All businesses will use at least one form of “Succession Planning” strategy during its lifetime. This phrase can mean many things to a business owner. Succession Planning is subject to scale and scope of a business, and like any strategy, the most effective ones are developed over time and employ specially designed resources. Transitions are part of a businesses DNA, and unfortunately some are forced on a business before they are planned for.
One key tool to ensure business continuity and continued success for your business is a well designed Succession Plan.
Succession Planning quite simply is planning for the future and continued success of the business. It insures the continuity of services of the business entity itself and likely includes planning with in each of the 4 Pillars we commonly talk about in our blogs (Products, People, Operations, & Marketing) .
If a business losses ability to generate revenue due to change in ownership, loss of key people or suppliers or lack of consistency in their products, clearly it is not as successful as it could be. Proactive management considers multiple scenarios that may effect revenue generation. Common risks a Succession Plan identifies & addresses may be a sudden loss of a key leader, preparation for sale or retirement, or even rapid business growth.
- In this article we provide some very brief points on questions around the most common transitions Business owners may face. Like many of our “Conversations Series” articles this is designed only as an overview and in bullet point fashion. Future blogs will address these points more thoroughly or please contact me if you would like me to expand on specific points.
Why undertake Succession Planning-
A good “Stress Test” for small business
Business growth has determined need to document processes and business knowledge
Improper hiring practices have created a gap in culture or brand execution
Succession Planning is..
- A Leadership Development Strategy
- A Risk Management Best Practice
- A Sustainability Best Practice
- Crucial for Knowledge Transfer
Types of Succession Planning
- Strategic Leader Development (Next Generation)
- Emergency or Interim Management (Sudden loss)
- Departure Defined (Sale, Retirement)
When is right to plan?
- Business/Company is financially sustainable
- Strategic Plan/Priorities are in place
- Leadership and Management is involved and engaged
- Performance appraisal plan is in place (pending scale)
When is the Wrong time to plan?
- During a sudden loss (death/medical emergency, etc)
- Ad-hoc leadership patterns are apparent
- When economically challenged
- Unstable labor base (high attrition, low engagement)
As mentioned the reasons why an organization may address this depends on there specific situation and needs. We will outline the more common areas people have asked us for help. The most proactive thinkers look for Leadership succession with in an organization. Others are more Risk Management savvy and want to protect against a Leadership “Emergency”. Organizations that find themselves in an Emergency situation often look for an interim management (Outsourced) solution so here we point out keys to consider. Lastly many are looking for a departure plan, “how to insure the ship will run when I retire”. Here we give tips on what to considered and plan for. If you are uncertain what your business needs are or where to even start, please reach out and C.S.Simons Consulting will be happy to provide some free direction to get you started.
Steps for Leadership succession
- Identify future goals and challenges (strategic plan)
- Create model of needs, competencies, skills, experience
- Identify potential successors and assess individual and organizational gaps to determine developmental needs
- Create individual and organizational development plans
- Measure frequently and revisit models and plans as environment and priorities shift
Emergency Succession Planning
- Identify critical executive functions and responsibilities
- Name and train a backup for each function
- Ensure that key relationships and contacts are documented
- Create and update a binder or digital file that includes key documents such as strategic /operational plans, annual and monthly calendars of organizational activities, etc.
- Create a board approved policy and procedure for Emergency Succession
Interim Management option considerations
- Proprietary IP concerns/Legal concerns
- Knowledge transfer/Time to proficiency- Transition production curves
- Minimum contracted time? (3 months common)
- Support structure with in business/company
Defined Departure issues
- What are our vulnerabilities with departure of our Executive/Owner/Partner ?
- Unique skills of this person … Can they be replaced?
- The “Do-ability” of their job?/ Compensation needed for replacement?
- Management Team strength? Is an internal successor ready now?
- Should we Consider a Merger/ Acquisition or Restructuring?
How to create a Succession Plan
- Identify critical positions
- Identify competencies
- Identify Succession Management Strategies
- Document and implement plan
- Evaluate effectiveness
Some of these steps may seem overly simplistic (which is why they may be overlooked). A Succession plan may be an insurance plan that is never needed (unplanned departure) or for a certain event like retirement that everyone works to achieve. Planning to insure there is little interruption in the continuity of business functions, reputation and revenue will positively impact your current customer base, your employee population, and quite possibly your ability to sleep at night!