It has become abundantly clear in recent years that as Connecticut’s workforce population continues to trend older and many business leaders draw closer to retirement, succession planning is becoming an increasingly critical component of any business’ long-term success.
Whether it is a family-owned or mid-sized business that has had the same closely knit management structure for years, retirement is eventually going to become a reality. And without a thoughtful, well-crafted plan for what comes next, the business might not last much longer once current leadership departs. This is the reality all such business owners face today, and it accentuates the need for carefully planning for the eventual transition.
Succession planning can mean many things to different people or organizations. When dealing with privately held businesses, it at times is confused or comingled with the process of transferring ownership to outside third parties. While that process can go hand in hand with succession planning, it is actually a separate process generally known as exit planning.
But with succession planning, the business is dealing with the inevitable change in key leadership roles atop the organization. With this in mind, how does an organization go about succession planning? What should be considered and by whom? Are there particular steps in the planning process that should be included?
Create a Succession Planning Team – This is usually a small group that consists of owners and key management personnel, some of whom are planning for their replacement, as well as outside consultants such attorneys, accountants or bankers, who can provide independent and objective input.
Role analysis – This involves identifying critical positions and determining the appropriate skills that are needed for that position to be successful.
People analysis – This is the process which helps to find and assess potential successors, by determining who in the organization could fill the role of an owner or key management personnel and has the desire to step into a new and expanded role.
Develop and document the succession plan – Once these initial steps are taken, it is now time to determine the next steps necessary to get from Point A to Point B and document the plan. The plan is usually fluid for each position to be filled but generally includes-and answers-a number of questions. Such as:
Proactively implement the succession plan – Finally we come to implementation, where the organization’s vision and the participants’ roles must be properly communicated to make the plan successful. This is where it is important to provide training, learning and developmental activities to mentor individuals tapped to fill the organization’s key roles. Also at this point, companies should have already made sure that the individual’s values and business goals are in line with the organization’s; in this step, specific individuals are groomed to start fulfilling their new roles.
As you might gather, a succession plan is different for all organizations and can even be different for the varying roles within an organization. The plan should be tailored to specifically meet the needs and ensure the future success of each particular business.
The hallmark of a good succession plan is people who are proactive, open-minded and are willing to provide and accept feedback. By involving managers and leaders at all levels, along with getting a commitment to develop internal talent and monitor the process, a business will be well on its way towards future success.
Naturally, transitions are not easy, but as our workforce population ages, it is imperative that organizations address the issues surrounding transfer of ownership and management. Their long-term success depends on it.