As a small business owner, one aspect of managing your business you probably haven’t taken into account is succession planning. Most business owners think that it’s too far off to really consider, especially at the beginning of their career.
Although you may have no intentions of leaving your business any time soon, the fact of the matter is that you never know what will happen to you tomorrow. In order to preserve your business, it’s crucial to think about succession planning now.
So, what exactly is succession planning?
Succession planning is a protocol you lay out to train and develop your ideal successor. For larger corporations, HR departments usually oversee the process by scouting out talent to fulfill key roles within the company as they become vacant.
By grooming ideal candidates for these important positions far in advance, a company can guarantee the continuity of its business operations.
To learn more about the benefits of succession planning, read on.
Clears Up Confusion When Naming a Successor
The main benefit of succession planning is that it clears up any uncertainty about who, how, and when your successor is to be found. You either appoint someone yourself or lay out a process that vets candidates and determines how they are to be selected.
By going about it in this way, you diffuse any potential feuds or fall outs between co-owners and employees. This is especially true for family businesses. Often times, tension mounts when there is no clear method for selecting a successor. The family dynamic the business is founded on can crumble over these types of disputes.
This makes it crucial to lay out a succession plan or to name your successor early on.
Saves Your Company Time and Resources
Succession plans are designed to identify and groom the ideal candidate for a role. In most cases, this means you should have your eye on internal talent rather than external.
For one, hiring outside talent is 1.7x more expensive than it is to hire someone internally.
When you hire internally, you also save immensely on time. A new employee that is not familiar with your company’s processes must be trained, which takes up more of your internal resources to do so.
Improves Retention and Profitability
To create a succession plan, you need to have a plan to train employees. One way of going about this is to have a career development plan in place. By creating a channel by which employees can advance and grow, they feel valued.
Employee engagement is the secret to retaining your hires. They are far less likely to leave for another opportunity if you provide a way for them to grow as a professional. Such opportunities are the key to maintaining a healthy and happy workplace.
Another part of succession planning is taking the time to groom several candidates at once. You may have an employee in mind for the role, but if you limit yourself to one person, you’re actually increasing the risk for your business. Should something happen to them, you need to have other candidates prepared to take over.
You can apply this principle to all levels of management in your company. From C-suite positions to middle management, having a succession plan in place for all positions will minimize risk.
Creates a Framework for Hiring in the Future
When you create your succession plan step by step, you’re creating a method that can be used over and over again in the future. By starting now, you can see if there are any flaws in your plan and make necessary changes. In this way, you’re preparing your company for success going forward.
Reinforces Your Company Values
When creating a succession plan, you’re not only looking to hire the right person for the job; you’re looking at ways to promote your company values. Company values create a work culture, and that is something you can’t build overnight.
Your company’s values should exude from you as the leader of your business, and you should impart these values to your employees. When hiring new candidates or promoting from within, it’s important to think of how this person’s qualities align with your values and how that will affect your business going forward.
Hammers Out Important Financial Details
Lastly, a succession plan for your business will help you face all the big financial questions that lie ahead, such as buyouts with your partners. It should also discuss how your business is to proceed financially without you and what would happen to your business interest should you pass away unexpectedly.
By providing clear instructions as to how these matters should be handled, you can prevent messy financial problems later.
To learn a bit more about the process of succession planning, below is an infographic that discusses why you should have a succession plan and how to write your own below.