A Succession Planning Strategy for Your Business
The resignation of Robert Mugabe and the current race for power within the ANC have highlighted the importance of succession planning within the political landscape, but just how important is it for your business? Statistically, just 28% of succession plans end up being truly successful. On this week’s The Money Show with Bruce Whitfield, we considered the all-important questions you need to ask of yourself, and of your business, when creating a succession planning strategy for your business:
Why are you doing it?
There are three primary reasons why you need to create a succession planning strategy for your business:
If you’re looking forward to selling your business, ramping up the valuation of your business is key. In this situation, choosing your successor will depend highly upon who will help you increase the value of your business.
If you’re attached to the idea of building a legacy that lives on far beyond your life, strategic succession planning helps you to secure and build it correctly. This is, however, a highly emotional reason for building a succession plan, and selecting your successor could be very difficult. You may feel tempted to hand over your business to your most loyal, or longest-serving team member. They may not, however, be the right person to drive your business’ future growth.
For your retirement
If you’re looking to secure a comfortable retirement by relying upon a payout from your shares in the business, you’ll need to ensure that your successor is forward-thinking and able to implement a relevant, sustainable strategy for business growth. For this type of succession planning, you should select a successor who will remain loyal to your business strategy, and who is fully capable of implementing it.
Where do you begin?
Your succession planning strategy starts with defining the following aspects of your business:
Elements that drive growth for your business
Growth drivers for your business exist far beyond just your future sales strategies. Consider the impact of technology on your business, both now and in the future. For example, retail stores must consider and cater for e-commerce and online opportunities. Relationships are an important asset for every business, but if you’re no longer heading up the business, how will they be sustained? Building relationships that rely upon data, and not just lunch meetings or a round of golf, is vital. Technology, as it continues to progress – and take over – the world of business, is a tool that must not be forgotten in your succession planning.
Skills your successor needs
Picking the right successor from within your business can be difficult, as their current role could lead them to be strongly biased towards an operational area. For example, a great financial manager may not be the best team leader, and a great technical mind isn’t necessarily best-suited for making staff-related decisions. A successor with a broad cross-section of skills is best, as these skills enable them to compliment the skills within your management and larger teams. Your successor should have a strong tolerance for change; be skilled in assessing risk, and be able to manage your team as well (or even better) than you can.
Your business’ culture
Your business is an extension of your own world view, and that’s why you’ve played a direct role in creating and maintaining your business’ culture and environment. Objectively assessing your business’ culture will help you define the handover process and, where a divisive or negative environment has come about, you’ll need to work quite hard to change it. A politically charged environment may mean you’ll have to shape the team differently, so that you can smooth out a path for your successor
Who Will Be Your Successor?
Choosing who to succeed you can be a difficult task. You may find your successor:
Within your family
Choosing a family member – perhaps even one of your children – to succeed you cannot be an emotional decision, although it’s human nature to make it one. If you’re choosing one of your children as a successor, assess their involvement in your business, and what their focus area has been in their own careers. Consider too, their age, experience, and skills and, if necessary, appoint someone who may be able to help bridge the experience gap.
Within your business
Picking someone to succeed you from within your business may also be quite tricky. Make sure they are fully equipped, experienced, and skilled to take over, and understand that you may lose some members of your team along the way. Don’t pick a successor just because they’ve been with you the longest – loyalty doesn’t always equate to skill.
From outside your business
Choosing someone from outside your business will usher in changes within your business, no matter how strictly they adhere to your handover strategy. They’ll bring in a whole new set of ideas and perspectives.
Do you need help with your company’s succession planning? Aurik can assist. Get in touch with our team, and we’ll help you build your business into an asset of value, that continues long after you leave the office.