Our clients often ask, “What should I do about succession planning for my business?” “When should I start?” How do I go about it?” Our answer is usually to start succession planning as soon as possible. It is not so much about finally preparing your business for sale (although that can be an urgent consideration), but more so about ensuring that your business is running at its best potential so that it can easily be prepared for sale at any time you choose to sell.
Succession planning is a critical process for small businesses to ensure continuity and sustainability, especially during times of leadership transitions. There are three main areas to consider. People, Business Knowledge and Planning. Here’s a guide for small businesses succession planning in New Zealand:
People
- Assess Current Leadership: Begin by evaluating your current leadership team’s strengths, weaknesses, skills, and experience. Identify key individuals whose departure could significantly impact your business.
- Identify Successors: Look for potential successors within your organisation. Consider factors such as skills, experience, leadership qualities, and cultural fit. Develop a pool of potential candidates for each critical role.
- Develop Talent: Implement programs to develop and groom potential successors. Offer training, mentoring, and stretch assignments to prepare them for future leadership roles. Encourage cross-training to broaden their skill sets.
- Communicate Openly: Be transparent with employees about succession planning efforts. Communicate the importance of continuity and career development opportunities within the organisation. Encourage employees to express their career aspirations.
- Involve Key Stakeholders: Engage key stakeholders such as board members, senior leaders, and advisors in the succession planning process. Seek their input and support to ensure alignment with strategic objectives.
- Consider External Options: While internal talent development is essential, also consider external candidates for critical leadership roles. Network within your industry and build relationships with potential external successors.
Knowledge
- Document Processes and Knowledge: Ensure that critical processes, procedures, and institutional knowledge are documented and accessible. This helps in smooth transitions and reduces the risk of disruption when key personnel leave. Your intellectual property can be the key in unlocking the succession planning potential for your business.
- Address Legal and Financial Aspects: Consult with your business advisor to ensure compliance with regulations and address any tax or estate planning considerations related to succession.
Planning
- Create a Succession Plan: Develop a formal succession plan outlining roles, responsibilities, timelines, and contingency measures. Clearly define criteria for selecting successors and the process for evaluating their readiness.
- Review and Update Regularly: Regularly review and update your succession plan to reflect changes in your business environment, market conditions, and employee development. Make adjustments based on feedback and lessons learned.
- Test the Plan: Conduct simulations or tabletop exercises to test the effectiveness of your succession plan. Identify areas for improvement and refine the plan accordingly.
- Monitor Progress: Track the progress of potential successors and provide regular feedback on their development. Address any performance gaps or development needs proactively.
As your succession plan comes to life you will feel more in control – because you are! You will have “de-risked” your business, empowered your staff and given yourself options for the future. Remember to recognise and celebrate successful transitions and achievements within your organisation. This fosters a positive culture and motivates employees to actively participate in succession planning efforts.
By following this guide, small businesses can develop a robust succession plan to safeguard their future and ensure continued success in the face of leadership changes. Watch this space over the coming months as we will discuss the practical steps of developing and implementing a succession plan through a dedicated webinar with some of our senior advisors.