After investing a career’s worth of hard work, expertise, and personal capital to grow a successful company, many business owners turn their thoughts toward succession planning as retirement — or your next achievement — begins to take shape on the horizon.
Often, that’s a mistake; not succession planning, but waiting too long to identify leadership candidates and prepare them to lead the business into a successful future.
According to the Society for Human Resource Management, succession planning is as much an employee retention tool as it is an aspect of strategic business planning. Establishing a company-wide succession plan can help you and your business:
- Identify and address talent needs and skills gaps
- Refine, protect, and retain institutional knowledge
- Retain top employees by providing development opportunities and a long-term career path
- Create a clear roadmap for a confident exit when you’re ready
Recognizing that no two companies are alike in their leadership needs, when is it the right time to start working on your succession plan? What key questions should you ask as you build out a strong future C-suite?
Is There an Optimal Timeline for Succession Planning?
The short answer to this question is, well, not really. Every company’s timeline is individual. But it often takes 12 months or more to build out a leadership succession plan and depending on business needs it could take more than two or even three years. That’s why often, by the time the business owner feels ready, he or she may already have fallen behind.
The risks of not succession planning can include:
- Losing mission-critical knowledge when valuable employees depart
- Being forced to choose a less-than-ideal successor for key positions
- Loss of productivity and continuity when onboarding new leadership hires
- Disruptions to significant business relationships with key customers, clients, and vendors
It really is a classic “fail to plan = plan to fail” scenario.
In practice, succession planning is an ongoing, recursive process that should be in place for valuable workers in key roles throughout an organization. It’s not a once-and-done occasion — though in the context of a long-term owner of a business, it certainly can feel like a critical career event. That said, when developing your individualized succession planning roadmap, be sure to build out your timeline with consideration for time and resources to meet these goals:
1. Identify the key positions responsible for maintaining continuity
It goes without saying that the owner of a closely held company who has served at the helm — often for decades — wears a lot of hats. Ask yourself: Can your role be filled by a single individual, or is it in the best interest of the company to divide your current responsibilities between two leaders?
As you consider responsibilities you’re accountable for, it’s wise to play out scenarios in which your seat suddenly becomes vacant. If a crisis were to arise, who can step up to prevent chaos and support business continuity? If you’ve run a successful business, you understand the value of contingency planning; be sure to make room for it in your succession planning roadmap.
2. Catalog competencies, capabilities, and characteristics needed for success in the role(s)
You might begin by reviewing a job description, but be sure to ask each critical leader to participate in this step. Their input becomes especially important if your company has seen growth and change. Do they need to hold special certifications or professional licenses to be effective? Creating a profile of an ideal successful individual in the role can help your team build out the development path to help candidates get there over time.
3. Identify individuals who are well-suited to succeed current leaders
The people you recognize as quality candidates may be internal or external. Chances are, you’ll identify more than one candidate for any given position — a good thing, given the fact that the only constant in business is change.
This can yield a shortlist of employees who might need professional development as part of their retention plan. Remember, it’s not about promising a role or title; it’s about providing valuable growth opportunities over the long term.
4. Identify shortcomings in capabilities and competencies
As you compare candidates’ capabilities with the needs of each role — often personified by the current title holder — capability gaps and development needs will crystallize and become clear.
5. Create individualized development plans to bridge gaps in skills and knowledge
Some shortfalls may require investments in education and training, while others may be met with internal mentoring, coaching, and incremental opportunities. But the roadmap for every succession candidate will likely be unique.
6. Implement, monitor, and adjust succession plans
The structure and management of succession plans depends on your exit timing (or the prospective exit of another key leader). If the goal date is close, be prepared to dedicate more time to development. Put a plan in place to ensure your candidates aren’t overwhelmed by the combination of day-to-day responsibilities and their new development planning goals. Another important detail to consider when working with internal succession candidates is that once they move into a new role, they’ll need to be replaced, too.
Remember too, succession planning urgency and the prioritization of professional development starts at the top.
7. Execute a calm, confident handoff
The number one goal of a succession plan is to avoid chaos and disruption — but consider the multiple rewards a company can reap by implementing succession planning for significant roles both within leadership and for other key accountabilities:
- Improved employee loyalty and engagement
- Clear performance goals and success metrics
- Reduced organizational risk
- Better insights into workforce needs and opportunities
- Lower recruitment costs
What About Ownership Succession Planning?
Succession planning is a strategic, long-term professional development and business transition process that should start well in advance of a business owner’s departure. If you’re a sole owner or key stakeholder in a closely held business, your exit strategy is about much more than filling your leadership role with a competent replacement. You’re looking for an answer to the question, “Who should own my business next?”
You’re probably also exploring how to access liquidity from the value of your business, so you can start moving with greater confidence toward your next life chapter. That’s why you’ll want to explore all your exit strategy options and compare their potential results — for you, for the company’s future, and for the employees whose loyalty and hard work also contributed to your success. Click below to get the guide — the sooner, the better. You’ll be glad you didn’t wait.