of a company’s total costs, any compensation strategy needs to be carefully considered in collaboration with the CFO.
Although salary is important, today people want more than just salary; they want a total compensation package. If a person can trace the company’s success to their desk, they will want to get a percentage of that as compensation. Properly compensating the right employees will benefit the company.
It’s important to review the succession plan quarterly and examine it through the lens of the company’s strategic growth plan. As the business grows, it changes. And when those changes occur, review the succession plan in all areas — where did the company invest, what challenges came with that, are the right people in place to help the company thrive?
Meetings should involve the department heads with the idea of learning what’s happened. Brief checkups are usually all that are needed to learn whether the departments are on track with their leadership and succession training.
Communication is extremely important. Let employees and stakeholders know a leadership transition plan is in place and be available for questions, should they arise.
Companies need someone to champion the cause. This person won’t assemble the entire strategic plan — it’s a group effort — but there should be one designated person responsible and who can also be held accountable for it.
It’s necessary to have a strong strategic advisory team help assemble a succession plan. Business owners and CEOs shouldn’t put together a plan alone. Talk with peers who have been through it, as well as CFOs, lawyers, and insurance professionals who can bring their experience and knowledge to the succession plan development process.
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