5 Points To Consider for Effective Succession Planning
Deciding how, when, and who to hand over the leadership reins is potentially one of the biggest decisions you’ll have to make as a business leader or owner. It’s a decision you’ll need to put a lot of thought into and one you’ll need to start planning well before you intend to step aside.
Succession planning is a plan for the future that allows you to identify, grow and guide your talent so they are ready to step into leadership positions when the time comes, even if it happens sooner than expected.
Succession planning can be a highly effective way to ensure a smooth leadership transition with minimal impact on the business. However, if not done correctly, you run the risk of the opposite happening.
To help get you started with the succession planning process, we’ve pulled together a list of five key elements you should keep in mind.
What Is Succession Planning and Why Is It Important?
Succession planning is the process of creating a comprehensive plan to ensure suitable candidates are coming through the ranks to fill important positions.
This kind of planning allows you to identify talent within your organization and provide them with training and growth opportunities that will get them ready for leadership positions.
Changes happen both in life and in business and these changes can happen unexpectedly. If you don’t have a plan in place, you run the risk of being inadequately resourced should you or one of your leadership team need to step aside unexpectedly. This can then have a negative impact on your organization’s performance and your legacy.
By showing your top talent that they have a path to follow and growth in their future, they are also more likely to be motivated.
5 Points To Consider When Succession Planning
1. Figure Out What’s Important to You
Before deciding on who should succeed you, or who will fill important leadership positions within your team, you need to spend some time reflecting on what your business means to you.
This means thinking about the level of involvement you and your family have and what your overall vision is for your business.
The person that you choose to succeed you, or sit in leadership roles around you, needs to be aligned with this vision and values. They need to be aware of any family dynamics at play too.
As part of this reflection process, you should be thinking about when you see yourself transitioning away from your role and what factors might influence this timing. Having this timeline in mind can help you better plan for your succession.
2. Assess Where Your Business Is and Where You’d Like It To Go
Taking stock of your business is important as there are many different factors that will influence when and how you hand over the leadership. You should consider the following elements:
- Finances. You’ll need to make sure your business’ finances are all in order and that everything is documented before stepping aside. If this is not currently the case you can put in steps now to make it happen. From a personal standpoint, if you are currently dependent on the salary you’re getting, you’ll need to put a plan in place to make sure you’re financially stable when you step aside. This will usually be done as part of your estate planning.
- The structure of the business. You should assess whether your business is set up in a way that it can be transferred to someone else. If a number of processes and decision-making strategies are controlled by just you, handing them over to someone else could be difficult.
- Business performance. Asking yourself whether your business is doing well and whether it would survive a transition of leadership is important. If it’s not performing well, you can work on improvement strategies and put in place a growth plan alongside your succession plan.
- Team dynamics. You’ll also need to analyze how your teams and managers are working together, how well they understand the organizational vision and growth plans, and whether everyone is working toward a common goal.
3. Identify Talent and Your Successor
A big piece of the succession plan puzzle is identifying the person who will succeed you. This might be one of your children, another relative, or someone else.
Whoever it is, you’ll need to identify that person early on to ensure this individual is properly prepared, has enough knowledge of the business as a whole, and is trained for the role.
4. Continually Develop Talent
Interests, priorities, and plans can change over time. Therefore it's important to regularly communicate with, and mentor, future leaders within the business.
This involves having regular check-ins about their goals and aspirations. Together you should continually look for opportunities where they can grow their skills and experience, further preparing them for their next step.
5. Consider Your Family
If you have a family business and are planning for succession, you must make sure everyone knows about the plan. Family dynamics can impact succession conversations, so it’s important that you take that into consideration when choosing a successor and deciding on the plan.
As you get started with your plan, you should do some work to understand expectations within your family about how they see the business going, and where they see themselves fitting into that. You can then communicate your own expectations to your family members.
Continuous, open communication is crucial for an effective succession plan.
Succession planning is an essential process to ensure that your business is ready and able to deal with a planned or unplanned change in leadership, whether that is from your departure or that of another leader.
There are certain elements that must be taken into consideration for your plan to be a productive one. Succession is also something that impacts your overall wealth management plan. Therefore, it’s important to speak to your Entrust Wealth Partners advisor as you navigate this process.
Our Entrust Wealth Partners team is here to listen and advise you on the best path forward for you when it comes to succession planning. Contact your advisor or reach out to us at (860) 838-3730 to speak about your plan.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which strategies or investments may be suitable for you, consult the appropriate qualified professional prior to making a decision.
This material was prepared by Courtney Henry Consulting.