By Kobe Eru Godwin
Succession planning is a concept that most Africans don’t give much thought to. This is one major reason why companies don’t last; they often die right after their owners’ demise. Succession planning is a process for identifying and developing internal people with the potential to fill key business leadership positions in the company as they become available. It is what has kept companies like Microsoft, Pepsi, Coca-Cola, IBM, and a host of others, going strong after so many years. These companies have being around for decades because among other things, they understood and practiced effective succession planning.
With the global proliferation of Small and Medium-sized Enterprises (SME’s), issues of business succession and continuity have become increasingly common. When the owner of a business becomes incapacitated or passes away, it is often the case to find that the business which was otherwise healthy gets shut down. Proper planning helps avoid many of these glitches associated with succession and transfer of ownership.
What’s more, the following statistics should further awaken you to your organization’s need for a succession plan:
- About 40% of leaders in new roles will fail. This is often because of inadequate preparation for that role.
- Most companies fail to plan until a crisis happens.
- Many organizations are facing an impending loss of 40-50% of their workforce in the next few years as baby boomers retire.
- There are too few young people in the workforce to replace the baby boomer generation.
- Many organizations are viewing talent management and leadership development programs as an expense, rather than an investment.
- Succession planning is equally as important for an organization as planning for company growth.
- Only 21% of employers believe they are effectively preparing and implementing a succession plan.
How then should a business owner or manager go about his/her succession plans?
- Recognize key roles for succession planning: This involves deciding which positions require a long term succession plan. Sometimes, the ownership of an organization differs from its management and so this should be reflected in the succession plan. A CEO might decide to retain ownership within his/her family and make the management external, or retain both ownership and management within. Either way, a plan has to be in place to ensure the smooth running and easy transition of the business in case of any eventualities.
- Define the proficiencies and motivational profile necessary to undertake those roles: This refers to a narrative explanation of the knowledge, skills, attitudes, and other abilities that lead to exemplary performance. It is a model which should provide blueprints of the talent to build at present and in the future, and describe “what should be” for such hierarchical levels as executives, managers, supervisors, salespersons, technical professionals, or other groups. A contemporary improvement in some corporations is to articulate the organization’s ethics, values and code of conduct and then rate individuals against that as well as against other proficiencies.
- Create talent pools that could potentially fill and perform highly in key roles: A talent pool is a group of people being prepared for more challenging responsibilities. Promising candidates being prepared for possible promotion are placed in talent pools. Of course, no promises are made that they will actually receive promotions. Instead, the organization commits to helping individuals prepare themselves to qualify for higher levels of responsibilities. However, it is up to such individuals to continue performing well at their current jobs while also preparing themselves to meet the new challenges at higher levels of responsibility
- Assess people against these criteria – with a future orientation: The idea is to assess individuals against the competencies required for success in an organization. The proficiency model comes into play here. What does the company expect from an individual in this position? While there is no widely accepted formula for evaluating the future potential of leaders, there are many tools and approaches that continue to be used today, ranging from personality and cognitive testing to team-based interviewing and simulations and other assessment centred methods. The company should also assess individual potential for success at higher levels of responsibility.
- Focus on transferability: Organizations that have been through an ownership transition are less optimistic about transferability of value to a new owner(s). When planning for succession, pay close attention to elements of transferability — i.e., how well the business can run without you in areas such as daily operations, new-client growth and client retention. The more independently the business can operate, the more easily it can be to transfer to new owner(s) and the higher its potential value.
- Formally document all plans: Every detail of the succession plan should be properly documented for easy referencing. Also, changes that might occur with time should be adequately reflected in this document.
In many ways, succession planning is similar to any other strategic or business plan that companies undertake to recognize new customers or markets. All require analysis, planning, commitment to implementation, monitoring, periodic evaluation, and adaptability, as well as buy-ins from owners, family members, and key employees. Failure to put in place a proper succession planning process can ruin an organization in the long haul.