A Guide to Succession Planning

An unplanned change in circumstances at leadership level has the potential to derail any business. This is particularly true if the change is sudden, or the company has insufficient cover in place.

The unexpected loss or resignation of a key team member, or lack of foresight when an owner or manager retires, can negatively impact productivity, revenue, and company morale, throwing the whole business into disarray.

Succession, or replacement planning as it’s sometimes called, is a business strategy that tackles potential senior staffing issues head on. It involves companies taking a proactive approach to passing leadership roles down to employees, ensuring a business continues to run smoothly no matter what staffing changes or challenges lie ahead.

What is succession planning – and why does it matter?

Succession planning is a way of safeguarding the future of a business. It ensures there are always competent, reliable, trustworthy members of staff to fulfil vital company roles, both short-and long-term, by cross-training employees who merit career advancement.

Suitable candidates are given the opportunity to develop skills and knowledge by shadowing senior staff members, giving them an understanding of the business at a granular level. This means all employees who show aptitude and willing have a chance at promotion – not just managers and executives.

As well as protecting a business from upheaval in the event of senior staffing changes, succession planning also provides opportunity for diversification. This allows companies to nurture internal growth and development, broadening the collective expertise of staff and management to remain competitive, progressive, and successful.

A robust succession plan for diversification should include hiring people from a variety of backgrounds who have different approaches to leadership and bring a mix of experiences to the company.

Provision must also be made to ensure all existing employees have equal opportunities to fulfil future roles within the company.

The process of succession planning  

Succession planning is an ongoing process, rather than a one-off event. Regular reviews should be carried out to ensure up-to-date staffing provision is in place and any changes that affect current planning are addressed.

It’s also important to regularly assess current leaders’ skills and capabilities; interview candidates who show potential to be replacements and commence training for any staff who may be suitable.

Once a candidate’s training has commenced, it’s vital that their knowledge is kept up to date with any changes in company policy or procedure that may affect how they work. This will ensure they are ready to assume the new role whenever the time comes, even if it is at short notice.

Succession planning is about preparation rather than pre-selection. Cross-training staff by inviting them to shadow various roles across several departments will give them the knowledge and range of skills to be able to step into a more senior role if required.

In large companies, the board of directors, along with the CEO, usually oversees succession planning. The business’ owners, shareholders, and employees are also involved. For smaller, family-run businesses, succession planning is training the younger generation to take over.

Some companies have more than one succession plan; one that caters for emergency situations such as sudden illness and another that’s a long-term vision for the future of the company.

Succession planning for business partnerships

One approach to succession planning within business partnerships is through a cross-purchase agreement. This is where each partner takes out a life insurance policy that names the other as the beneficiary, allowing the surviving partner to continue running the business after their death.

This ensures that, should one partner pass away, the surviving partner doesn’t have to worry about finding the funds to buy the deceased partner’s share of the business.

Benefits of succession planning

Aside from the obvious benefit of avoiding future staffing and management difficulties, succession planning has numerous positive influences on the efficiency and productivity of a business.

From an employee’s perspective, succession planning shows you are a company that’s willing to invest in its workers. The training of junior staff members by senior management to fulfil their job roles demonstrates the company’s commitment to developing career prospects. It shows employees there is a clear trajectory for advancement and even ownership, which also helps attract top talent to your business.

This has a hugely beneficial impact on both morale and employee work ethic. It also fosters staff loyalty and boosts job satisfaction, ensuring the people you train and invest in can be relied upon in the future.

From a management perspective, the training and mentoring of employees across various departments within a variety of roles supports synergy and good communication within the business. In this way, succession planning ensures staff at every level share the same company values and standards of excellence, giving your business a powerful unity of vision.

As a business owner, succession planning inspires confidence in your shareholders and investor. When the new CEO is already well-known and respected years before they step into the role, it reassures those with a stake in the company that its future – and their money – is in safe hands.

Succession planning also provides business owners with peace of mind. When the time comes to sell or retire, a well-thought-out succession plan means their exit strategy is already in place, making for a smooth, efficient transition.