Studies have shown that 90 percent of companies understand the importance of succession planning, yet less than half have a formal succession plan. While the importance of succession planning is intuitive to most senior executives, here are some common reasons they fail to plan:
1. “Creating a succession plan takes too much effort.”
Succession planning is hard work. A significant investment in time and resources is required to properly plan for succession, and some companies just aren’t willing to make the investment.
2. “We’ll know the right person when we see them.”
Some companies believe succession planning will just happen. They think a successor will come to the fore at the appropriate time, so they don't believe a systematic approach is really necessary.
3. “We’re a family business, and a family member needs to be the successor.”
Some family businesses automatically identify a family member as the successor, regardless of his or her capability. So, they feel there is no need to develop a program or properly plan for succession.
4. “I don’t have time for that; my to-do list is already a mile long.”
Management may be too busy working “in” the business to spend time working “on” the business, to borrow a premise from Michael Gerber’s book The E-Myth. In these instances, senior executives are too engaged in the day-to-day management of the business to spend time focusing on succession planning.
5. “We’re a small business; we don’t need a succession plan.”
Some companies view themselves as being too small for a formalized succession plan. Plus, they feel there just aren’t enough resources in terms of time and people to reasonably work out a plan.
6. “I’m years away from stepping away from the business. I don’t need to worry about succession now.”
Some executives simply have immortality syndrome; they don’t want to deal with their own mortality.
7. “Nobody knows this business better than I do.”
For some executives it is a matter of simple avoidance. They are not ready to give up their position in the company and cannot contemplate being replaced.
8. “I’m just going to eventually sell the company. Why would I need a formal succession plan?”
Sometimes a CEO/owner views his or her “succession plan” in terms of a sale of the company. They see no need to plan for succession; the business will just be sold when they are ready.
9. “Where would we even begin?”
In some cases, the company’s management understands the importance of planning, but simply does not know where to start.
In most cases, the failure to do proper succession planning results in lost shareholder value. Even if you are planning to sell your company, many potential buyers will look to an internal management group to run the business. Make the commitment to properly plan for your business succession, and maximize your company’s value!
Contact us at 215.441.4600 or Email if you have questions or would like to discuss how this topic may impact your business.
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