Succession planning.  For most small businesses uttering the words “succession planning” brings visions of retirement, sale or shutting up shop.  But, and this is important, succession planning is not limited to selling or exiting out of a business.  The practice of identifying up and coming employees, grooming them for a particular role or simply having them in a place whereby they can take over should someone leave, is all part of succession planning.  Having an effective succession strategy in place should mean you are never surprised by the unexpected.

Really what we’re talking about when we talk about succession planning, is the development of a plan to provide for the continuation of a business through the skills, development and motivation of key members of your team.  Such a plan will identify areas of improvement and it will highlight were training and development is needed (or even the swap-out of employees).  The succession plan will apply to every stage in the business cycle from start-up through to maturity.

There are three key tiers to developing a succession plan strategy and each is important:

So let’s start at the top with Operational Succession.

When developing a plan relating to operational succession you will be focussing on the people part of your business.  You’ll be reviewing procedures around their recruitment, assessment, management, motivation and development.  The idea here is to identify and develop employees capable of taking over in the event of key people leaving the business.

As the owner of the business, the onus is on you to train and develop these people towards their future potential, whatever it may be.  For example, at this stage you may not have thought about what you will do if and when you decide to take a step back from the business, but having someone energised and trained may make the decision and transition easier should need be.  Not only this, but your staff are likely wanting to be challenged, in identifying suitable candidates for succession, staff have the opportunity to grow their skills and knowledge making them more valuable to you but also providing them with a fulfilling work environment.

Added benefits include things like increasing knowledge in key functional areas (which increases the business’ value), minimising “key-man” risks (where one person is the living breathing knowledge bank for the business) and allows you as the owner to take on more strategic work rather than solely working in the business itself.

So if you’re a small business owner, how do you go about creating this kind of high-performance business culture?

It’s actually a lot simpler than it sounds and the following can be used as a starting point:

The development of this strategy is about identifying what skills and traits you would like to see in your employees then developing methods to measure how they develop towards learning those skills and traits.  But let’s just pause for a moment and say:  what if you have a fabulous employee but they are happy “just doing their job”, they don’t want to have an ownership interest at any point in the future.

Alternative career paths should be allowed for within the business for these employees because they are loyal, hardworking, diligent, culturally correct, they just don’t want the pressure and responsibility which comes with business ownership.

The next tier in the succession planning strategy relates to crisis management.  Now most of the time when business owners think about succession planning and crisis management, it involves the sudden exit of the key player within the business, usually through death.  Crisis may not be limited to a death or disablement, it could be a catastrophic fire or flood.  In planning for all this, owners tend ensure the correct insurances are in place.  And this is a very good and valuable exercise to be undertaking.

However orders still need to be filled, customers still need to be looked after and employees still need to be managed and paid.  And in a small team, accidents involving death or disability are felt closely by all.  But who is expected to step up to the plate and manage all of this until a future plan can be agreed upon?

This is where ensuring an effective succession plan includes identifying employees who are capable and have the ability to step up in such (hopefully rare) scenarios.  These employees need to be groomed to understand the impact on both the team and the business itself in such situations and not only capable of following a plan to manage it, but lead others through the crisis as well.

The last piece of the succession planning process involves reviewing the owners of the business, their intentions and wishes for the future.  The reality when exiting out of a business, is that it’s going to take around 5 years.  It’s not instantaneous so a plan needs to be in place to help keep everything on track.

A solid strategy for a withdrawal from the business will actually increase it’s value and ease of exit.  Planning for this requires you as the owner to take a hard look at what you want (or don’t want), timeframes, legacy issues, family issues, everything.  Use your advisors to help you develop your plan so when the time comes, the transition is smooth and painless.

In reading this you may say to yourself:  “I don’t need to worry about this, I’ll just shut up shop” or “this’ll never happen to me” or “I’m a long way off needing to worry about this”.  And if you’re a one-man band who is able to easily transfer their clients elsewhere then that’s fine.  But if you’re a little larger, with even just one employee, then succession planning is something which needs to be looked at in order to ensure a lifetime of hard work is not lost in one move.

If you own a business which has multiple members of the leadership team or multiple founders, succession planning is an imperative.  Many a good relationship has been destroyed through a lack of agreements and understanding between the partners and/or their spouses.

For the time and effort it takes, it really is worth it.

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