9 reasons companies fail to commit to succession planning

I have seen a host of studies suggest that while 90 percent of companies acknowledge the importance of succession planning, less than half ever manage to get started with their planning process. Here are nine reasons why:

  • Succession planning is hard work. It takes time, heavy thinking, and diligence in vetting candidates, establishing development programs, mentoring, and engaging in all the necessary activities to properly prepare for succession.
  • Your company engages in replacement planning. Some companies simply hire when the need ultimately becomes necessary. The problem with this approach is that you are taking the best candidate available at that time of need, rather than planning ahead and getting the best possible candidate for the role.
  • There is no need to plan because a family member has already been identified. We see some family-owned businesses fail to properly plan for succession because they believe they have a natural successor within the family. Sometimes this occurs without consideration of the skill set necessary to really be successful in the position. The family member may not have those skills, or if they do, a well-thought-out development program can only enhance their chances to succeed.
  • Management is too busy working in the business. As Michael Gerber points out in his book The E-Myth Revisited, too many executives do not take enough time to work on the business, rather than in the business (i.e., they aren’t spending enough time on strategy).
  • Your company thinks it is too small. There is no truth to this if you ultimately want to capture some value from the business. Even a sole proprietor can begin to train someone for succession when the time is right and sell the business to the successor at an agreed-upon value, which is generally is a better answer for both parties than just liquidating the business.
  • You are susceptible to the immortality syndrome. Some business owners simply do not ever see themselves giving up the business. They don’t plan because they don’t contemplate retirement or death.
  • You believe no one is capable of replacing you. Some executives do not believe anyone is as good as they are, and so they believe they are irreplaceable.
  • “Why should I groom a successor? I'm just going to sell the business anyway.” The reality is that unless your business can operate without its owner, you will not be able to sell the business for very much. In order to get the most value for the business, a capable management team who can operate the business without the owner needs to be in place. Most buyers of businesses rely very heavily on existing management.
  • You don't know how to get started. The simple answer is to make the commitment to plan. Start by setting time aside to simply begin thinking through all the issues involved and then begin attacking them piece by piece.

Stop making excuses. As Jim Collins and Jerry Porras say in their book Built to Last: Successful Habits of Visionary Companies, “the most successful companies over the long-term are those who have rigorous succession planning initiatives and CEOs who play a very active role in grooming their successors.”

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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