As a business owner, having a succession plan is essential to your company’s future. A succession plan ensures that your business is prepared for all contingencies and helps develop high-potential candidates to fill future leadership and other roles.
Learn why succession planning is vital to your business and discover seven essential steps for a successful succession plan strategy.
What is Succession Planning?
Succession planning refers to how a business transfers leadership roles to keep the company running smoothly as business owners retire or pass away. Succession planning involves strategically hiring and training employees to take on leadership roles so that the company can continue running without interruption when a vacancy occurs.
Succession planning also ensures that your company moves talented people through the leadership pipeline, giving employees the opportunity for advancement, which is crucial in the modern workplace. Diversity concerns and workforce shortages are causing many companies to struggle with filling positions left by retiring managers and executives.
Why is Developing a Succession Planning Strategy Beneficial to Your Business?
Developing a successful succession planning strategy for your business promotes the following benefits:
- A transfer of knowledge that ensures the continuation of your business
- Better organization and strategizing when hiring and promoting employees
- Helps identify training needs and skill gaps
- A shared sense of value and vision among employees
- Brings in new talent with diverse backgrounds and experiences
- Being prepared for all contingencies
Finally, succession planning provides you with an exit strategy when you want to retire or sell your stake in the company. A well-crafted succession plan allows you to move on to the next phase in life while your business continues.
How to Develop a Succession Plan
Developing a succession plan strategy depends on the type and size of your company. Generally, you will want to consider the following elements when creating a succession plan:
- Your company’s organizational structure
- The scope of your succession planning strategy
- How to implement the plan
- How to measure the plan’s success
- Plans for transitioning roles
You will also want to consider different business succession planning strategies to decide which option works best for your company. Options include selling to a co-owner, leaving it to an heir, or selling it to employees or a third party.
Windes succession planning services can develop a successful plan for your privately held company in California.
7 Steps for a Successful Succession Planning Strategy
An effective succession planning strategy helps you identify and develop future leaders for all critical roles in your business. The right approach prepares your company for all possible contingencies and helps train current employees for the future. Your succession planning strategy should include the following seven steps:
1. Be proactive
The biggest key to developing a successful succession plan strategy is to be proactive. While you may wait until a few years before retirement to worry about a succession plan, it is prudent to start planning earlier. A proactive approach can help you prepare for unexpected situations and allows you to work on accelerating the value of your business for a future sale.
Start thinking about the impact of different positions in your business and how a vacancy in one of those positions affects business flow. If your accounts payable or receivable relies on one or two people, your business could face delays or other problems paying employees or clients. Use this strategy to have a backup solution in place.
2. Identify succession options
As you consider the positions you may need to fill one day, look around your company and identify employees who could make successful succession candidates. Consider multiple options, including those next in the organizational chart and who may possess the skills and talent needed to fill your leadership positions. This also allows your business to diversify leadership and management roles.
When identifying candidates, consider what type of training they may need to grow into the position. The earlier you examine your options, the more prepared your company will be when vacancies occur.
3. Discuss the opportunity with candidates
Discuss your thoughts with the people you have identified as prospective succession candidates. While some may jump at the chance to step into a leadership role, other employees may have different career goals in mind.
By discussing the possibility with them and discovering their goals and commitment level to your company, you can better understand whether they fit into your succession plan.
4. Train and develop candidates
As part of your succession planning strategy, include training and development for candidates. Ideally, you will invest in professional development courses to teach them skills they will need to perform at a high level. You can also begin a mentoring program to impart company-specific knowledge unavailable in general training sessions.
5. Hire with the succession plan in mind
A significant element of a successful succession plan is to hire employees with succession in mind. Choosing succession candidates is much easier when you have a talented pool of capable candidates. Focus your recruiting efforts on attracting new hires who already possess the qualities you need to lead your business.
6. Try out your succession plan
It is vital to give your succession plan a trial run before turning your company over to new leadership. A trial allows you to observe where your strategy works and where it fails so you can adjust it for success.
It also provides your succession candidate or candidates with an opportunity to show what they have learned and how they will handle running your company once you have exited your position.
7. Plan for obstacles
One final element of a successful succession plan is to prepare for potential obstacles. The best way to do this is to work with a professional succession planning firm that knows how to identify the barriers to a successful succession strategy and the solutions you can implement to overcome them.
Windes offers succession planning for businesses ranging from small family-owned to large corporations. We can assist with goal assessment, choosing a successor, and finding the right transfer strategy for your business.
Plan for Your Business’ Future
Ensure your businesses’ continued success with a well-organized succession planning strategy. Windes is a consulting and advisory firm providing tax and financial solutions. We specialize in business succession planning and wealth transition strategies for privately held companies in Los Angeles, Long Beach, Orange County, and beyond.
Contact Windes at 844.494.6337 or email@example.com to learn more about succession planning and how we can help you create a succession plan for your company.