As we enter the New Year, the thought of resolutions often comes to mind. In the business environment, perhaps our 2019 focus will be strategy—spending more time working on the business, rather than in the business. For others, it may involve succession planning—identifying who will take over the business when you are ready to turn the page in the next chapter of your life.
What’s interesting is that both of these activities are intertwined. Succession planning is an integral part of business strategy, and successful business strategy incorporates identifying, developing, and retaining the talent to transition the business.
We have talked in the past about the benefits of starting succession planning early, before you may be ready to transition your business. We’ve also discussed owner emotional readiness to exit, a key consideration that cannot be underestimated. When the business owner, who is often the CEO, looks to transition, it may create uncertainty and tension for both internal and external stakeholders. To alleviate concerns and minimize risks, certain steps should be taken to ensure a smooth transition:
- Identify the skills and experiences the next leader will need to guide the company. A mistake is selecting the next leader in the likeness of the predecessor when the company needs someone different. What worked well in the past may not work for the company in the future. It’s analogous to looking through the windshield, rather than looking in the rear view mirror.
- Evaluate internal and external candidates. External candidates are often perceived as more exciting and promising. This perception is a risk because external candidates do not have the same knowledge of the company or its culture. Internal candidates may be a lower risk than outsiders, but are often overlooked as not being ready. An executive search firm can help guide you through this evaluation process.
- Manage the dynamics of succession. Transitions from one leader to the next can be tricky because of the political and emotional intrigue that surrounds them. It’s not unusual for the exiting leader to struggle with “letting go.” The best interest of the company and the individuals involved is to hand over the reins and recognize that the way things may have been done in the past may be done differently going forward.
Succession planning is a process that deserves the same level of time and attention paid to other business strategy initiatives. It’s not a human resources driven exercise, but rather a critical element of governance, leadership, and successful exit planning.
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