You work hard to hire quality employees and help them develop into the middle managers who keep your projects moving smoothly every day. Are you equally attentive to what will happen if they leave?
Many manufacturers’ succession plans begin and end with the keys to the executive suite. It’s important to know who will take over when you or other senior executives leave, but the loss of a key middle manager can be more disruptive to your day-to-day operations. If your succession plan doesn’t encompass midlevel managers, it’s incomplete.
Who’s going, who’s coming?
To be most effective, your midlevel succession planning should start with understanding who is on your shop floor now — and who is going to be there five or ten years from now. This will likely to be a different group of employees.
The Conference Board (which prepares the Consumer Confidence Index) estimates that 64 million skilled baby boomers will be eligible for retirement by 2010. After they retire, you will have a workforce composed of Gen Xers (born between 1965 and 1976) and Millennials (born between 1977 and 1998).
These younger generations of workers typically do not approach work the same way as boomers, and Gen Xers and Millennials approach work differently as well. And unless your middle managers know how to manage and mentor this intergenerational work force, you may experience a high turnover rate. If managed right, though, you will have a built-in stable of high performers who are quite likely to be ready to shoulder more responsibility when the time comes.
Gen Xers, generally, do not want someone looking over their shoulders. They view their bosses as colleagues, and they value feedback and suggestions more than detailed instructions. Millennials, on the other hand, are team-oriented and seek feedback, but they typically do not expect to stay with a job for long.
When it comes to drafting a succession plan for middle managers, you must consider the skill sets they will need to direct a diverse, changing workforce. Tomorrow’s leaders are likely to benefit from experience in a multicultural, as well as intergenerational, environment, for example. Look at your existing workforce to determine the types of managerial skills your middle managers will need five or ten years from now, as well as the operational and business acumen they must acquire.
Seek feedback from all
A top down/bottom up succession-planning approach may work best to address each group’s expectations. Ask your senior managers to share their assessments of high-potential employees with each other and with human resources personnel. At the same time, ask your possible future leaders for their thoughts on their jobs and the company as a whole.
Comparing the responses can lead to valuable insights not only about your most promising management prospects but also about the skills and personalities you should look for in new hires. It also may point you toward leadership training or managerial adjustments you may need to assure harmony among the generations.
Train for future responsibilities
Once you have identified potential managers, create plans to give them the experience and training they will need. Whether your development plan spans one year or five, it should include concrete objectives that are linked to annual performance reviews — for both the budding managers and for senior managers charged with nurturing them. Unless succession planning has visible support from top management, it will not be a priority and will thus be less effective.
No stopping required
Succession planning for the generation gap will make it more pleasant to come to work, but it also can boost your bottom line. When you promote from within, you are more likely to retain key employees. But most of all, you are ensuring that one foreman’s departure does not bring an entire line to a stop.
Sidebar: The steep cost of turnover
Succession planning does more than ensure your business operations will continue if someone leaves. It also helps you retain your most talented workers.
Manufacturers already are aware that the pool of skilled workers is shrinking. But they may not know how much turnover costs them. According to a 2005 study by the Institute for a Competitive Workforce, per-employee turnover costs — including additional hours to make up lost time, the time and cost of finding a replacement, and hiring and training expenses — range from about $20,000 for a customer service representative to more than $57,000 for middle managers.
Add in indirect costs, such as losses in productivity, sales, knowledge and experience, and turnover may become an expense many manufacturers can’t sustain. Flexibility may help. For example, manufacturing is not well suited to telecommuting, but it may accommodate job sharing or flexible hours. That, in turn, may increase employees’ job satisfaction and encourage them to stay.
If you look at your operations from a new perspective, you are likely to find room to bend. You also may find that it will keep you from breaking.
Kevin Fuqua, CPA, CVA
Partner, Tax Services Director
