Failure to plan for future leadership can be devastating not only for the executives who are moving on but for the rest of the organization’s workforce. As one senior manager recently confided, if his company’s owner had committed to succession planning, their business would have been a much larger enterprise than it is now and all the issues regarding the founder’s exit would have been resolved.
There are several reasons why succession planning doesn’t happen. Some executives find it difficult to plan for their replacement because it raises issues regarding their mortality. Others are afraid of establishing a succession plan because it means that they will have to develop the people who will replace them.
Still others are caught up in the day-to-day of putting out fires and succession planning is a distant concern. There are always deadlines to meet, month-end production goals to hit and regulatory challenges to overcome. I haven’t even mentioned some of the obvious factors that put the brakes on succession planning like the last 24 months of robust refinance lending that made it hard for leaders to think about leaving when the money was rolling in.
Whatever the root cause, lack of succession planning jeopardizes everything that an owner has worked so hard to build. Without an effective succession plan, owners might sell at the wrong time and lose money or end up paying more taxes. Moreover, death or disability might result in the wrong person at the helm of the company.
Three Keys for Succession Planning
At its core, succession planning should be viewed as a strategy for identifying and developing future leaders. Here are three steps to implementing a successful plan.
Step 1: Consider all the key roles in a group and identify which employees could potentially fill those positions. What training would they need to develop their skills? Don’t assume that only high-potential employees will be interested in moving up. On the other hand, there will be employees who want to grab the brass ring but don’t really understand the time and effort needed to improve their skills. This is where an annual review of an employee’s goals can be invaluable.
In mortgage banking, the holy grail is still volume but that doesn’t necessarily mean that a top producer is the best match for a management career. The originator and manager positions require completely different skill sets.
Step 2: Invest in the professional development of employees who have indicated they are interested in moving up the ladder. This can be accomplished by job rotation, executive coaching and graduate executive education programs. Professional development should also include advanced communications skills—both in-person and virtual. Remote working requires leaders to present and motivate by video and not just at in-person events.
Step 3: Integrate succession planning into your company’s hiring and recruiting efforts. During the interview process, identify candidates’ long-term goals and willingness to invest their time and effort into developing additional skills. These qualities are just as important as the volume shown on an employee’s W-2s.
Succession planning enables owners to protect their firm’s legacy while providing employees who are suited for management with a career path for long-term success. It is a win-win for senior executives and employees alike.
Pat Sherlock is the founder of QFS Sales Solutions, an organization that helps organizations improve their sales talent management and performance. For more information, visit https://patsherlock.com.
