- May 10, 2021
- Posted by: Philip Struble
- Category: Uncategorized
No Time for Sugar Coating
Even well run, successful businesses fail at planning for their future.
The identification of who will be the next generation to own and manage a business is one of the most critical management tasks for a business owner. This action is what guarantees the owner’s personal retirement goals and sets in place the owner’s legacy for continuing the business into the future.
Yet, ownership transition is most often at the bottom of the management’s list of action items.
Don’t Plan for Succession
Studies have shown that 90 percent of companies understand the importance of succession planning, yet less than half have a formal succession plan. Here are some common reasons they fail to plan:
- Creating a succession plan takes too much effort.
- We’ll know the right person when we see them.
- We’re a family business, and a family member needs to be the successor.
- I don’t have time for that; my to-do list is already a mile long.
- We’re a small business; we don’t need a succession plan.
- I’m years away from stepping away from the business. I don’t need to worry about succession now.
- Nobody knows this business better than I do.
Why Plan for Business Succession
For a business, working without a succession plan can invite disruption, uncertainty, and conflict, and endangers future competitiveness. But business owners and entrepreneurs need to recognize that there are many benefits for companies and owners who plan suitably and strategically for an orderly transition of management and ownership:
- Survival and growth of the business or its assets — under the current structure or after-sale or restructuring
- Preservation of harmony when the business is family-owned
- Reduction or elimination of estate and income taxes• Facilitation of retirement for the current leadership generation
- Ability to retain control of the process instead of having someone else make decisions
How to Plan for Business Succession
Succession planning is the act of identifying and developing candidates for key positions within your company. Here are a few steps to help you get started.
Think about what the company will need in the future to remain competitive and accomplish the strategic goals. Consider what’s going on in your industry and then incorporate this into your succession plan.
Update existing job descriptions and create new ones for new roles. Identify the critical skills, knowledge, and experiences that are necessary to move the company forward. Create or update job descriptions to reflect this information.
Draw your current organization chart, including the names of the individuals who currently fill each position. Begin by drawing it the way it makes sense to you. Now, imagine what it will look like two years from now. Identify who is ready to fill positions if key employees were to leave.
Meet with every employee. Find out if employees are interested in advancing into different roles, and evaluate them to determine if they have the skills necessary to be successful.
Develop an individual development plan for each employee. This plan identifies what skills, knowledge, and experiences each person needs, how they will obtain them, and target specific dates to prepare for their next role. Focus on the next potential position options; those within the next couple of years.
Succession planning is personal long before it becomes tactical.
Most literature about succession planning generally ignores the fact that succession planning is about human beings. Very little of what is written deals with the “soft” personal issues like relationships, self-interest, ego, or feelings.
One of many verses in the bible to help us wrestle with the human side of succession planning is from Ecclesiastes 2:18-21.
I hated all the things I had toiled for under the sun, because I must leave them to the one who comes after me. 19 And who knows whether that person will be wise or foolish? Yet they will have control over all the fruit of my toil into which I have poured my effort and skill under the sun. This too is meaningless. 20 So my heart began to despair over all my toilsome labor under the sun. 21 For a person may labor with wisdom, knowledge and skill, and then they must leave all they own to another who has not toiled for it. This too is meaningless and a great misfortune.
Drilling deeper into scripture helps us answer the issues posed by the writer of Ecclesiastes.
Business leaders and entrepreneurs need to elevate the importance of succession planning. Few issues affect the business so thoroughly, as does the departure of existing business leadership and the arrival of a new business regime.
And every aspect of this impacts humans. Make the Bible part of your succession plan.