Succession planning is the process of passing on the leadership of a company to others. Often, it involves training employees internally or recruiting qualified individuals from outside the organization.
Definition of Succession Planning
No one is guaranteed to stay with any given company forever. A business’s current executive leaders and owners may retire, move on to other opportunities, or pass away, leaving a void that needs to be filled.
Succession planning is a strategy that’s used by companies to make sure key leadership roles and general ownership of a company are taken care of after the current leadership moves on. It involves advance planning, recruitment, training, and other strategies.
Importance of Succession Planning
More and more old business owners are retiring, leaving many companies with high-level positions to fill. Succession planning aims to make sure those positions are filled immediately, and it affords businesses the following benefits.
One of the primary reasons to perform succession planning is to make sure the business can transition from one set of hands to the next as smoothly as possible. To ease the transition, a business needs capable leaders already in position to inherit key roles within the organization. It requires choosing the right candidates and making sure they’re properly trained.
When the right people are chosen and prepared, they can succeed the current leaders without disrupting the company.
Training a new generation of leaders
Training from within the company is one way that succession planning takes place. By going through the process of choosing eligible candidates from within the organization and preparing them to perform leadership duties, the company transfers important skills to the next generation, effectively creating a new generation of capable leaders.
Maintain or improve business culture
When candidates are trained up from within the business’s own organization, it goes a long way toward preserving the existing business culture the current leaders have worked so hard to build. Assuming the current culture is a positive one, that can be a very good thing.
On the other hand, recruiting from outside the company allows for the possibility of introducing new energy into the organization, potentially transforming the culture once leadership is passed on to them. If the current culture needs improvement, that could benefit the company as a whole.
Getting Started with Succession Planning
Naturally, succession planning begins with a plan. It should start as early as possible to make sure qualified candidates are ready to take over. That means:
- Mentoring current employees
- Recruiting qualified applicants
- Creating a leadership pipeline within the company
In addition, the process of succession should be well established within the company. Heirs to the company should be named in advance, and any potential conflicts should be resolved.
Financial matters may also need to be accounted for. For instance, shareholders might all hold life insurance policies in case if one of them passes away. The policy allows the others to purchase the deceased individual’s share in the company and carry on ownership without interruption.
Outside counsel is often necessary to make sure succession planning is handled in the most effective way possible. Legal assistance from a corporate attorney can help businesses plan for the future.