Lesson 12 – Buyouts and Family Businesses

I am still working in mu $100 challenge and I am preparing its final Power point presentation.

Acton Hero Erick Slaubaugh

When he was 19 years old, Erick Slabaugh did wanted to go to college but joined his father's business in a time of need after losing a major client.

Erick Slabaugh is the second generation of entrepreneurs in the family, as he said: “Entrepreneurship can be an adventure, but it also carries with it responsibility.”

At the beginning of his business, Erick had to work weekdays and weekends, and the profit from his work did not pay off as much as what his friends made and still had time to enjoy the weekend. But as he said, today the situation has reversed itself. There were times when he did not find himself a lucky one, especially when his friends had fun and he had to work.

He mentionated that:  to start a business, it takes courage. When he was a young entrepreneur, he did not asked questions so he would not frown on his salespeople, but he said that the older he is, the more mentors he has, and he recognizes how much would have been wise if he had recognized value of mentorship when he was young.

From his experience he tells us that we should invest in something that we know.

“There is a lot of accountability but it is incredibly rewarding if we use our values ​​to be our guides in difficult decisions.”

Succession planning

 Definition

Identification and development of potential successors for key positions in an organization, through a systematic evaluation process and training. Unlike replacement planning (which grades an individual solely on the basis of his or her past performance) succession planning is largely predictive in judging an individual for a position he or she might never have been in.
(http://www.businessdictionary.com/definition/succession-planning.html)

http://www.faithresources.com/assets/downloads/Succession_Planning.pdf

Ten Key Steps to Effective Succession Planning By William J. Rothwell, Ph.D., SPHR

“Succession planning requires more of a commitment to a longer-term, strategic view of how to meet talent needs than short term, and sometimes panic-driven, efforts to fill vacancies as they occur. It can be established and operated using ten key steps that have been field-tested in many organizations, industries, and economic sectors. 

Step One: A first step for any systematic succession effort is to clarify the senior leaders’ expectations and preferences for a succession program. After Sarbanes-Oxley, corporate Boards have become more active in succession planning. A fundamental mistake, and a formula for disaster, is to dump the responsibility for the succession effort on the Human Resources department.

While the Human Resources function or other parts of the organization must participate, the leadership responsibility for succession planning rests with the CEO. If he or she does not favor systematic succession planning, it cannot be successful.

Step Two: A second step is to establish competency models by talent pool considering the positions that will be fed by that pool. A competency model is a narrative description of the knowledge, skills, attitudes, and other abilities that lead to exemplary performance. Competency models provide blueprints of the talent to build at present and in the future. In short, a competency model describes “what should be” for such hierarchical levels as executives, managers, supervisors, salespersons, technical professionals, or other groups. Alternatively, competency models may be created for specific departments. A recent innovation in some corporations has been to articulate the organization’s ethics, values and code of conduct and then rate individuals against that as well as against competencies. Ethics, values and codes of conduct provide a basis by which to assess individuals against a dimension that goes beyond what it takes to get good results on the job

Step Three: A third step is to conduct individualized multi-rater, full-circle assessment. The idea is to assess individuals against the competencies required for success in an organization. The results of a multi-rater, full-circle assessment usually indicate gaps between what competencies an individual currently possesses and what he or she should possess to be successful.

Step Four: A fourth step is to establish (or reengineer) an organizational performance management system. One fact of life is that individuals are seldom eligible for promotion, advancement, or other developmental opportunities if they are not performing successfully in their current jobs. Individuals must thus be measured, as objectively as possible, against the performance expectations for their current level of responsibility.

Step five: A fifth step is to assess individual potential for success at higher levels of responsibility. Unlike past or present-oriented performance management, potential assessment focuses on the future. Some means must exist to examine the talent available for future possibilities--and advancement. Regular potential assessment provides the means to do just that.

 Step Six: A sixth step is to establish a means of regular, ongoing individual development planning. Once it is clear what present and future gaps exist for individuals as a result of performance assessment and potential assessment, some means should be established to help them prepare for the future by narrowing those gaps. To that end, individual workers--and their immediate supervisors--devise a plan to help individuals develop themselves and thereby prepare for possible future promotions.

Step Seven: A seventh step is to implement individual development plans (IDPs). There are various ways by which to do that. One way is to establish in-house leadership and management development programs. A second way is to develop competency menus, in print or online, that provide specific developmental suggestions for individuals. Examples of developmental suggestions might include books to read, classroom courses to attend, online courses in which to participate, on-the-job assignments to seek out, and action learning projects that bring together groups of people to solve practical business problems while simultaneously permitting the means by which to build competence in new areas.

Step Eight: An eighth step is to establish a talent inventory. Increasingly, decision-makers must be able to find the organization’s talent on short notice. To that end, they must have information about the pools of talent that the organization is developing and has readily on tap so that teams can be marshaled on short notice to fight fires, seize opportunities, outdraw competitors, and fill vacancies. As part of this step, it may also be useful to create depth and development charts to show how many people fall into different categories. Different HR strategies may be needed to manage individuals in different talent grids. 

Step Nine: A ninth step is to establish accountability for the systematic succession planning effort. Individuals—and their bosses—must be held accountable, for cultivating their talents over time and closing developmental gaps. Otherwise, individual development plans will not be realized. Often, financial incentives for talent development can help. For instance, individuals can be given bonuses if they achieve their developmental objectives, and supervisors can be given bonuses if their workers achieve their developmental objectives. Alternatively, periodic meetings may be held in which individuals must report on how well they are implementing their individual development plans, and senior executives may report to the CEO or the Board on how well their employees have been progressing toward realizing their individual development plans.

Step Ten: A tenth and final step is to evaluate the results of the systematic succession planning effort. Often, the time-to-fill metric is a key measure of success. How long does it take to fill positions with qualified applicants? While not directly a financial measure, the time to fill does translate into financial terms. Productivity is lost, and so are opportunities, when vacancies exist in today’s right sized corporate settings

What Common Mistakes Are Made in Establishing Succession Planning, and How Can They Be Avoided?

Many mistakes are commonly made in establishing succession planning programs. They are worth enumerating. It is also worthwhile to describe some ways to avoid these common mistakes.

Mistake #1: Assuming that Success at One Level Will Guarantee Success at Higher Levels. An individual’s success at one level is no guarantee of success at higher levels of responsibility. The reason is simple: the competencies required for success at each level are different. Hence, it is important to separate thinking about how well someone does his or her current job and how well he or she might do a job at a higher responsibility level.

Mistake #2: Assuming that Bosses Are Always the Best Judges of Who Is Promotable. A second mistake is to assume that, for purposes of succession planning, bosses are always the best judges of who is promotable. That is not always true. Bosses are self-interested players in the succession game. They have a stake in what happens to people. Indeed, some bosses do not want to see their best people promoted for fear of an inability to replace them. Some bosses grade people by their own standards—with the result that some individuals who are quite unlike the boss are not considered for promotion. While the support of a boss is useful in developing individuals, more objective assessments, such as multi-rater assessment are excellent in aiding the manager’s assessment.

Mistake #3: Assuming that Promotions Are Rewards. Some employees have an entitlement mentality in which they feel that long service with an organization should always be rewarded with promotions. But business decisions must be based on who will do the best job, not who is “owed” a promotion because of greatest seniority. Workers must continually be reminded that doing jobs at each level requires different competencies, and the best way for them to compete is to prepare for future challenges rather than expect promotions for past performance at a different level of responsibility.

Mistake #4: Trying to Do Too Much Too Fast. The strong results-orientation of many organizations today emphasizes quick results. Senior leaders expect to see all the components of a comprehensive succession system in place immediately. That is not always realistic. It is advisable to think of implementing systematic succession in a phased way—either from the top down or else starting in specific divisions or locations with greatest need.

Mistake #5: Giving No Thought to What to Call It. A fifth mistake is to devote no time to considering what to call the succession program. As any marketer knows, product names do matter. It is not necessary to call a spade a spade. Many organizations choose alternative names--such as “leadership development program,” “human capital management program,” or even “talent program.”

Mistake #6: Assuming that Everyone Wants a Promotion. A sixth mistake is to assume that everyone wants a promotion. That is not always true today. In many downsized organizations, workers have seen what pressures their bosses have to deal with. Some say “leave me out of that.” Hence, it is unwise to assume that everyone wants a promotion—or even to assume that money will convince everyone. It will not. Check first. Find out what people want to do. For that reason, many organizations launch both a top-down succession planning program and a bottom-up career planning program to galvanize development efforts both among managers and among individuals.