Peter and his wife Jane lived on their dairy farm. They never really discussed succession with their four children as it had been a family tradition that the eldest son took over from his father. While their eldest son went off to university, their youngest son decided he wanted to work on the farm. He became the unofficial manager of the farm and felt that he was in a good position to take over when his father decided to retire.
Meanwhile, one of their daughters married a farmer who had a degree in agriculture. He was keen to develop new business models and revolutionize the farm with a modern approach.
When Peter died unexpectedly, the family faced a terrible dilemma. Jane knew her husband wanted their eldest son to take over the farm, but it turned out that he had no interest in doing so. A huge rift developed between the youngest son and the rest of the family as he felt he deserved the role more than anyone. The son-in-law also believed he knew what was best for the farm and encouraged his wife to fight for their right to take over the property.
Had Peter and his wife invested some time and money into consulting a lawyer and having a farm succession plan drawn up, they could have saved the family much hardship, confusion and stress down the track. It would have also ensured that their farming business did not suffer from legal battles from disgruntled family members.
We have to admit that running a business is hard work such that a lot of business owners find themselves too absorbed in the business to work on the longer term problems like planning for succession. The amount of work needed on a daily basis in terms of time so as to make the business successful leaves no time for the ownership and management change that will eventually occur. When discussing about succession, there are tough questions that need to be asked which many business owners may not be very comfortable about.
In the past, succession planning was something companies and businesses only did to avoid worst-case scenarios; replacing senior leadership due to retirement or career change. This discussion only ensured that the executive was taken care of ignoring key contributors in the lower ranks across the business that were critical to the company.
There are a number of reasons as to why business owners ought to consider planning for management succession. First is the issue relating to taxes. If no plan is in place upon the death of the owner, the government takes as much of the value of the business leaving very little for the heirs. A succession plan can reduce, and sometimes completely avoid taxes and ensure that the family and employees get what they deserve.
Second, when planning for succession, the business owner retains control over the outcome. When business owners fail to plan, the government or various interested parties will eventually take control. Third, when a business owner does not implement a succession plan before being incapacitated, the value of the business often drops rapidly. Therefore, the business and the business owner die on the same day. This means that owner’s intended beneficiaries will not receive the full value of the business as would have been had a succession plan been in place. In relation to this, the longer business owners wait to design and implement a succession plan, the greater the risk that the plan will not meet their goals. The risks also increase with the health of the owner.
Our society today has made us equate “who you are” with “what you do”. Consequently, business owners face an uphill task that will ultimately affect their level of credibility. Therefore, they are used to being at the top of the business and therefore important to the community. As a result of being in control, their opinions and ideas have added weight because they are incharge.
Although no one would want to discuss about mortality, we have to consider that the process of succession planning is all about what will happen “when I am gone”. The first recommendation by many planners is for the business owner to identify a personal advisor who will help him or her deal with the complex emotional issues involved in the whole process. This therefore means there are many indicators to consider when executing succession planning.
Simply put, succession planning has the power to transform how businesses manage the future of their skill – from top to bottom – in order to positively impact bottom-line results. If done well, it drives an ongoing, proactive dialogue between business owners and their employees that identifies and tracks their individual performances. By helping businesses identify potential skills, businesses can proactively train and groom skilled employees across all departments in the organization.
When exploring widely, effective succession planning relies on a number of best practices irrespective of the industry that the business is operating in. These include;
Define the Process
The beginning of this process is assessing the critical positions of your business in terms of the roles that are crucial for the stability and continuity of your business. Upon assessment, the business owner needs to thoroughly assess the nature of skills required for these positions at each and every level, not only the management level. This is to ensure that the process is able to create a symbiotic relationship of employees.
Once these two steps are concluded, the business owner can generate development plans for grooming individuals and deepening the skills that will be critical to the business. Focus should first be on the high potential employees and how to develop and retain them. The process will also allow you to identify low performers as well.
Once the process of assessing and identifying employees has taken place, business owners will be in a position of having a good idea of the depth and scope of available skills. This step entails a lot of discipline. If ongoing monitoring and evaluation is not adhered to, the whole process will break down.
To overcome this is to tie a development review process that will help keep track of employee performance and also enable the business owner to evaluate employee performance even on an annual basis.
To be realistic, designing, implementing and executing an effective succession planning process can be exhausting and challenging to manage. A paper-based system may not be viable because there are many variables that need to be considered for assessment. As soon as information has been collected, keeping it current, centralized and easily accessible is very difficult when documents are kept in box files.
Fortunately, there are innovative and creative techniques available to help facilitate the entire succession planning process. Applying technology will allow the business owner to easily understand his or her team.
In summary, once a succession plan has been established, it should not be simply forgotten. The management succession plan must be implemented, usually over an agreed period of time. It ought to be revised when business conditions change substantially or when important participants leave the business. It should be revisited on an annual basis so that respective laws don’t negatively impact the plan.
The writer is the Chief Executive Officer of Gateway Success Consultancy Ltd.
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