The aim of a succession plan is to aid in the transfer of ownership of a company, whether it’s due to retirement, death, or disability. Included in this process is the assignment of assets and wealth accumulated by the company.
Without a family succession plan, the business’ fate is uncertain and could be left in the hands of a court. Furthermore, in the case of a business owner having multiple children or family members, it could cause disputes within the family over who is the rightful successor.
One of the major purposes of a family succession plan is to aid in maintaining peace within a family during the transfer of leadership.
For many family and closely held businesses, succession in a family business has been recognised as one of the most complex, frustrating, and demanding business management challenges to be faced. This is mostly due to the relationships and emotions involved when discussing topics such as death and/or financial affairs.
Yet succession in family business planning can also be a great opportunity to maximise opportunities and create a profitable multi-generational institution that embraces the founder’s values and mission.
A successful succession plan works as an excellent method to manage employees’ competencies, which in turn allows for easy identification of skilled staff. This can save money and resources that may have been wasted on recruiting for a position that could well be filled internally.
Drawing up a succession plan obviously needs thorough consideration and preparation. It requires insight into the organisation, and a thorough, strategic approach. Below are five suggested steps for the development of a succession strategy for your business…
To begin the process, key leadership positions within each department need to be identified. It’s recommended that a Human Resources (HR) Director be included as a part of the strategic leadership team for these discussions.
For a small department, the team could begin with a review of positions at the division level, to determine which positions are key. Larger departments may want to focus on the bureau and office level.
The next step is to document the education, experiences, key competencies, and other factors necessary for success for each key leadership position.
The third step in the succession planning process is to gather an understanding of your current bench strength. In order to gauge bench strength, the department needs to determine whether critical leadership positions have one person or more ready to successfully assume the role and responsibility of the position.
Determining the depth of talent within an organisation will allow department leaders to focus on strategy development and measurement where it is needed.
For the purpose of succession planning, this stage is dedicated to career development.
A performance review session can provide an excellent opportunity to begin discussions of career development, goal and opportunities. Discussing and encouraging the career development of all employees is an important part of management. However, for the purpose of succession planning and increasing bench strength in specified areas, the selection of a subset of employees upon which to focus career development efforts may be necessary.
The final step in succession planning is the process of monitoring and evaluating the effectiveness of strategies implemented to close the high priority talent gaps. Succession planning strategies are designed to be an inclusive opportunity to increase the available talent pool of candidates for key leadership positions and the future needs of the business.
At the end of the day, it’s important to keep the framework for one’s succession plan strategy as simple as possible. Whether it’s for a family business or not, companies tend to add excessively complex assessment criteria to the succession planning process in an effort to improve the quality of the assessment. While the intention may be good, this adds an extra layer of complexity to the the assessment process and may result in clouding the overall goal of succession.