8 steps to take toward a succession plan
I have had the good fortune to work with dozens of closely held enterprises, many of them multi-generational family businesses. Such organizations face myriad complex problems, and succession planning takes a back seat to the issues of the day. Often, the path of least resistance is to have no succession plan at all.
In businesses where management is tight knit like a family, there are often personal agendas and sibling rivalries that make discussions very uncomfortable. Our business culture does not promote candid conversations and the lack of structured performance management systems exacerbates the problem.
Yet the sands of time have a way of forcing discussions, as older generations see the need to sustain what they have built or prepare for a liquidity event. While uncomfortable, conversations like these are entirely necessary and can unearth a litany of complicated legal and tax issues.
Consider these 8 steps when creating a succession plan for private companies and family-held businesses.
1. Set specific, long-term goals for ownership
This is often achieved through some form of long-term planning process.
2. Establish a set of managerial competencies
Focus on those things that are important in your operating environment (such as operational excellence, innovation or financial acumen).
3. Evaluate the management team
Have the management team assess the skills of each manager or hire an outside firm to study their emotional intelligence and skill level. Create a grid and grade based on the managerial competencies.
4. Debrief the assessment
Review the findings of the skills assessment and offer each manager specific development opportunities that will inform on how they can progress during the course of their career.
5. Seek out high-quality legal and tax advice
Consider all legal and tax implications regarding transfer of ownership or control. Remember that with outside advisers, you get what you pay for.
6. Create a robust performance management system
Train your managers (especially senior managers) on how to hold people accountable to specific performance outcomes.
7. Identify the successors
Have frank (and confidential) conversations with your top people about their career path. Consider hiring an executive coach (or have them join an executive group like Vistage) to help them develop their skills. Having the ability to develop other people, understand financial information and harness technology are critical success factors for contemporary executives.
8. Handcuff your best people
Ensure that you have provided incentives for future senior managers to stick around.
Timing is everything, and it is essential to think clearly about when to pull the trigger on transition. Generally, upcoming managers should be moved into position gradually, which allows them to prepare and for others to see that they have earned the right to lead.
The method in which such promotions are communicated is also critical. It is important to communicate why leaders have been selected and what their role is expected to be.
Such decisions are vital to the sustainability of a company. They warrant methodical planning and thoughtful execution.
Read more on this topic: Build the process that you need — but don’t overbuild
Category : Succession Planning
About the Author: Vistage Staff
Vistage facilitates confidential peer advisory groups for CEOs and other senior leaders, focusing on solving challenges, accelerating growth and improving business performance. Over 45,000 high-caliber execu
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This is excellent and in my case timely. I have a client I am going to forward this to that will benefit greatly from this. Thank you!
Great input: succinct and insightful.
I have several clients who will find this article very relevant and useful.
Some family businesses need to get the ball moving: these steps could be the catalyst.
Great article I use these 8 steps and will continue to use them.
These eight steps are a great road map for succession. Family businesses have an additional level of complexity, which should have a strategic focus.
As part of Step 2, Establish a set of managerial competencies, I suggest adding hard requirements, education and experience, for each management position. Younger family members moving up the ranks will understand what is required to obtain these positions. Then you will have qualified managers, not just those with the right last name. It also adds to the moral of non-family employees. They understand the family members earned their positions.
I would like to put and exclamation point on Step 7, Identify the successors. My sister and I ran a business together for twenty years. We were most effective when we were both Vistage members. Vistage helped us manage our conflicts to get on the same page and then keep us on the same page.