Succession planning is often surrounded by a cloud of confusion. Bill Hovey, CEO of Linchpin Group Australia, tries to help SMEs in understanding succession planning.
In my daily work with clients a number of issues about succession planning arise continuously.
The first is confusion around what succession actually entails. 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 three dimensions: ownership succession, management succession and internal succession.
Ownership succession focuses on who will own the business, and when and how that will happen. This is a platform for an owner’s eventual transition from both management and, in many instances, from ownership. The ownership succession plan enables the business to be ‘groomed’ attractively to ensure it is seen in the best possible light and gets the best price if you plan on selling.
Management succession focuses on who will run the business, what changes will occur, when they will be accountable for results and how results will be realised.
Internal succession is 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. A 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.
The second is the misconception that having succession on the to-do list is all that is needed, particularly when the owner has no intention of leaving any time soon. It is absolutely critical that any business starts planning for succession as early as possible; in fact, you can never be too well prepared and you certainly can never prepare too early. You need to consider having:
- a strategy in place should you, or a key staff member, be unable to return to work for a long period, or in the worst case scenario – never.
- this strategy documented and communicated effectively to the business
- a process in place that ensures qualified and appropriately trained people are able to take over competently when the current key people retire or move on
- business plans which demonstrate a clearly defined viable future
- business plans which clearly articulate, document and communicate the key people within the organisation.
Another issue I come across regularly with clients is that many find letting go of the business extremely difficult. Letting go is undeniably tough, particularly in a business to which you have given your lifeblood and identity. However, being able to let go at the right time for you, whilst leaving the company in healthy shape, is the real testament to your strength of leadership. Ideally, to make the wrench less painful personally and to leave a robust business behind, you need to let go from the word go. This means, from day one, choosing your people wisely, having confidence to delegate and engage them in all aspects of the business, nurturing them along the way, and rewarding them for their performance and their behaviours.
Clients often ask me how they can be sure that they will choose the right successor. To do this confidently you need to have sound recruitment strategies in place. This is critical because a poor succession choice can undo in months what you have painstakingly built over many years. These strategies should form part of a plan to have the right executives in the wings, groomed to take control and lead the business strongly into the future. This is also a sound risk management strategy for a situation when there is an unexpected emergency.
-Bill Hovey is CEO of Linchpin Group Australia (www.linchpingroupaustralia.com).