A smart business owner is a forward-thinker. He knows that at some point in the future there may come a time when he needs to pass the reigns of the company onto someone else, whether it’s a family member, trusted employee or investor to keep it running even when he’s no longer able to head up operations, writes Alex Pirouz.
Succession planning is a systematic approach in identifying and developing internal people with the potential to fill key business leadership positions in the company. Succession planning increases the availability of experienced and capable employees who are prepared to assume these roles as they become available.
Having this process in place is vital to the success of your organisation because the individuals identified in the plan will eventually be responsible for ensuring your company is able to tackle future challenges. These ‘high potential’ candidates must be carefully selected and then provided training and development that gives them skills and competencies needed for tomorrow’s business environment
Not only is succession planning motivating for employees and a way to prepare and safeguard the company against any unforeseen and sudden changes in human capital, it is also an excellent method with which to manage employees’ competencies in a manner which allows for easy identification of other skills already present on staff. This can save a company thousands of dollars in time and resources wasted on recruiting for a position that could well be filled internally.
The value in identifying these employees within the company is infinite – the employee is already familiar with the company, its policies, its products and services, its staff and more. This familiarity cuts down immensely on the orientation phase that typically takes place when a new staff member is hired to fill a role. This means the potential successor can focus entirely on learning the new job requirements and the skills and techniques necessary to fulfil those requirements.
It is not just about saving money but also about saving time – having someone lined up and ready to fill someone else’s shoes is extremely convenient if a key employee decides to leave during a busy period, and having someone on staff who is trained or in the process of being trained for a role also provides valuable vacation support.
The transfer of ownership and control of a business from one generation to the next is important to get right. While a large number of business owners recognise the importance of succession, many businesses do not have a succession plan in place for the future.
Given that a significant number of business exits fail through liquidation, bankruptcy, illness, divorce or closing up shop, these questions should not be taken lightly. After all, investing the time to develop a strategic succession plan is one of the most important financial decisions business owners may ever make – without one, the value in the business will retire when you do.
Craig West, founder of Succession Plus, has spent the past 15 years advising entrepreneurs on business structuring and succession planning. Throughout his involvement he has witnessed first hand the importance and true value a good succession plan can provide if it is properly executed…
Excerpted from an article originally published in the Sep/Oct 2013 issue of Think & Grow Rich Inc. magazine. If you are a subscriber to Think & Grow Rich Inc. magazine, you will receive this article in your Sep/Oct 2013 issue of TGR. If you are not a subscriber, click here to subscribe.