Updated: Dec 15, 2021
If you want to guarantee Success - you should start with “Succession”
This is part 2 of our series of blog posts and podcasts to get your business ready for next year. Business planning is something that too often takes a back seat to the “day to day” of running a business - particularly in small businesses. In this series we’ve already talked about budgeting, and we’re going to talk about setting up key performance indicators (or KPIs), business growth, and more. But today, let’s talk about something that few small businesses actually talk about. Succession Planning.
Let’s start by defining succession planning.
Simply put - Succession Planning is a PROCESS for identifying and developing new leaders to affect a smooth transition for a business leader when they leave, retire or die.
No matter how old you are, no matter how long you’ve owned your business, the simple fact is that every business in the world will eventually transition! So, wouldn’t it be a great idea to have a plan in place for that inevitable business transition? Business succession, therefore, primarily focuses on the transfer of leadership and/or management from one generation to the next within the business.
Without a succession plan - there is potential for a power vacuum. Succession Planning allows the organization to target talent investments to ensure leadership continuity. It reduces risk from leadership attrition, and focuses on the critical roles that are so important to the objectives of the business.
Let me ask you a question… What would happen to your family and your business if something happened to you tomorrow? Would the business continue to operate? Would your family be taken care of? Leaving behind solid instructions for your family is the purpose of the Green Box exercise - which I learned from Vistage. Later in this series, we’ll have a blog post on the Green Box exercise. But for now, let’s get back to Succession.
Succession planning is a key component of the Exit Planning process - which is made of 3 major sessions - Exit Planning, Succession Planning and Continuity Planning. A frequent question I get from business owners is why succession planning is so important if I plan to sell the company externally?
Well - there are two great reasons.
#1) Many buyers want to have a team in place already, and
#2) Owner dependency kills deals.
A great succession plan will solve for both of these!
3 steps to Developing a Succession Plan
Step One is Identifying Key Roles for potential vacancies [remember everyone eventually leaves, retires or dies] and then Assessing requirements and skills of existing employees - and that includes you!
Step Two is filling those future vacancies. Now you can do that one of two ways. First, consider internal candidates - this will help you identify future leaders that already exist. If none exists then you should consider hiring. In my businesses, I always instructed my managers to always be hiring for their own replacement! Again, that includes you!
Step Three is to assess skills of the candidates from step two, and then fill the gaps through training and development.
Let’s break down each of those steps so you can start working on your own succession plan.
Step One - Identifying Critical Roles
Since you are probably critical to the success of your business, you should start with yourself. Once you’re comfortable with the process, I urge you to do the same thing with each of your managers, supervisors - and even carry it down to the front line employees! Succession planning has a place in the entire organization.
Start by listing all the things only YOU can do. Make a list of the critical functions that only you can do. Let me give you an example - believe it or not, many years ago, I was the only person in my organization that could calculate commissions. Why? Because I wrote the plan, and at the time we only had 3 or 4 sales people. I believed that I was the only person that would be diligent enough to get it right every time, and besides, it would take me WAY more time to teach someone else rather than just do it myself. One day, I realized I had a team of nearly 50 sales people and the process that used to take a few hours now took me 2 full days - 10% of my available time every month! Something had to change. Reluctantly, I brought in one of our admin folks, and told her that she had to sit with me and meticulously document the entire process for the full two days. The following month, I went to her office and sat with her to follow the process for a full two days. You know what I discovered? Within a few months, she was able to do the same thing that took me 2 days in a fraction of the time. And, we had a documented process for someone to follow in case something happened to both of us.
So - what are the things in your business that only you can do? Is it related to banking? Customer relationships? Overall management? List those things to get started.
Step Two - Identify and Assess the Candidates
For each of those tasks, jot down a possible successor for it. If there is not one internally, then just write “new hire” for that item. That’s easy. Right?!
Determine how ready that person is to take on that specific role. Are they either 1) ready to assume full responsibility, 2) can perform the task with help or 3) completely untrained with little experience. Of course, if you listed the candidate as “hire externally,” you won’t yet know if that person has the skill set needed to assume the position - but you’d darn well better be able to assess it when you hire them!
I frequently hear that it gets a little challenging when you go beyond the tasks and have to identify the successor. But consider that if you do this as a routine process in your business how much easier and better it is compared to the challenge of how hard this exercise is if you’re under pressure that someone left, died or became disabled...
Step Three - Develop the Candidates
OK - now that you have the tasks and you’ve assessed the successors - it’s time to think about developing and grooming those candidates to get them ready to assume the responsibility. It is absolutely essential to start with an honest assessment of where the candidate is currently. Then, you can fill the gaps through training and development.
Come up with a strategy to develop those candidates. Every good development plan will likely include some of the following: on the job training, giving them extra exposure - sometimes actually doing the job for some period of time, or perhaps some behavioral training, as needed. Once that candidate is fully trained, I like to give them frequent opportunities to use their new skills by having them perform the tasks occasionally - sometimes while I’m on vacation or away on business. That will keep them fresh on the tasks.
Now I fully understand some of the things a business owner might do - you might now want to hand off those tasks to anyone else - perhaps due to confidentiality or some other reason. If that’s the case, then it’s absolutely essential to clearly document those things so someone can assume those responsibilities if something happens to you. You might want to go back to our podcast last year on documenting processes to learn more about.
So let’s review the three easy steps to starting a succession plan. 1) Identify the tasks, 2) Select a successor and 3) assess and develop that successor for assuming that responsibility.
Through succession planning - you can actually identify & develop potential leaders - which will increase the availability of experienced and capable employees. It affords an opportunity to evaluate individuals for roles he or she might not have experience with, and ensures constant development of employees - which leads to better employee retention. Most importantly, guarantees that employees on hand will be ready and waiting to fill new roles - which will allow the business to grow and flourish.
I encourage you to take a little time right now to start working on your succession plan, and carry this exercise to your managers, supervisors and employees. Now - this may take a little coaching from you, because the typical employee reaction to succession planning is fear of replacement! It helps if you explain that you’re working on succession planning throughout the business, and make sure that the business will continue to thrive as the business grows and new opportunities present themselves, or in the event of an unforeseen disaster.
Why do it now? Well - things happen. And sometimes something happens that is so catastrophic that it knocks the train off the tracks. Think about the 5 Ds. The 5 Ds are Death, Divorce, Disagreement, Disability and Disaster! Those things happen - when we least expect it. And those are things that we can anticipate as we de-risk the business with a solid succession plan - a key part of any exit strategy.
It genuinely pays to think about the worst case scenario, and plan for it. What happens if the owner dies or becomes disabled? What happens if a key employee leaves or dies?
Look - You might never need it. But if you’re unprepared and something happens, it’s too late!
Call to Action:
So - there you have it. Three easy steps to get started! Now, go work on your succession plan!
If you need any help, just go to our website and click the button to schedule a call with me. BTW - here at Mastery Partners, we offer a half day workshop on Succession Planning. It might be worth doing in your business. Just call me and let’s talk about the details.
Also, we offer a long term solution for your business with our MasterYclass. As business owners, we all come to a “Y” in the road, and we have to decide which way to go. This happens all the time - daily really. You have to decide which way is best for you, your business, your employees, and your customers. I’ve been there too. I have been down that road over 100 times. I know which way you need to go. Business is not complicated. Buyers want two things: revenue growth and a maintenance-free revenue stream. Our MasterYclass helps you accomplish just that - business growth and more fun running your business. Even if you aren't planning to sell your business anytime soon. Check out our website or register for our webinar about the class here.
What are you going to do today - to Maximize Business Value?
And remember, we’re here to help. If we can help you in any way don’t hesitate to reach out!
Want to learn more? Check out our podcast:
ABOUT THE AUTHOR
Tom Bronson is the founder and President of Mastery Partners, a company that helps business owners maximize business value, design exit strategy, and transition their business on their terms. Mastery utilizes proven techniques and strategies that dramatically improve business value that was developed during Tom’s career 100 business transactions as either a business buyer or seller. As a business owner himself, he has been in your situation a hundred times, and he knows what it takes to craft the right strategy. Bronson is passionate about helping business owners and has the experience to do it. Want to chat more or think Tom can help you? Reach out at firstname.lastname@example.org or check out his book, Maximize Business Value, Begin with The Exit in Mind (2020).
Mastery Partners, where our mission is to equip business owners to Maximize Business Value so they can transition their business on their terms. Our mission was born from the lessons we’ve learned from over 100 business transactions, which fuels our desire to share our experiences and wisdom so you can succeed.