The Green Sheet Online Edition
February 23, 2015 • Issue 15:02:02
Who will take your place?
Who will take your place in the management and leadership of your organization when you are ready to retire, become severely injured or incapacitated, or die unexpectedly? What plans do you have for the continued operation of your business or its timely liquidation, while preserving as many resources as possible? Every business today, large or small, needs a management succession plan.
Management succession planning prepares an organization for a transition in leadership whether by choice to transfer power smoothly to the next generation, a leader's career mobility or retirement, or unforeseen circumstances such as major illness or death. The process recruits and develops employees for key roles within the company.
Through this process, the company recruits superior employees, develops their knowledge, skills, and abilities, and prepares them for advancement or promotion into increasingly challenging roles. Actively pursuing succession planning ensures constantly developed employees who can fill each needed role. As your organization expands, loses key employees, provides promotional opportunities, and increases sales, your succession planning guarantees that you have employees on hand ready and waiting to fill new roles.
Key to successful transitioning to new leadership is the development of a formal succession plan. Why is a succession plan essential or imperative? Most business owners want to leave the business with as many resources as possible. To accomplish this goal, there are four general options.
- Groom your successor so that there is a smooth transition when you leave, avoiding organizational crisis.
- Sell the business to family members, employees or an outside party.
- Retain ownership but hire outside management if no one currently inside the business is qualified to lead into the next generation.
- Alternatively, liquidate and close the business.
Why do people and businesses not have a succession plan? Many business owners have no interests outside the business and are unconcerned with the future, many are unwilling or unable to consider their mortality, and some are simply disinclined to select a successor. Those who are able to address this transition typically engage in a four-stage management succession process: origination, choice, education and conversion.
Begin the succession process by preparing a written succession plan, which can take as long as two years to develop and as long as 10 years to implement. Start the process when you are between the ages of 45 and 50 if you are planning to retire at age 65. Allowing adequate time to fully consider the company's structure, its specific situation and its long-term goals assures a smooth transition and prevents chaos.
A written succession plan is essential. It provides for the ongoing operation of a business when the owner or a key member of the management team leaves the company or until the company can be successfully liquidated. Here are five steps to help you develop a written plan.
- Gather detailed information on the company, its history, current status, goals and all personnel.
- Select advisers to assist you with developing the plan including insiders and possibly outside continuity experts.
- Evaluate the company's goals, objectives, financial standing and the personal goal of the owner who is leaving.
- Write the plan. When the plan is complete, conduct a review with the business' accountants, lawyers and bankers to be sure all aspects of the plan comply with the law and can be implemented without unanticipated consequences.
- Review the plan every one to three years or whenever the company's personnel or structure changes to assure that it continues to meet the company's needs.
Evaluate the skills of people within the organization to determine if one is the logical successor or select an outsider to take the reins of the company. Identify other employees who have potential to ascend to top leadership roles. This process encourages staff development and sends a message to employees that the organization is serious about developing its people. It may also persuade talented employees to remain with the company rather than seeking growth opportunities with other organizations.
Grooming a successor from within the company saves the time and expense of hiring a new leader from outside, and it aids in continuity because an insider might be more likely to follow through with current plans and strategies. If the plan calls for a family member to move into the leadership position, it is important to:
- Establish a formal plan for family participation in the business.
- Provide solid work experience for all family members to warrant that succession is based on performance, not heredity.
- Evaluate the prospective successor based on performance rather than family connection.
- Set up a succession transition team to keep decision makers updated on the changes taking place and about their roles in the changes.
- Complete the transfer of ownership and control.
Train the chosen successor to take over the leadership position. Provide critical opportunities or experiences to those identified as potential new leaders. Engage all of the company leadership to provide development opportunities for high-potential leaders, assuring that the new leader is adequately prepared to take over the company leadership and management. Utilize a variety of tactics and strategies including job shadowing to help provide an adequate representation of exactly what the job involves.
Implement your plan, understanding that change is always difficult. By taking the time to create a plan utilizing all the resources of your business, you minimize the frustration, anxiety and difficulty in accepting new leadership. Everyone knows how the transition will transpire and will work to facilitate a smooth conversion to new leadership.
Former Xerox Chief Executive Officer Anne M. Mulcahy said, "One of the things we often miss in succession planning is that it should be gradual and thoughtful, with lots of sharing of information and knowledge and perspective, so that it's almost a non-event when it happens."
Vicki M. Daughdrill is the Managing Member of Small Business Resources LLC, a management consulting company. E-mail her at email@example.com or call her at 601-310-3594.
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