A smart small-business owner is a forward-thinker. He knows that at some point in the future there may come a time when he needs to pass the reigns of the company onto someone else, whether it’s a family member or trusted employee.
Succession planning is a logical step for a business owner who wants his company to keep running even when he’s no longer able to head up operations or is looking to sell and exit the business at a later stage.
Whilst this concept is relatively new to a lot of business owners, companies have been wrestling with ways to identify, develop, and retain their talent for decades. So, why is it suddenly popping up on every company’s radar screen?
Succession planning is a sign of the times
Today’s organisations are faced with two issues: the retirement of the Baby Boomers and, the widening talent gap.
The home-grown, paper-based succession planning that companies relied on in the past are no longer meeting the needs of today’s workforce. In order to achieve results, companies need to start with the basics, create a strong process and then invest in the tools, human capital and technology to instil a talent development mindset in their organization.
Justin Pagotto, founder of Bullet Proof Our Business has been helping business owners with their asset, revenue and equity protection for years. He has seen a lack of understanding of succession planning.
“I see and speak to so many business owners who spend years, sometimes decades, building the value of the business. But, where they fall short is having a properly documented succession plan. This means, their hard earned equity can quite often be quickly destroyed, especially if one partner exists the business suddenly due to sickness, death or other other factors,” Pagotto explained.
“By having a succession plan, you can create certainly around the transfer of ownership that provides a terminating owner with the option to sell or dispose of their interest in the business to the remaining owners. It can also outline the funding mechanism for the remaining owners to purchase the departing owners shares,” continued Pagotto.
It’s easy to put off planning when everything seems to be going so well, right?
Wrong.
Now is the time to begin succession planning.
Three reasons why succession planning won’t wait for you to be ready
- You can’t plan for disaster. No matter how good you and your staff are at revenue projections or economic predictions, no one can truly plan for disaster. Whether it’s an unforeseen illness, a natural disaster, or a CEO’s decision to suddenly retire, the reasons for having a succession plan in place before it is needed are endless.
So while you can’t plan for disaster, you can put into place a series of contingencies that will help your company stay afloat if, in fact, catastrophe occurs.
- Succession planning benefits the business now. Just as business practices have evolved over the years, succession planning has also grown and changed. It’s no longer a plan that can only be accessed when leadership is going to change; a succession plan can be used before its “real” intent is necessary.
It can be used to build strong leadership, help a business survive the daily changes in the marketplace, and force executives to review and examine the company’s current goals.
- Succession planning gives your colleagues a voice. If you’re running a family business, the process of succession planning will give family members an opportunity to express their needs and concerns. Giving them that voice will also help create a sense of responsibility throughout the organisation, which is critical for successful succession planning. Resist the temptation to solely carry the entire weight of creating and then sustaining a plan.
As you can see its not a matter of whether you should have a succession plan, it’s a matter of when.
Six easy steps you can take to get your organisation ready for succession
- Identify the areas of expertise or positions that are integral to the operation of your organisation. Focus on positions that directly support your organizational strategic or operational plan.
- Conduct a Strengths, Weakness, Opportunities, Threats (SWOT) analysis of your organisation to identify areas affected by workforce shortages or operational issues
- Describe clearly on paper the skills needed to perform the key areas of expertise or positions identified. Develop a competency profile of the key positions based on the knowledge, skills and abilities needed to successfully perform the job.
- Identify employees who are interested in the key areas of expertise or positions and evaluate their capacity to fill these roles.
- Create a plan for the transfer of knowledge and describe how it will be implemented. Provide employees with the opportunity to expand their knowledge, capacity and skills by taking on a temporary assignment, enrolling in professional courses or job shadowing in the identified key position or related area of expertise. Support the professional development of employees by providing coaching, mentoring and performance feedback.
- Evaluate whether your succession plan meets the organisation’s objectives and goals. Identify indicators (such as turnover rates and vacancies) and monitor results to ensure that you can make adjustments to your Succession Management Plan as needed.
Succession planning should be a joint effort between your HR department, senior management and board members, with input from the post holders themselves.
In this way, you can build up a picture of who should be the next person in the role, setting realistic and shared expectations for all concerned. The result should be a smooth recruitment process and the ability to bring excellent new people into the business when required.
Alex Pirouz is the founder of RIDC Advisory, a business advisory firm partnering assisting companies successfully start, grow and exit their business. Connect with Alex on LinkedIn.
