Succession Planning is Vital – What You Need to Know

In 1977, Steve Jobs and Steve Wozniak incorporated Apple Computer, a company that would revolutionize technology and consumer electronics and have a profound impact on the music, film, and wireless industries. Apple went public in 1980, and by 1983, it was one of America’s top companies.

In 2003, Jobs was diagnosed with a rare form of pancreatic cancer. The cancer took his life in 2011, when he was 56 years old. Apple without Steve Jobs seemed unthinkable and losing him could have been devastating to the company. However, after his death, the company continued to be successful and stayed on a trajectory of growth. The key to Apple’s continued success was brilliant succession planning.

All businesses, including small and family-owned businesses, need some form of succession planning to ensure the financial stability and growth of the company after the founders are gone.

One way to start thinking about succession planning for your organization is to imagine finding out that your CEO or other vital team member is suddenly gone without notice. What would the first day in your company be like? What would be your greatest concern? Succession planning addresses these and other key factors.

Succession planning is a strategic process that helps organizations prepare for changes in leadership or key employees over time. It helps ensure continuity of leadership and talent within the organization. Effective planning involves creating a clear approach for hiring, developing, and retaining capable and skilled employees. It is all about finding and developing employees so that a change in roles goes as seamlessly as possible. Succession planning is not only about containing the damage or rapidly replacing a key leader, it’s about replacing a leader with someone who is qualified for the position, has the ability to succeed, and can step into the role swiftly and effectively.

Succession planning can be broken down into five basic steps.

1. Identify what the business operational and strategic objectives are. Identify critical roles on your team and which positions, if left vacant, would make it difficult to achieve current and future business goals.
2. Identify capabilities for key areas and positions. Identify relevant knowledge, skills, abilities, and competencies that are needed to achieve business goals. Make this information available to employees.
3. Identify employees who have the interest and capability to fill these key positions. Make sure you have the development and training programs in place to prepare employees for taking these positions.
4. Develop written succession and knowledge transfer plans. Define learning, training, and development experiences that your organization requires for leadership and key positions. Link employees’ learning plans to the knowledge, skills, and abilities required for current and future roles. Create plans for individuals to take on these roles.
5. Evaluate the efficacy of the plan at least annually. How quickly are key positions being filled? Are employees progressing in an established and defined knowledge base?

A succession plan provides many benefits:

Employer

1. Protects your business from uncertainty.
2. Helps identify employees for key positions.
3. Minimizes recruitment costs.

Employees

1. Boosts morale – highlights growth possibilities and encourages employees to achieve more.
2. Engagement & retention
3. Helps improve performance – provides training, helps set goals.

Challenges faced in implementing succession plans

1. Lack of clear objectives and alignment with the overall organization’s strategy. Not a stand-alone process but a strategic initiative that aligns with company goals and values.
2. Insufficient leadership buy-in. active participation and support from top management to support and champion these efforts.
3. Limited talent development opportunities. Providing adequate training, mentoring, and growth opportunities requires consistent commitment of time and resources.
4. Employees not feeling engaged in the process.
5. Resistance to change by leadership and or employees. Overcoming resistance to change requires transparent communication, education about the benefits of succession planning and involving employees in the process.

We see how hard you have worked to create and grow your business and want to see it continue to grow and succeed. R&A works with our clients' estate planners or attorneys to ensure the tax aspects of a succession plan are optimized. If that is your situation, we are here to help.