As the year comes to a close, many business owners are preparing for next year. They are reviewing budgets, customer contracts, vendor relationships, and setting performance goals for 2016. These are all essential planning steps that need to be taken annually. However, there are other important planning steps that should be taken not only at year end, but on a regular basis – succession planning. Now, some believe that succession planning is needed only when a leadership change is impending, but there are several reasons that a company needs to invest time in developing a plan to ensure the overall health and stability of the organization. To help clients, prospects, and others understand the practical and immediate value of succession planning, Sikich has provided a brief overview below:
- A Plan for The Unexpected – While most companies have well established processes for determining annual revenue projections and strategic goals, far fewer are prepared to deal with a disaster or crisis. Many companies face unexpected situations that can be devastating to the organization such as sudden terminal illness of the CEO, natural disaster, or unexpected retirement. This can leave the future of the company in serious trouble. By implementing a succession plan, a company will be able to carefully consider each of these situations and have a plan ready in case the unthinkable or the unforeseen happens. The last thing anyone (including the impacted business owner) needs is to lose the value of the company because of a lack of proper planning.
- Uncover Skill Gaps – A key benefit of this type of planning is that it allows management to identify in advance where potential skill gaps may exist once succession occurs. Proactively identifying possible gaps provides the opportunity to address the issue through additional training or the decision to hire new staff with the relevant experience and skills. Having a realistic understanding of the “next generation” manager skills needed gives the company a clear picture of the challenges they will be required to address.
- Identifying Future Leaders – Succession planning provides the opportunity to identify “high value” talent who have the skills (or potential to develop the skills) needed to help them move up in the company. Identifying these professionals years before succession will allow management to provide the needed training, coaching, and mentoring so they will be prepared to handle new performance requirements. If a company waits until succession is an immediate concern, they will significantly reduce their ability to identify and train future leaders. This situation may result in less than optimal company performance after the transition.
- Enhanced Employee Engagement – No one likes uncertainty. This is especially true in situations where one’s career and livelihood are involved and they have seemingly little control. It is important that employees understand there is a plan in place to ensure a smooth transition of leadership/ownership that will result in the continued prosperity of the company. Communicating the essentials is important to not only keep them engaged, but also to divert any anxiety, stress, and fears about the future. The last thing anyone wants during a transition is the loss of employees due to uncertainty about their career or the company’s future.
Truth is, many owners are reluctant to create a succession plan because it can be difficult to envision the company without them. After all, they have poured years of their life into the company to ensure it is successful. It can be understandably difficult to plan for a day when they will not be involved in the company. However painful it may be, succession planning is important and can provide immediate benefits to the company before succession is even an issue. If nothing else, it will provide the existing owners with the opportunity to plan for and shape the company long after transition.
As with most things in business, proactive planning is essential to ensuring the company is in the best possible position to be successful. Whether a transition event is impending or management wants to be proactive in the planning process, Sikich wants to help! For additional information please contact Ray Lampner.