It is commonly agreed that business cashflow, and the maintaining/growing of it, is the biggest issue your business will face day-after-day and year-on-year. The challenges associated with sustainable growth and customer retention should not be underestimated no matter how successful you’ve been and for how long you’ve been in business.
Second to business cashflow as the issue which causes more heartache and business failures (or businesses to severely underperform) is success planning.
What sorts of businesses have succession planning issues:
- Businesses that have been operating for more than 5 years;
- Businesses where the principals/executives are over 45 years old;
- Businesses that have high staff turnover in the next generation of future leaders;
- Businesses where there are no logical successors within the business today;
- Family businesses where the Sons/Daughters are not interested in being part of it;
- Businesses where the founders/principals have been part of it for more than 15 years;
- Small to midsize Legal/Accounting/Medical/Dental practices (from 5 to 20 practitioners) where the major participants do not intend to be there in 5 years; and
- Businesses where the principals/executives are starting to suddenly encounter the health issues that come with middle age.
In other words, well over 50% of all businesses out there today.
What is Succession Planning?
Succession planning is a process of determining critical roles within the company, identifying and assessing possible successors, and providing them with the appropriate skills and experience for both present and future opportunities.
In other words succession planning covers these important, and often poorly executed, steps:
- Staffing and Recruitment … You Recruit and Retain superior employees who are right for the business
- Learning and development … You provide employees with the tools, methods and experiences to develop their knowledge, skills and abilities
- Leadership … You provide employees with the techniques and practical experience to genuinely – and naturally – be the future leaders of your business
- Annointment … You make sure that – when the time is right – everybody in the business knows who has been selected to spearhead the succession. If things change suddenly you do not want your plans to fail do to opportunistic “coups” that take place in the vacuum caused by the sudden changes
- Performance and Compensation management … You prepare employees for advancement and/or promotion into ever more challenging roles
- Talent Management … Even though you’ve identified the future leaders, some times you need to replace these superior employees for the long-term future of the business.
Why Do I Need a Succession Plan?
Succession planning is a process by which the successors (future key employees/leaders) are identified for key roles throughout an organisation including vital roles in each department of the business.
Because it (should) take into account the strategic vision and objectives of the business, it means a business with a good succession plan in place, will perform no worse and often much better as a result of the changes caused by the succession.
This is because both employees and customers are ready for the changes when they occur in terms of appropriate skills and experience to have no/minimal impact to business operations (and profitability).
Conversely, businesses without a succession plan in place will inevitably stumble when events occur – such as a sudden death or departure of key executives. These stumbles manifest as a drop in revenue, earnings and often customers who are dissatisfied with the performance of what was previously a good business relationship.
In fact, many businesses who have not prepared succession plans actually go out of business as a result of the events that triggered the need for that succession plan.
What is in a Succession Plan?
Typical activities covered by a succession plan include:
- Identify, Define and Articulate the roles and skills which are critical for future company growth
- Analyse and address each of the gaps (processes & people) revealed by this planning process
- Identify and Specify the developmental needs of all employees to fill tho key roles
- Ensure that all key employees understand their career paths and the roles they are being developed to fill
- Create the learning environment that trains people for skills and positions that may not currently exist in the company
- Recognise that the employee’s time needed for training/learning as part of the succession plan may mean their current roles need to be backfilled for some time and that this is a cost of securing the future of the business
- Allow the succession plans to evolve with the business through regular executive discussion of people and roles
- Identify the top performers in all departments and work openly with them to ensure they are engaged and satisfied to stay with you for a long period
- Continually manage and monitor the succession processes, and whether planned development for individual employees has taken place AND delivered anticipated/acceptable outcomes
Feel free to contact us, if you want more information, or want to commence a succession plan for your business.