Six Solid Steps for Succession Planning Success
Previously, we talked about the importance of succession planning and uncovered some missteps many business owners make that you can avoid. Now let’s take a look at what you can do to be successful. One of the biggest causes of failure in succession planning is unmet expectations. At best, when a plan has a different outcome than what an individual or group of stakeholders expect, it’s hard for them to get behind and support it. Even simple misunderstandings can undermine an otherwise perfectly good plan. To avoid anger, frustration, or even litigation, it’s a good idea to have an intentional process and a clearly communicated timeline for that process. Because each business is unique, your process should be customized to fit. But here are six solid steps that should be a part of every process:
- Identify your goals as a business owner. Give some thought to your personal goals for future income, how much you want to be involved in the business, your values and your legacy for the future. Be sure to include in your considerations any investments both inside and outside of the business.
- Identify the goals, needs, and expectations of the other stakeholders. This could include family members, partners, or even key employees. It may not always be easy, but including them at this early stage will help avoid issues later.
- Plan for ongoing management. Assuming you want the business to continue, you’ll need to determine who is both willing and capable to take over your responsibilities. Keep in mind this may include adjusting compensation structures so that key managers have the incentive to grow into their new roles and take on new tasks.
- Balancing the needs and goals of everyone involved, map out the optimum situation you hope to attain in the succession plan.
- Explore all options. Do enough research to understand how close you can meet the goals above with what is legal and financially feasible. Note: some business owners make assumptions here and skip this step. Not exploring all the options can cause expensive and jarring changes down the line.
- Decide on and implement the succession plan. Your first step here is to hire a professional advisor to draw up the legal and financial documents. They can also help you with the process to implement the plan. Key in this step is to create a timeline and communicate it to the stakeholders.
A few thoughts about the timeline. First, it’s a great way to make your intentions clear. You can even include specific events that trigger the next step in the plan. That way it becomes a tool for managing expectations. And as we discussed, managing stakeholder expectations is the best way to avoid negative rumors and prevent destructive behavior. Implementing a plan before exploring all the options; looking at options before identifying all the stakeholder goals; missteps like that will undermine your efforts before you begin. But following these steps, in this order, will help keep you on solid footing and give your succession plan the greatest chance for success. Are you starting a succession plan? What has helped you most? Drop us an email at [email protected], we’d love to hear from you.