Thinking Ahead Today For Tomorrow's Sake
Although not discussed on a day-to-day basis, succession planning is definitely something to consider for companies that plan to be in business for the long haul.
October 24, 2011
A big challenge that many ag retailers face today is succession planning. The notion of having everyone in place, such that they are ready to make the next step when the opportunity occurs, seems more like a sports analogy than a retail agronomy scenario.
Many retail managers miss the opportunity to put a succession plan in place because they fail to recognize when there is an ideal opportunity in front of them. Everyone understands how the volatility of fertilizer pricing requires smart managers to buy/contract their inventory when the market opportunity presents itself, not just when they have an empty bin. In today's market, buying only when you need it could be a recipe for disaster.
Building a talented organization is really no different than managing your inventory. If your goal is to build a high performance team, you need to be ready to hire talented people when they are available — not just when you have an opening. Additionally, when you have employees with good potential, managers must internally plan for succession/promotion by training those individuals in the organization with the talent and desire to do greater things.
Having A Succession Plan
Succession planning and building bench strength can be broken down into three components: Timing, training and budgets.
The Ag1Source agronomy team has heard from many retailers nationwide that consider recruiting to require as much luck as it does skill. Many ag retailers feel that when an organization has an opening, a little luck is required to get the right candidate to walk through the door. Successful organizations have figured out how to remove the luck component from their hiring process. Instead of hoping for the candidate to walk through the door as needed, they are prepared to hire a talented candidate at any time with the intent to train and orient them into the next available slot that they may be well suited for. Sure, there are limits to this approach, but hiring in agronomy is cyclical. There are four to five months a year where virtually NO movement of people happens. So for the seven to eight months that there is movement, you have to be organizationally prepared to hire the RIGHT candidate when they walk through the door, open slot or not.
As managers, we need to stay in tune to turnover rates. Our industry has higher turnover rates than most, so adding a talented employee to the bench may just give them a short period of time to get trained up on your systems and company before they get put out on the frontlines when another employee leaves.
The bottom line about building bench strength is to hire talent when talent is available and has less to do with the current need.
Our second component to succession planning and bench strength is training. In the most successful, high performance organizations, each employee is asked every year: "Where do you want to take your career to and what training do you need to get there?" While this has to be done within the existing training budget, some of this training can be as simple as a mentor program or a salesperson shadowing a regional manager for a week or two. It's the regimented approach to each employee thinking about what they want to grow into. If they feel they have a future in your organization, they are much less likely to look for that future outside your company. This is a very key factor in keeping the employees that you visualize can grow within your company. Spending a little time on career development keeps employee improvement high throughout the organization. Then, when a promotion opportunity opens up, you are more likely to have an employee ready. From internal shadowing to investing in formalized training or degreed education, a personal development plan for everyone makes succession planning work.
Lastly, budgeting for extra people and training can either be viewed as a limiting factor OR an investment in the future. Some of our more successful clients keep a couple of employee slots available at all times. The longest we have seen a bench employee in one of these slots is four months. Usually, they go through their onboarding process, are allowed time to learn the role they'll be in and because of market opportunity, organizational change or the loss of another employee, they get put into a more permanent role in a more planned approach.
Looking At The Numbers
Still think you can't afford to have an extra person on the payroll? Consider this:
An average turnover rate for ag retail is about 20%. Successful companies are less than 10%, while many are unfortunately over 30%!
If you have 25 full time employees, a 20% turnover rate implies that you will have five openings to fill during that seven- to eight-month hiring window.
Costs related to open positions are much higher than people think. Calculate what your total costs could be from:
- Lost productivity/sales while other employees attempt to pick up the additional workload.
- Lost sales due to lower customer contact in that market.
- Increased time required for a manager to keep tabs on remaining employees workload — less time to focus on other things.
- Lost department effectiveness and efficiency.
A very rough rule of thumb is that good employees are worth at least 2.5 times the amount of their salary to a company. Therefore, a $60,000 employee is worth $150,000 in margin/year. This opening will cost your organization at least $15,000 per month. Now multiply this number times the five openings in our annual example!
The cost of hiring an OPEN position is quite a bit higher than hiring before there is an opening. Hiring ahead removes advertising costs, lost candidates due to interview timing, administrative cost of reviewing and considering resumes, travel costs, etc.
Training for employees that have been hired to fill an open position will have a higher cost due to its impact on the business. Candidates hired to fill an open position will need to be trained on the job. As a result, they can't be 100% effective during, and for a while after, the training period. However, if they are hired ahead and trained early, the slip in efficiency will be minimal during the transition, and their effectiveness can be realized almost immediately.
Think of it this way: At a maximum of four months on the bench, the dollars budgeted to allow a couple people on the bench during any year never totals more than one full time employee slot.
Taking a forward approach to talent in a succession plan as well as bench positions can take some time to organizationally implement. However, in the long run, it can not only save money, but it can save sleepless nights when the luck component of recruiting isn't going your way. â——
Waschek is a partner in Ag1Source, the largest agricultural recruiting and personnel solutions organization in North America.
Esfeld is a partner in Ag1Source, the largest agricultural recruiting and personnel solutions organization in North America.