Malzahn Strategic - Minneapolis, MN skyline

Three Key Areas of Succession Planning: Leadership, Talent, and Knowledge

Three Key Areas of Succession Planning: Leadership, Talent, and Knowledge

Succession planning is important and are you addressing it in your organization at all levels and from the various perspectives? Below are three key areas of succession planning you need to focus on:

  1. Leadership succession planning: Typically, this is the area that gets the most attention—especially the top leadership positions such as the Board of Directors, CEO, President, and the other “C Level” leadership positions. However, focusing on the next level of management as well as the key non-management positions occupied by what I call “legacy employees” is crucial to successfully implementing a succession plan.
  2. Talent succession planning: Here I refer to “talent” as the specific gifts and talents that your employees possess that will be leaving your organization as they retire. For example, you may have an employee who’s very talented at understanding the specific markets you serve. Another employee may be talented at the human resources side of the business. They have built a culture of inclusion and respect that may be hard to find. You may have another team member who is talented at understanding technology way deeper than the normal “user.” He or she is the one that everyone asks for help and they also have the communication talent to help others in addition to the technical talent. Replacing talent is different than replacing knowledge as you can get a new employee who is experienced in technology but doesn’t have the talent of communication, for example.
  3. Knowledge succession planning: In addition to developing a plan for the leadership positions and replacing key talent exiting your organization, you need to also plan for transitioning the knowledge from the exiting workers to the new ones.

When focusing specifically on the knowledge succession, there are three distinct areas you need to address. These areas of knowledge are equally important when considering the wave of knowledge that is exiting the workforce.

  1. Business knowledge: Refers to the business knowledge which typically resides at the leadership level of the organization. Are you training your emerging leaders (in every area) on how to run the organization as a business? Are you sending them to specific training schools for your industry? For instance, when I attended the Graduate School of Banking, I noticed that most of the students were lenders, but institutions may be forgetting that the other leaders coming from operations, technology, treasury management, HR, finance, and marketing also need training. They all represent critical areas of the business of banking. You will have a better team when the leaders of all key areas understand and value the other areas of the organization.
  2. Specific technical knowledge of your industry: In the banking world, each area  requires years of experience to learn as there are no specific certifications to become an expert in deposit or loan operations or the core system “gurus,” for example. There is also the extensive lending knowledge that some bankers have acquired over the years in areas such as commercial real estate, construction and development lending, small business lending (SBA), or Commercial and Industrial (C&I) lending. And there is also the Treasury Management and Cash Management expertise that every community financial institution seems to be looking for to grow core deposits and increase non-interest fee income. Currently, there are only two or three universities in the nation that provide a four-year college degree in “Banking.” Even though you may not be in the banking industry, this specific technical knowledge is exiting your organization too.
  3. Relationship knowledge: Passing along the knowledge of “knowing your customers” is crucial when addressing the succession planning issue at your organization. How are you preparing to successfully transition the relationships built over 30-40 years of employee/customer relationships? Make sure to include this part of the succession planning as you start transitioning relationships to the new employees. This includes sharing not only about the types businesses you serve but also sharing about the customer’s family history, places they like to eat, best way to stay connected with them, and how they like their business handled (i.e. in person, phone calls, emails, text, etc.).

An effective succession plan involves the investment of time, money, and resources. Therefore, when your organization invests in developing its successors, are you considering the following areas of “Return on your Investment”? Are you keeping the employees accountable for the resources of time and money you’re investing in them as the future of your organization? Below are three ways to explore this concept:

  1. ROI on training: Education and training is expensive but necessary in order to not only retain your current talent (employees) but also to develop the newly acquired talent. But do you have a culture where employees appreciate the investment your organization is making in them? Ensuring employees don’t have an entitlement mentality and making them aware that your investment requires a return is part of keeping your employees accountable.
  2. ROI on mentoring: Establishing a formal mentoring program takes a lot of time and personal effort from the mentor especially. The mentee needs to respect the mentor’s time and make the effort to really learn from the mentor. This attitude encourages the mentor to continue investing his or her time with the mentee. The mentee in turn learns more and it will be a rewarding experience for both parties.
  3. ROI on experiences: When your organization invests in sending employees to conferences or special certifications (i.e. compliance certifications, industry specific conferences, industry certifications, HR certifications, etc.), you should expect a return on that investment as well. These employees are gaining not only the certification itself but also the experience of being with other professionals and colleagues. They also gain from the networking that happens naturally at these events—especially since they are outside the organization.

Below are strategies to address the succession gap in the areas described above:

  • Establish a mentoring program as part of your Talent Management Program. Get serious about pairing up employees who are mature business leaders with the up and coming leaders of those areas and the new employees. The mentoring should include all three areas of knowledge: business, technical, and relationships.
  • Establish a “reverse mentoring” program as well. The reverse mentoring works the opposite of the regular mentoring program where now the younger employees mentor the older employees specifically on technology-related activities. For example, you can pair up a young mentor with an older employee to teach them how to use new capabilities from your CRM system.
  • Ask employees who attend conferences to present to the team who may benefit from the newly acquired knowledge. At the minimum, they could write an “Executive Summary” of what they learned and share it with the team.
  • Invest in the “soft skills” such as training on leadership talent and management skills development (notice that leadership is a talent and management is a skill). Invest in the other skills that are crucial for all employees to succeed—especially those in leadership—such as negotiation, communication, presentation, and presence skills.
  • Most importantly, establish a culture of continuous improvement and learning where everyone is cross trained on other duties and everyone has a backup.
  • If you are the recipient of the mentoring and training, are you paying it forward? Are you sharing the information learned with the rest of the team?

I hope some of these concepts and ideas are helpful to you as you prepare your Strategic Plan which includes your Succession Plan for your organization.

Strategic Planning Sessions: Integrating IT, ERM, and HR

Strategic Planning Sessions Integrating IT, ERM, and HR

Information Technology (IT), Enterprise Risk Management (ERM), and Human Resources (HR) are foundational areas of an organization yet they are often forgotten when conducting strategic planning sessions. When I meet with clients, one of the first items I call to their attention is to ensure these critical areas are represented during the planning sessions. Let’s study the reasons why individually:

Information Technology

Most organizations, regardless of industry, currently utilize some technology to run the business. Yet it is common for companies to see IT as an expense and necessity versus the investment that it truly is. When your organization has a strong technological foundation, you can run your business more efficiently and effectively. You can scale and thus grow your business exponentially. The key is that technology strategies must align with the business strategies. In other words, technology should support the business and not drive it. Businesses must maximize technology to accomplish their mission. They should use technology to create efficiencies wherever possible, automate processes, and produce the best product they can to meet their clients’ needs.

Technology investments are considered capital expenditures and they need to be planned with enough time because they can be a large outlay of cash. The cash outflow as well as the depreciation and/or amortization must be included in the financial projections of the company. A good question to start the conversation is: Does the current technology align with the business objectives of the company? If not, start aligning the technology strategies with each of the business objectives.

Enterprise Risk Management

Once again, if your organization is open for business, it most likely faces risk. ERM is the function in an organization that identifies and assesses ALL the potential risks that could affect an organization. The next step is to mitigate and possibly eliminate some of the risks identified. Lastly, the function of ERM monitors and reports on all the risks identified and assessed up to the Board of Directors. Directors have the responsibility and fiduciary liability to know and understands the top risks the company faces. The goal of ERM is to mitigate as many of the risks possible so the organization accomplishes its mission.

Good questions to ask during the strategic planning sessions are: 1) What are the new risks to our organization that come from these new strategic objectives? 2) When you conduct an ERM Risk Assessment ask, what are the strategies to mitigate our top ten risks?

Human Resources

Without the people, regardless of how automated your organization is, there is no business. We’re all going home! Planning to attract the right talent and retain your top talent starts with the right acquisition strategies. Unfortunately, like IT and ERM, the employees are seen as the major expense to an organization instead of viewing the staff as the biggest investment you can make—not only in people’s lives but in the life of the organization and ultimately in the lives of your customers.

In addition, the HR leader must be in constant communication with the other department leaders so they, together, can plan for the new talent acquisition with an understanding of the business needs. HR needs to be represented at the strategic planning sessions to ensure the people side is not forgotten. This includes new FTE’s, new type of talent needed for future developments, and additional talent needed to add depth of staff. As volume grows in certain areas of the organization, you may need additional staff in that area. Other times you may need to create brand-new positions that didn’t exist before. With new technology developments, there are new jobs that are being created that we never dreamed of because there was no need for those types of skills.

As you start your strategic planning process, I encourage you to involve these critical functions in the planning process. You cannot go wrong. Your strategic plan will be complete and stronger. You will have the buy-in from these key areas in the organization and the entire company will benefit from this approach.

Books by Marcia Malzahn