Succession planning is critical to all businesses, no matter their size or industry. Charisse Gray explores the different succession plan options owners should consider.
A business without a succession plan is like a ship without a rudder, unable to navigate safely and wisely the sometimes placid, sometimes stormy seas ahead.
If you are a business owner you should take the time, as early in the business cycle as possible, to examine where you are going and how you are going to get there. Don’t be put off if you can’t see an immediate reward for your early planning, the key is to have time on your side. Leaving your planning too long can jeopardise all that you have built and hoped for. Effective internal succession planning is ongoing and the earlier you start planning, the more viable you can make the business.
There are many aspects to consider, and there are different plans to suit the different stages of succession. And you need to plan for all those stages. Succession is best described as the transfer of both management and control within a business. It does not mean a complete exit from ownership, but it does mean an exit from management. It can be described more definitively as having two dimensions: ownership succession and management succession.
Ownership succession focuses on who will own the business, and when and how that change will happen. Management succession focuses on who will run the business, what changes will occur, when the new management will be accountable for results and how results will be realised. But there is another plan to consider first.
Bill Hovey, CEO of the Linchpin Group Australia and managing director of Linchpin Succession Management, brings a third element into the picture: internal succession. He defines this as a disciplined means of nurturing, developing and retaining talent as a platform for an owner’s eventual transition from management and, in many instances, from ownership. Hovey explains that well executed internal succession planning creates an environment which ensures that the best people have been chosen wisely and groomed appropriately to lead the business into the future. Hovey describes ownership succession as a platform for an owner’s eventual transition from management and, in many instances, from ownership. The ownership succession plan enables the business to be ‘groomed’ attractively to ensure that it is seen in the best possible light and gets the best price if you plan on selling.
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Inadequate planning can be dangerous, and not having a well considered succession strategy in place exposes even the most successful business to catastrophe. If you put succession planning in the too-hard basket, or act only when retirement is on the horizon, you could experience monetary losses, and even loss of the business itself through any number of factors. These include the degradation of the brand, failure to keep pace with the competition, loss of customers, loss of sales, staff attrition and loss of key talent, a fracturing of stakeholder relationships and goodwill, and a gradual decline in the value of the business.
* Charisse Gray is a senior business writer for the NSW Business Chamber (http://www.nswbusinesschamber.com.au).
Test Yourself
How prepared are you? Six important questions for the business owner:
1. Do you have a strategy in place should you, or a key staff member, be unable to return to work for a long period or never?
2. Is this strategy documented and has it been communicated effectively to the business?
3. Do you have a process in place that ensures qualified and appropriately trained staff can take over competently when the current generation of managers and key people retire or move on?
4. Has this strategy been documented and communicated to the key people involved?
5. Are you able to demonstrate your business plans for a clearly defined viable future?
6. Have these plans been clearly articulated, documented, and communicated to the key people within your organisation?
