When I say ‘succession planning’ what does it mean to you? How does it make you react?
The answer probably depends upon the environment that you work in.
A large corporate perspective
If you work in the large corporate world then succession planning is probably HR driven and refers to the process of identifying talent and the admin exercise you complete as part of annual reviews or appraisals to name an individual as your potential future replacement, when you progress onto a new challenge.
That may sound a little cynical, but I’m sorry I’ve worked in a number of large global corporates and I’ve yet to see one take this seriously or treat it as anything more than following a HR process to put some names in a box. The biggest pity is that if done seriously and properly it is a fantastic way of keeping and rewarding high potential talent, showing your employees that you value them and creating a culture of empowerment and excellence.
Small business owners
If however you work in a small business and are a small business owner, have you even given this subject any thought at all?
If you have, what does it look like? What’s your plan for your business when you decide its time to take a back seat / step away all together and retire / or just don’t have the energy anymore to take the business on its next phase of growth?
For many business owners when they started the company, if they even gave it a thought, the desire was probably for a second generation to take over and continue building the organisation.
Unfortunately for many owners they are realising that the second generation have their own ambitions, there are new careers that never existed before, or they want to paddle their own canoe’s and experience for themselves what its like to do their own thing.
There is a whole generation of business owners who are suddenly facing this dilemma, and if we’re really honest about it, the unique challenges of 2020 will probably lead to even more thinking about it once they are assured that the business will survive.
Planning for succession
So how do we go about the process of succession planning.
- Start to understand what you want out of the business when you step away. Do you want a cash lump sum to fund your retirement plans and to walk away without any ongoing obligations?
- Decide what you want for the business when you step away from it or out of it. Do you care what happens to it, would you be happy if a competitor bought it for example?
- Understand what you want for your employees and workforce. Do you want to feel like their future is secure?
- Have clarity on the types of exit available to you. (Trade sale, asset sale, Management buy in or out, Employee Ownership Trust, Employ an MD and keep taking the dividend.)
- Don’t underestimate the work involved in preparing a business to exit from it. This can take anything from 3 – 5 years if you are to get the maximum value for your business.
- Be clear on the emotional drain that exiting a business has. Make sure you have the best professional advisors around you. You will need support through this both professionally and personally. Are you aware of the team you will need and the roles they will play?
Its never too early to start thinking about succession planning!
It’s not just corporate speak or process, and in fact it is far more important for the small privately owned business than it is for the large international corporate.
And finally when do you want to start thinking about succession planning?
- Whilst you are still motivated and engaged in the business with the energy levels required to make important change.
- Or at that point when the batteries are low, motivation has waned, tough decisions are hard to make & implement and your appetite to make change is at its lowest.
When I ask again what succession planning means to you, will your answer be different now?