If you own a business, no matter how small or large, you need to have a contingency plan in place. What should happen if you were to become incapacitated, or worse, pass away unexpectedly? Who would ensure that your business will run smoothly and without interruption, and how? What protections have you put in place to ensure the continuation of your legacy? Putting plans in place to address these questions, and more, is a business strategy called succession planning. Keep reading to find out why succession planning is so important for your business, and what you can do to put one into place.
What is Succession Planning?
Succession planning is the process of putting measures into place such that your business can continue running smoothly, and without interruption, in your absence. It could also apply when you suddenly lose key talent. This might include passing leadership roles down to trusted employees, or even a plan to sell the business to another company. A succession plan may be activated on a temporary or permanent basis. For instance, if you decided to retire or pass away. Other instances include a long-term illness or other incapacitation.
Succession planning should also include related action items, such as creating standard operating procedures (SOPs), training, and systems to make sure the right people gain access to what they need in order to succeed.
Why Is Succession Planning Important?
What would happen to you business if you were to suddenly become incapacitated? What is the worst possible outcome? What is the best possible outcome?
The worst possible outcome could include scenarios such as major interruptions in your service or product such that customers move over to your competitors. Employees feel so burned trying to keep the company afloat that they quit. Your leadership team doesn’t have the right training, experience, or access to take over the helm. Complete nightmare, right?
Now, imagine the best possible outcome. Your leadership team remains cool, calm, and collected. They know exactly what to do and how to take over in your absence so that operations continue running smoothly and without a hitch. Your clients and customers stay satisfied and loyal. Your employees have confidence in your leadership team and continue feeling fulfilled and worthy in their jobs.
How do you achieve this best outcome, and not the worst outcome? If you haven’t guessed it already, it’s your business succession plan. Having a plan in place boost’s your organization’s resiliency.
You can make sure your legacy is protected and remains in place, no matter what happens. If you wish for your business to continue running smoothly in the face of adversity, having a solid succession plan is non-negotiable.
Succession Planning Examples
Succession planning is a broad process that can touch on many key areas of your organization. Before you begin, it may be helpful to understand what is typically included. Think about the areas of your business world that would require intentional strategies to mitigate issues, including talent loss. Here are some examples:
Roles & Responsibilities: First, identify key roles that your business couldn’t operate without. These are your essential roles that must be filled at all times. Create detailed descriptions for each of these roles, including responsibilities and required skills, talents, and relationships.
Career Planning: Then, create a system in which each employee has mentorship and guidance. Provide them with the space to map out their career goals in your business. Studies show that career planning gives employees a sense of meaning, thus helping boost their sense of purpose and productivity.
Leadership Development: Because you’ve already identified critical roles, and the skills needed to fulfill those roles, you can give employees a clear guide as to how to work towards filling leadership roles one day. Start identifying employees who are showing growth and encourage them to take advantage of training and mentorship programs.
Training & Education: It’s also important to provide employees with the tools to succeed. By providing training, education, and development programs, you will develop the talents of your employees so that you will have good candidates to fill critical roles when they are vacated.
Knowledge Management: Last but not least, make sure you don’t suffer “brain drain” by capturing and passing down knowledge within your organization. This can include anything from documenting your Standard Operating Procedures (SOPs), training, guides, job descriptions, and any other information that is needed to perform business functions. Be sure to create a system for reviewing, auditing, and updating your documents regularly.
Types of Succession Planning
Succession planning is hardly a “one-size-fits-all” approach. As the business owner, only you can decide what the future of your business and your legacy will look like. Further, it’s up to you to implement strategies to get there.
Because of this, succession planning can take many shapes. In our “Types of Succession” guide, we explain 5 common ways your succession plan could take place. Examples include passing your business to an heir and selling your business to a co-owner. Click on the link to find out more exit strategies and how they all work.
Who Should Engage in Succession Planning?
Not everyone has to engage in succession planning. If you’re not sure, ask yourself if your sudden absence would impact your organization negatively. Also, ask if you feel any responsibility to make sure a transition would go smoothly.
Here are some examples for who should engage in succession planning:
C-suite executives of companies
Directors of organizations, including non-profits
Leaders of sub-organizations
Directors of human resource departments
Just because you don’t fit into any of the above roles doesn’t mean you can’t do succession planning. For instance, let’s say you’re an employee of a company that you care about. You were hired for your unique skill set, and you’re the only person in the organization that does what you do. Perhaps you helped develop the role in some way, and you are an integral part of the organization’s function.
Although creating a succession plan may not be part of your responsibilities, you may feel compelled to create a training manual for your specific job anyway. This can be described as a succession planning activity. You are making sure that if you were to leave one day, that someone could step into your role and have a chance of succeeding because you left behind training and documentation on how to do your job.
How to Create a Succession Plan
Now that you know what a succession plan is, and why it’s a critical activity for some, you might be wondering how to go about creating a succession plan. Again, a succession plan can take many shapes and forms. One CEO’s plan could look entirely different from the one created by the CEO of the company next door.
However, let’s pretend that you are looking to create a basic succession plan. It’s main objective is ensuring that someone in your organization can seamlessly step into your role and take over should anything happen to you.
Here, we break the process down into 6 steps.
Identify critical positions
Seek out promising employees
Notify individuals of the opportunity
Launch (or continue) professional development
Test out succession plan
Integrate your succession plan
1. Identify critical positions
Spend some time exploring and identifying which roles are critical to your operational effectiveness. These are the key people at your company that you wouldn’t want to lose. They may hold special skills or institutional knowledge that are hard to replace. You would be in hot water if any of these key players were to suddenly leave.
Once you’ve identified these positions, go over their roles and responsibilities. Identify the skills and knowledge base that have made these employees successful in their positions.
2. Seek out promising employees
Next, comb through your organization to identify employees who possess the potential to step into these positions. If you’re lucky, you’ll identify someone who already possesses the skills required to take over a vacancy. More often than not, however, you’ll identify some promising candidates who are worthy of some training and mentorship.
Although you may feel compelled to turn to the employees next in line on your organizational chart, don’t ignore other employees who hold promise. This could be someone who shows commitment and drive.
3. Notify individuals of the opportunity
Once you’ve identified critical roles and possible replacements, hold a meeting with each employee. This is not the time to make any promises, but let them know that they have been noticed for their hard work, integrity, and skill sets. Communicate that you are planning for the future of the company and that you have identified them as candidates who show potential to move up in the organization.
This would be a great time to hold career planning meetings and make sure that their goals align with what you have in mind for them. Identify areas in which they could use further training, mentorship, and support.
4. Launch (or continue) professional development
Ideally, you’re already offering organizational training and professional development. Now is the time to ramp up your efforts. Provide training, cross-training, and job rotations to make sure that your candidates provide the hands-on training that they need. Initiating a mentorship program is a great way to improve their soft skills and networking within the organization.
5. Test out succession plan
Don’t wait until you have a vacancy to test out your succession plan. Instead, have a potential successor step up to the plate and fill in for a higher-up during an absence. This could be a vacation or an illness that is keeping them out of the office. During this time, the employee will get the opportunity to see what it’s like to work in such a position and test their abilities. You’ll also have a chance to observe where they excel and where they are lacking and require additional training.
6. Integrate your succession plan
Most likely, your current cohort of candidates won’t perfectly match the current executive leadership group. This is especially true as roles are vacated on various timelines, and successors face their own timelines and learning curves. Make sure to identify back-up options, and don’t forget external recruitment as an option. Last but not least, take a holistic look at your succession plan and see where there are any blind spots or gaps that can be improved.
Don’t Forget About Your Estate Plan!
Building a successful business is no walk in the park. It involves taking risks, convincing others, and making sacrifices. As an owner, the business you’ve built up is very much part of your legacy.
This gives you even more reason to make sure that your business will continue thriving, long after you’re gone. Succession planning is the key to making this happen. The process involves identifying key players, grooming successors, and providing your future cohort with the tools they’d need to succeed. Don’t wait until it’s too late to find out whether or not your succession plan will work. Methodically test and fine-tune your plan. Succession planning is an ongoing process that should evolve alongside business.
While your business makes up a large part of your identity, your succession plan won’t protect your legacy as a whole. That’s why business owners should take care to set up their Estate Plan, which goes hand-in-hand with their succession plan. In this Estate Plan, you can name a Power of Attorney, and designate how your assets should be distributed. This includes any personal interest you own in the company. By having a flashed out estate plan and succession plan, you can walk in confidence knowing all aspects of your legacy are protected. Consider getting started today!
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