Why Is Succession Planning Important?

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When you start a company, you have a vision, dreams and big plans for your business. But do you have a succession plan in place?

According to a 2021 survey conducted among members of The Society for Human Resource Management, just over 20% of those asked said their organization had a formal succession plan.

No entrepreneur likes to think about their own mortality or reaching a point where they can no longer run their business, but they can't ignore the need for succession planning.  

Business owners are also sometimes conflicted about entrusting the enterprise they built to a successor. Perhaps there are no family members suited to or interested in taking over. Maybe the business owner does not see someone who is currently in the company ranks as being able to handle the head job. It’s critical however to overcome these feelings and perceptions and understand the many benefits of succession planning.

four common types of succession plans for small business owners

The Need for Succession Planning

Succession planning is not just about anticipating someone passing away. There are occasions such as illness, disasters and unforeseen hardships during which another individual may have to assume leadership of a company. Is your organization ready for this?

Often, leaders are preoccupied with how “things are now.” Things may be going well. Operations are running smoothly. Business is booming. And so, it makes sense that succession planning is not necessarily a top priority. However, this is exactly when the importance of succession planning really does come into play.

Ensuring the company’s future is in good hands if a key stakeholder is suddenly absent (for whatever reason) is part and parcel of running a successful business.

RELATED: Succession Planning for the Small Business Owner >>

Problems Associated with Succession Planning

If there is no obvious successor (such as a family heir) ready to come in and assume responsibility for the organization, then succession planning can seem somewhat confusing. 

Where do you start? How do you identify potential successors?

This is one reason why so many business owners tend to leave succession planning by the wayside—a major mistake. When something does occur which takes the company leader out of their position, the organization needs to be able to step up and continue on, “business as usual.”

Beyond the confusion of where to start, there is also the time constraint issue. As mentioned earlier, more than likely, the business leader(s) are focused on maintaining operations and making sure that customers are serviced and money keeps coming in. Setting aside the time needed to attend to a succession plan can seem difficult. And yet, it’s a necessity in terms of solidifying the longevity of the company.

business succession planning tips to start the process

Importance of Succession Planning

We’ve established that the “leave-succession-planning-to-chance” approach could profoundly disrupt your business. But why specifically should you dedicate time to a succession plan?

1. Establish Needed Training Objectives

Once you come to identify who will ultimately segue into positions of authority and leadership within the organization, then you can work on any training and education that might be required. That is to say, having specific individuals in mind can help you tailor a plan to those individuals when it comes to succession.

For example, Mary may be ideally suited to a leadership role, however, some of her soft skills might need some polishing. With succession in mind, you can offer her the relevant coaching or mentoring thereby setting her (and the company) up for success.

2. Help to Attract Top Talent

Many younger employees are in fact entering the workforce with an eye on upward movement. They want to know that there is potential for obtaining key positions in a firm. With a succession plan in place, this naturally lends itself to having the kinds of conversations that will let younger generations know that there could be roles for them.

Succession planning is very much about critical dialogues that you can be having with current and also future employees.

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3. Maintain Consistency Across the Brand

What we often see is that when a leader is gone or otherwise steps down, the brand takes a hit. This can sometimes be the result of new leaders coming in who are unaware of the company’s fundamental culture.

Establishing the importance of succession planning means establishing that your brand will continue. Identifying right now the leader or leaders who will take the organization into the future gives you a chance to make sure they grasp the company culture, vision and mission. It helps stabilize and secure your brand.

4. Reduce the Risk of Chaos

It’s a common story: a CEO leaves and chaos ensues. The company finds it incredibly difficult to cope and lapses into what is for all intents and purposes chaos.  Needless to say, it is quite difficult to come back from chaos.

By having a succession plan, you help to circumvent potential chaos down the road. And again, you enhance the organization’s chance of long-term survival.

RELATED: Business Succession Planning - Why it Should Be Your Top Priority >>

Axcet HR Solutions Is Here for You

We believe in creating lasting relationships with our Kansas City area clients. Our highly skilled team of HR professionals is on hand to answer your questions, help you navigate human resources issues, and also deal with the complex question of succession planning. Call to schedule your consultation.

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Written by Kellie Rondon

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