Succession planning

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Succession planning is a process for identifying and developing internal personnel with the potential to fill key or critical organisational positions. Succession planning ensures the availability of experienced and capable employees that are prepared to assume these roles as they become available.

Succession planning accelerates the transition of qualified employees from individual contributors to managers and leaders. Succession planning:

• Prepares current employees to undertake key roles
• Develops talent and long-term growth
• Improves workforce capabilities and overall performance
• Improves employee commitment and therefore retention
• Meets the career development requirements of existing employees
• Improves support to employees throughout their employment
• Counters the increasing difficulty of recruiting employees externally
• Focuses on leadership continuity and improved knowledge sharing
• Provides more effective monitoring and tracking of employee proficiency levels and skill gaps

Succession planning is a necessary part of an organisation's ability to reduce risk, create a proven leadership model, smooth business continuity and improve staff morale.

[edit] Succession Plan

There are four stages to developing an effective succession plan:

• Identifying roles for succession;
• Developing a clear understanding of the capabilities required to undertake those roles;
• Identifying employees who could potentially fill and perform highly in such roles; and
• Preparing employees to be ready for advancement into each identified role.

Without the implementation of a succession plan, there can be significant impacts on an organisation including;

• Loss of expertise and business knowledge
• Loss of business continuity
• Damaged client relationships
• Time and effort to recruit and train replacement employees

[edit] Business Succession Planning

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Business succession planning involves planning for the smooth continuation and success of a business which depends greatly on the availability of competent staff. Be it profit or non-profit organization, one of the concerns is there may be no successor to drive it once the leader or key person leaves – either by choice or other circumstances. This concern has been repeatedly expressed in the papers by leaders from the private and government sector. It is people, or more aptly, the right people, that make things happen. If the leader or key person does not retire (whether by old age, disability or choice) he will end his time of service when he dies. And when they do, problems often set in.

What is likely to happen to the organization when a key leader is eliminated without succession planning in place? Here are some things to expect. First, there would be either no able successor or where there is, the successor is often either unprepared to handle the heavy responsibilities placed upon them or he/she simply does not have the ability to manage the organization in the way it used to be. Whatever the case may turn out to be, the situation can be dire for the organization. Profit may be lost. Business can become untenable to continue. In the case of the unplanned death of an owner, the remaining co-owners and the heirs may be embroiled in a relationship crisis that threatens to wreck the business.

In an unplanned situation, ineffective quick-fixed solutions are the only answers left. If no able successor can be found, a temporary replacement is often the only choice left, and the ultimate result may still be the downfall of the organization. It is difficult enough to run an organization with experience and ability. Without the requisite qualities in the new leader, the rot of the organization is almost likely to set in immediately; unless it is lucky to have a replacement who happens to be suitable and motivated. If not, an unmotivated successor is equally bad news for the set-up. Without the drive, the organization will stay stagnant and more than likely, to slide.

Without succession planning, a business that has become successful can just as easily fail. The business grows because there is a leader with experience, drive and ability. Without proper succession planning, the future success of the business is left to chance once that leader is gone. Under such a circumstance, if it succeeds at all, it is by default rather than planned. That is not all. The passing of the baton from one generation to the next is often clouded by the stakeholders’ differing views and agendas. Without proper planning, the clashes of views and agendas can pull the business in several directions and this may wreck an otherwise viable business.

With so much at stake, business succession planning has to be a priority and should be part of every business planning. There are two main options available to business succession planning, which are:

1.Retention Planning: Retention of the business within the family circle; and

2.Buy-sell Planning: Selling of the establishment to other business owners or key employees or interested outsiders.

It is a norm in many parts of Asia that succession planning is a sensitive issue to discuss amongst partners or shareholders. This is despite the fact that a successful transition minimizes disruption, ensures continuous profitability and guarantee satisfactory returns to the partners and shareholders.

TODAY..... Good joint management and effort among business shareholders have built a successful and profitable business. The business shareholder and his family enjoy a comfortable livelihood and good lifestyle.

TOMORROW..... Suddenly, unexpectedly, a key shareholder dies and the business is disrupted instantly. What will be the outcome of the shareholders' business interest and his family's livelihood and lifestyle?

FUTURE..... The surviving shareholder and the deceased shareholder’s family face a critical decision. What are the options available to the surviving shareholders and the deceased shareholder’s family? What are the options available AFTER the event has happened?

•The heirs become active in the business - Do they have the experience, skills and expertise to manage the business and be an asset to the company?

•The deceased’s share is sold to an outsider. The heirs keep their share as inactive shareholders - Can the surviving shareholders accept this arrangement with the extra input of effort and yet share equally in the profits?

•The deceased shareholder’s share is sold to surviving shareholders - Will the surviving shareholders be able to raise the necessary cash for this transaction?

An IDEAL SOLUTION for all concerned could be...(action plan)

Proper business continuation and succession planning can help prevent a business from being frozen and discontinued. It also helps avoid conflict among family member and between heirs and surviving owners.

[edit] Family Business Succession Planning

Due to the complexities surrounding the transfer of ownership of family businesses from one generation to another, specific resources have been developed for family business owners planning for this transition. Among these resources is the McCabe Arch (sm) which is a visualization and planning tool for the American business owner. It offers practical solutions for planning the orderly consumption and distribution of financial and emotional wealth.

The process, like the construction of an arch, begins with two solid cornerstones, the business owner who is willing to plan for his or her eventual departure from the business, and the willing successor.

However, the unique aspect of an arch was that we continually build it from two sides. For a succession planning model to work, we needed commitment from the owner and the protégé. It was imperative that both sides complete their assignments with the ultimate goal of the finding—and resolving—the key issues that were represented by the various blocks. -Harry McCabe (Author of Pass It On: The Entrepreneur's Succession Playbook)

Each building block on each side of the arch represents a step in the 7 Steps to Succession(sm), which provides a time table and road map for Family Business Succession Plans.

McCabe, Harry. 2007. Pass It On: The Entrepreneur's Succession Playbook. http://www.readpassiton.com ISBN 9780979912306

Whitmore, Melissa. 2006. Success through succession: Implementing Succession Planningat the Texas Department of Insurance. Applied Research Project. Texas State University. http://ecommons.txstate.edu/arp/185/

Business Succession Planning by Hybrid Content - This article provides legal information for laypeople searching the Internet for information on business succession planning. Business succession planning, in most cases, involves a family or heritage business. http://www.hybridcontent.net/business.htm

Kruger, Sarah; Raaf, James J.; Schuma, Richard P.; and Costello, Ellen (2008). "Here, Take the Wheel. Succession Planning Stories and Insights from Business Owners" -- This book and website by Harris N.A. offers a window into the world of business owners who seek to transition their companies to succeeding generations, or alternatively, to sell them. Through a series of "real-life" interviews with people engaged in various stages of the succession planning process, a number of common themes emerge: interpersonal, financial, business, and emotional. And, while every situation is unique, there is much to be learned from the experiences of others. In addition to these firsthand accounts, experienced advisors provide expert commentary and advice about this very important topic. "Here, Take the Wheel. Succession Planning Stories and Insights from Business Owners" concludes with a framework for action which will be particularly helpful for those business owners who have yet to get started on planning their future succession. http://www.heretakethewheel.com