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Five Steps for Creating a Succession Plan in Your Floor Covering Business

Earlier this year I wrote about the annual "spring-cleaning" - that is cleaning up your balance sheet – which reflects your company’s assets such as real estate, equipment, inventories and receivables. Today I want to talk about creating a succession plan because without the right people in place the health of your business will be at risk even if your balance sheet is in order.

 Businesses spend a lot of time and money maintaining buildings, plants and equipment in good working order and it is important to do the same for your most important and very expensive asset - your people. Even small businesses need to consider what to do if they lose key personnel. Personnel can change for many reasons. Sure they can be fired but they also retire, die or become disabled, get promoted, take a better job with a different company or relocate with their spouse.  People’s lives change and that means your company will too; well managed organizations will have succession contingency plans ready.

A family-owned business is especially at risk of failing when its leader becomes incapable of serving and there is no ready replacement. The key is to identify people inside the family who are interested in and capable of taking on the mantle of CEO, or whatever the key position being vacated.  A classic example of a stressful scramble to save a family business is that of the Chicago Float Works which learned that things can go wrong even when you think you have a plan in place but it is not well documented. Or read about the lessons learned in a difficult transition from father to son ownership of the Moosehead Brewery and the points of philosophy behind succession planning developed as a result.

Whether family owned or not, every business has key personnel that are the backbone of the company.  Succession planning should be done for all roles that are critical to your organization.

Succession planning involves 5 critical steps:

1.    Identify key positions that should have succession plans.
2.    Identify key skills and talents needed to be successful in the position.
3.    Assess your employees and identify whether you can fill the position from within or need to recruit from outside.
4.    Develop a plan to improve training and experience for the successor.
5.    Continue to monitor your company’s needs and the suitability of your candidates.


Identifying the right successor means first understanding what is needed to succeed in that position and creating a job description or in the very least a list of skills and attributes. It’s therefore important to involve your department heads in this process. If you are the person in overall charge of the company you should prepare the part of the plan relating to your direct reports and have the department heads do the same for theirs.

Getting Started

Begin by looking at your organization chart. Under each key position create a box with two lines identified as: (1)  "Immediately" (meaning they are ready to step in at once) or (2) "Within 2 Years"    (meaning they can be ready to succeed then).

Write in the names of existing employee candidates or, if you do not believe anyone within the organization is a viable candidate, write in “From Outside.”  This means you believe you will need to recruit someone from outside the company. If you do not have anyone who is capable immediately from within it is a good idea to consider who you might look for when the need arises  - possibly someone with a competitor, supplier or from another industry.

If you have an existing employee you believe will be capable within two years it is important to consider what kind of training and expanded work experience is needed in the interim to further prepare them for success. As you promote from within this will in turn create openings at lower levels  so your plan needs to expand to take in all key positions affected.

The final plan (excluding the plan for the person in overall charge) should be discussed and refined with department heads.  Remember that a succession plan has to be dynamic because circumstances change. Continue to monitor the plan to ensure it is suitable for the changing needs of your company.

Creating a Succession Plan Has Other Benefits

What I have just outlined is a simple process to get you started on the critical path towards creating a succession plan. In doing this, however, you will also unearth some interesting questions and challenges such as:
  • How susceptible is the business in the event of employees leaving?
  • Is the current organization satisfactory or has this exercise highlighted positions which may need to be reviewed?
  • Is the company doing enough to keep key employees motivated and content?
  • Does the company need to revise its training programs?
  • Do any of your current managers feel threatened as a result of being in effect asked to nominate employees who could replace them? If the answer is yes then the obvious question is why.
  • Assuming it takes the stated two years to prepare an individual for a more senior position how does the company keep them if the opportunity does not materialize?

The list can go on forever but I think by now you get the idea. Implementing a succession plan exercise causes the company to take a good look at its organization and identify its strengths and weaknesses.

If I can be of help to you let me know and I would also be interested to hear about your experiences with succession planning.

Before I go I just wanted to say how great it is to know that our floor covering industry seems to be slowly emerging from the recession. Last week a recruiter friend of mine told me that job vacancies are on the increase and he was involved in more searches than he had been for the several past months. We are hearing about an improvement in the residential and remodeling segment and in some areas of the country housing starts are showing signs of life. These are all good signs of more improvements to come.

As always if you have, thanks for reading.

David

David Wootton is President of The Wootton Group, an independent flooring consultancy, and a member of the Floor Covering Institute. He is past CEO of both Columbia Flooring and Harris-Tarkett.

Comments

  1. David,
    Great content and good advice. I once worked with a company where I asked the owner about succession planning. His response was, "When I'm ready to retire I'll sell the company." What he did not realize is that the value of the company would have been much greater if his successor was trained and ready to step in when he stepped out. Most buyers want to know that capable management will be there, not necessarily the old owner. Whether the new owners keep the successor long term or not, no one knows but the Sale Value of the company is much greater with trained and capable management in place.
    One other comment is that changes of management are usually required to keep a company alive and fresh. New generations coming into a family business bring new energy and ideas. The market is always changing and if a company keeps bringing in strong new talent, it has a better chance of keeping up.
    Thanks for your valuable insights.

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  2. David, your information is very interesting and useful. As a business consultant I have worked with several family owned businesses and have found what gets in the way of 'everything logical' is 'everything emotional’. Thank you for taking the time to write the post.

    Jim Gould's comment from an owner, ("When I'm ready to retire I'll sell the company." What he did not realize is that the value of the company would have been much greater if his successor was trained and ready to step in when he stepped out. Most buyers want to know that capable management will be there, not necessarily the old owner.) This is another issue which is often kept from family members. "You mean I'm not part of the succession plan?"

    It's often not the sons and daughters who are in the dark but the grandchildren; many who have worked for years in the business and are hoping that this will be there home. Ownership and succession is easier when family members openly discuss their hopes and dreams with the holder of the purse strings. There are grandchildren who hang on for years, maybe even children and suddenly find out they will not be the new owners. It’s wise before any of the issues are tackled to have the real owner stand up!
    Lisbeth Calandrino

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