Why Businesses Need a Succession Plan
Growing a great business take years, if not decades of intense strategic planning and effort. Yet many businesses today are seemingly reluctant to consider their long-term future – something which has been illustrated in a recent study by the National Association of Corporate Directors, which has found that just 1 in 3 US companies have a succession plan in place.
A succession plan is an exit strategy put into effect by an organisation to identify individuals for future leadership positions – which ensures a seamless transition when senior executives leave.
Many businesses fail to implement succession plans because leaders fail to envisage that one day they will be gone, and do not like the thought of handing the reigns over to somebody else. Succession plans can also take years to put into effect, which gives some people the excuse that they do not have the time.
Nevertheless, according to a report by Software Advice, 62% of employees surveyed say they would be “significantly more engaged” in the workplace if their company had a succession plan in place. Indeed, along with reassuring workers, succession planning can also give investors the confidence that the company is still moving in the right direction with a clear vision and hierarchy.
Succession planning is vital, so when it comes to searching for individuals who have the potential to be future leaders, there are a number of factors that should be taken into account. Firstly, it is important to identify people who share the same norms and values so they can easily be embedded into the company culture. Secondly, a track record of success in the sector is essential to convince others that they have the knowledge and experience to do well. And thirdly, it is vital that individuals who enjoy learning and growing into a role are ultimately the ones identified – as the process could take 2 or 3 years.
The key to succession planning is being pro-active – not reactive. Identifying the right person takes time, and organisations should be constantly looking at ways to find future leaders. It should therefore be a multiyear process where individuals are identified and given senior roles in anticipation of one day taking on higher levels of responsibility. McKinsey and Company found that an Asian company appointed three potential CEOs to the position of co-chief operating officer and rotated them over a 2 year period in a variety of positions including sales, operations and R & D. The company did this to create a talent pool ready for vacant leadership positions.
1 in 3 succession plans fail. However organisations that are forward-thinking and utilise their resources stand a better chance of succeeding.