17 Sep Have You Been Succession Planning? Why It’s Time to Start
When was the last time — if ever — your organization and leadership team discussed a succession plan?
In any organization — succession planning is a crucial way to invest in and support the future of the company.
Vistage recently published a CEO’s Guide to Building the Leadership Team of the Future, and highlighted some key insights for the ways that companies should be preparing for this transition.
Highlights include three scenarios for succession planning: Operational, Aspirational and Transactional.
Operational: The Natural Flow of Business
In an operational scenario, a succession plan that continues business as usual will anticipate and prepare for the unexpected departure of a CEO or executive due to a health issue, new opportunity or retirement.
This scenario is so common that every organization should have a plan in place for this kind of succession.
By planning for business continuity, you put up guards against making reactive decisions in the moment, and instead identify protocols and processes that will maintain day-to-day operations while building in time to assess the impact of a leader’s departure.
This planning is especially important for a family-owned business, which can present a unique set of challenges that include:
- A lack of qualified candidates: Often, there isn’t another qualified family member with the skills for, interest in or ability to take the helm, especially on short notice.
- The family legacy: It’s important to honor a family’s legacy, especially in a longstanding organization, and innovation and growth need to align with that legacy.
- Transfer of ownership: Change comes with emotional and financial stakes, and those conversations could impact valuation and other steps of the transition.
Job scorecards can be a key way to succession plan in these environments. These scorecards outline roles and responsibilities, create areas of accountability and direct leaders on how to dedicate their time in different areas.
Aspirational: The Leadership Team as a Differentiator
In the same way that strategic planning defines where your business aspires to be in, say, five years, aspirational succession planning aims to align the leadership capabilities required to reach those goals.
This type of succession planning assesses the existing team and identifies opportunities to develop and prepare talent for new roles and positions.
Recent analysis from Vistage revealed that 59% of CEOs invest in leadership development to prepare their leaders for the future, and succession planning can prescribe training and development at the individual level to bolster those plans.
An aspirational plan can help address gaps in skills and experience that may exist among your leadership team. And as your organization grows and business operations become more complex, this plan can become a key component of the strategic planning process.
With 10,000 baby boomers leaving the U.S. workforce every day, the number of open jobs will only continue to dwarf the number of people available for those jobs. That makes it critical to plan ahead.
Transactional: Buying or Selling
Nearly a quarter of CEOs plan to sell their business within the next five years. Nearly half expect to sell at some point down the line. That number is even greater if you consider how many are willing to sell if someone were to approach them.
Planning for the financial transaction of a company sale requires adhering to some very well established steps, and those steps are complicated by a transition of leadership.
Transactional planning is all about preparing for that sale, and understanding how succession will impact the transaction.
As Jim Erben, owner of Erben Associates, writes for Vistage: “Succession will happen to 100% of business owners. The question is, will it be by design or by default?”
Potential buyers want to know the key performance metrics that indicate whether your company is doing well, and they want to know whether key executives are aligned and incentivized to continue to maintain and grow your vision and culture.
It’s crucial to retain the best executive team possible to maintain that consistency, and the best way to do that is to have a plan. And you can’t take years to develop that plan — make it an urgent priority.
Because when the CEO or key leader is ready to leave, it can’t come as a surprise, and you can’t be caught flat-footed without a plan. As leaders look ahead to the demands of the future, they should have an idea of how their leaders will be growing with them.
Are you ready to start planning for what comes next with your team? Reach out to book a 30-minute introductory call with us today to start learning.