Succession Planning And You
May 07, 2010
As with any other kind of planning, it’s critical for a business owner to develop some sort of exit plan. Whether the owner intends to sell the business, transfer it to a family member, or transition it to their employees, they need to put the pieces in place to make it happen.
One of my favorite questions for a CEO is: “If that individual were hit by a bus, would your company be able to function without them?” There are some positions and employees who have been with a business for long periods of time. Their role is often undefined and poorly documented.
All too often, these individuals hold the keys to many areas of a business’ operation. Perhaps they are the only employee who fully understands (and knows how to calculate) commissions payable to your sales force. Maybe they developed your operating system and have maintained in a manner that doesn’t include sufficient documentation for a new person to sort it out. And – this is the big one – maybe they aren’t part of the owner’s vision for the company in that vague, distant place in the future when the owner plans to retire.
According to Wikipedia, there are 4 stages to developing an effective succession plan:
- Identifying roles for succession;
- Developing a clear understanding of the capabilities required to undertake those roles;
- Identifying employees who could potentially fill and perform highly in such roles; and
- Preparing employees to be ready for advancement into each identified role.
These rules apply whether the owner sells the business or retires from it. In order for the business to run without the founder, significant thought will need to be put into making that possible.
If you look around your organization and you don’t see any employees suited for the eventual leadership role, then now is the time to start recruiting them. On the other hand, if you’ve already got key talent on board, it’s important that they understand their importance to the company. Train them, mentor them, and help them grow into the intended role. Incent them to stay with the company and share as much of your plan as you are comfortable sharing.
Work to define job functions and establish standards for each role within your organization. The more you do to streamline the operations of your company, the better positioned you will be when it’s time to move on. If that isn’t strong enough incentive to get started, consider the positive impact on a potential sale of your company down the road – you will have ready access to the documents required in the due diligence process and you will be able to demonstrate that the company can be run successfully without you.