Succession planning for small and mid-sized organizations

In the past, succession plans were developed only for executive positions.  In today’s business climate, succession plans need to be more broad-based, and need to cover other key positions.  In addition, succession plans need to be integrated with other HR programs, such as recruiting, training and development programs, to ensure they deliver results.

In the following few years, we will witness the retirement of a large demographic section of the population, the baby boomers.  It is expected that this phenomenon will affect large organizations with stable workforces, such as governments and utilities, in a profound way.  Most of these organizations have begun planning for these changes, and developing succession plans to ensure that knowledge retention occurs in order to ensure their ability to meet customer needs as these employees retire.

We are also in the midst of an acute skills shortage, which is expected to continue for some years.  Due to this skills shortage, as well as the fact that the boomers are such a large demographic group, many small and mid-sized organizations will find that they won’t be able to easily replace all their boomer retirees and carry on business as usual.  Organizations may need to rethink their human resources programs, organizational structures, jobs, and organizational processes, in order to ensure they continue to deliver products and services to customers.

Many small and mid-sized organizations, however, are not adequately planning for these changes.  The organizations that anticipate, and plan for, the effect of these demographic changes will be in the best position to ensure they grow and continue to meet customer needs in the next few years.

Succession plans should also cover key positions that are not easily replaceable.  For example, one of our clients had a key employee who was highly skilled in a particular aspect of their production process.  No one else in the organization had the knowledge to replace him.  This position required specialized knowledge that could only be acquired through internal training and experience.  Although this position was a non-executive position, we recommended that the company develop a succession plan and include this position.  Another client lost an employee who took key organizational knowledge, as well as the ability to deliver certain specialized services, with him.  Succession plans incorporate workforce planning in order to mitigate key knowledge retention risks.

The boomer retirements will also affect business owners who will be looking to sell their businesses and retire in the next 5 to 10 years.  Once the boomers retire, there will be a smaller pool of potential buyers.  Therefore, businesses will need to ensure their businesses are very attractive to potential buyers.  Succession plans and supporting HR programs can do much to ensure a trained and effective workforce and skilled management, and will increase organizational value to potential buyers.

Finally, succession plans should be customized to reflect the unique circumstances and culture of every organization.