A succession plan is important for any business. Small, family-owned businesses often lack a succession plan, and larger companies can sometimes fail to implement one effectively. Before something happens to you or one of your employees, think about creating a succession plan and discussing it with anyone who needs to be involved. If you're unsure of where to begin, it's helpful to ask yourself questions about how you want succession in your company to be handled and to consult a lawyer to help you create a solid plan that's legally sound.
Here's a guide on succession planning and some examples of questions you can ask.
What is succession planning?
Having a succession plan in place means you're ready to pass your business on to someone else or that someone in your company can leave their position to a new hire or a promoted colleague without a snag. Providing for the ability of one person to take over the responsibilities of another person successfully is succession planning. For family-owned businesses, this can mean appointing a child or sibling to run the business when you retire. In a large company, ensuring that employees who leave pass their knowledge and abilities on to those who succeed them is succession planning.
Why is succession planning important?
According to a study by STEP Project for Family Enterprise, there are 5.5 million family-owned businesses in the United States, many of which have no succession plan in place. This can leave your company vulnerable if something were to happen to you or if you decide you no longer want to run the business. A corporation requires a good succession plan because all employees need to be well-versed in their roles for the operation to run smoothly. Without an effective succession plan in place, your company could suffer if you or any of your key employees leave.
Who needs a succession plan?
Businesses of all sizes can benefit from having a succession plan. However, they become more important as a company grows. In the beginning, a small business may only have a few employees, so knowing who will take over which position or the company, in general, isn't as important. When the company grows, it becomes more important for employees to pass on their knowledge before they go. This is because the more people who work for you, the more task they have to accomplish, and the more challenging it is to know each individual's role.
What are the benefits of succession planning?
There are many benefits that come with creating a strong and effective succession plan. For employees, some benefits include:
- Knowing there's a chance for advancement
- Making an easy transition from one position to the next
- Remaining in the position could lead to ownership
If you're a business owner, these things can also benefit you, but here are some others to think about when making a succession plan for your company:
- You can rest easy knowing that the person who you want to run your company when you're gone has the knowledge and legal backing to take over.
- You can ensure that everything your successor needs to know is available to them, including important documents and contact information.
- You can see to it that all management and leadership positions can be passed on without any interruption in your services or productivity.
What are good succession planning questions?
Before you begin creating your plan, you may want to ask yourself some succession planning questions. Doing so can help you create an effective plan that covers all aspects of a successful departure and the onboarding of new employees or the takeover of a business when you retire or pass away. These are some good questions to start with when forming a succession plan:
- Do you want a relative to run your business if you pass away or decide to retire, or do you want to transition to an employee-owned business model?
- Will anyone have an issue with the person you name as your successor? And if so, who are they and how can you limit the negative impact of your decision to ensure a smooth transition?
- Are there any financial matters that need to be addressed regarding your succession plan?
- Does the person you want to run your company have the skills and abilities they need currently, or do they need more training and development in their role to prepare them?
- Will the existing management team have what they need to ensure a smooth leadership transition?
- Are employees equipped with what they need to pass their job on to someone from outside the company?
- Can your company operate effectively if key members of your staff were to leave suddenly?
- Does your succession plan affect any of your stockholders or stakeholders?
- Who needs to be involved in your succession plan?
- How do you plan to implement your succession plan?
Having a questionnaire for employees can also help you create a succession plan. It might include questions like:
- What are some key tasks you perform daily, monthly, or at other regularly scheduled intervals?
- Where do you store important paperwork, documents, and contact information for colleagues and associates?
- Are there people you communicate with regularly who are vital to you completing or performing your duties?
Whether you're trying to attract the best candidates to a role or you own your business and want to know it will be well-managed when you're gone, creating a succession plan can help you achieve your goals. Asking yourself some of these succession planning questions is a step in the right direction, but be sure to customize your plan to your unique needs.
Keep reading to learn more tips for improving your business:
Understanding different ways you can support and nourish your employees' careers can lead to success.
Learn what it takes to build a successful team.
Consider some of the ways you can upskill your employees to help them excel.
Think about how you can cash in on the strong trend for hiring in a small business environment.