The succession planning process entails finding candidates to succeed the CEO and other top executive roles. Picking successors, and managing the transfer to minimize the impact on a company. Above all, it’s about ensuring a brighter future for the company and its people under new leadership that will have the required skills and experience to propel the company forward.
Careful planning can ensure the continuity of a company as it passes through multiple generations. A well-prepared succession plan may also support a company in achieving the best possible exit.
It is challenging to be an expert on a process you’ll probably only do once. That’s why receiving the appropriate guidance from a reputable source may help you get your succession planning process right the first time.
Can’t imagine how your company would function without you?
Entrepreneurs — the owner-managers — are the lifeblood of privately held companies in the small to middle market. These remarkable individuals are the ones who have developed their companies, withstood years of recession and uncertainty, and emerged victorious, not just surviving but prospering. They can do so because of:
· The dedication to their company is unwavering.
· Their comprehensive understanding of the company’s operations and market.
But what happens if that person is removed from the equation? What happens to the company’s value?
As they explore the market for prospects, many company buyers ask themselves these questions. It’s for this reason that, for company owners contemplating an exit or retirement, it’s crucial to begin the complicated, perplexing, and ultimately humbling work of figuring out how to pass on the information and expertise needed to manage their company successfully to another party.
Once a company owner overcomes their apprehension about handing over control, there are several practical steps they can take to jumpstart the succession planning process, protect their company’s future, and reassure potential buyers.
Though succession planning is a time-consuming process, there are few ways it can benefit your company. Let’s look at the advantages of succession planning.
Become Disaster Proof
You pay for insurance to safeguard your physical company from natural disasters such as hurricanes, floods, and fires. To protect the company from theft, you deploy security measures. You also back up data to an off-site location to protect your company’s confidential information.
Most companies have a backup contingency in place for mostly everything, except for key executive members. This is a mistake.
Usually, company owners become so occupied in their company’s day-to-day operations that they overlook succession planning. Sometimes these leaders believe that they are too young to suffer from any significant illness. Alternatively, they may ignore the possibility that a key person (or several) will be tempted away by another organization in need of their expertise and prepared to pay top cash for them. Any of these conditions could make a company particularly vulnerable.
Having a plan in place for succession is like having replacement insurance in case your building catches fire. Albeit a fire would result in a painful loss, you can recover from it. Having a similar mindset about succession will make your company disaster proof.
Know Your People Better
Formal succession planning requires that your company:
· Determine which positions are most important to the company’s future development. Not all these jobs may be in the C-suite.
· Identify internal applicants who have the values, talents, and motivation to fill those important positions.
· Inquire about the interests and career plans of possible recruits.
These key steps in succession planning result in several advantages. A thorough examination of your org chart can assist your leadership in better understanding potential risks and can create a feeling of urgency to cross-train essential workers in certain positions.
“The better you know your people, the most likely you can design a success plan around them.”
Better Training and Development
As you identify capability gaps, you can begin to groom Sally, Bob, Bruce, and Jen for eventual succession once your organization has determined that they are interested in advancing into senior positions.
Coaching, mentoring, job shadowing, or a progressive rise in more advanced tasks may all be part of an employee’s professional growth. Other jobs may even require the individual to return to school to obtain extra training or certification.
If you identify potential successors early, it will give them time to attain the necessary skills and experience needed to succeed in senior positions. This also shows that you are willing to invest in employee’s personal development along with the company’s development.
More Eyes Focused on Success
Your company has a chance to receive possibly its best instrument for growth and prosper once your top succession candidates have been cultivated. This occurs when junior management sits down with senior executives to discuss why they’re doing things the way they are.
Explaining the status quo is a basic method that can disclose flaws in processes and procedures, sales possibilities, and opportunities for change. This natural process allows your company to keep an extra set of eyes on its leadership jobs and fosters criticism of outdated or inefficient corporate conventions.
Protect Brand Identity
You must have heard about externally hired CEOs who join an organization with great hype, but they end up failing within a short time. Unfortunately, such type of poor hiring impacts the company’s reputation and hamper its long-term success.
This frequently occurs when the new CEO is unfamiliar with the company’s underlying principles and mission because they haven’t “grown up” with it. They pull the corporation away from its core brand because they want to put their stamp on it or don’t understand the client’s wants.
Succession planning helps to future-proof your company, by ensuring that the culture lives on, and that the institutional knowledge continues to prosper.