It is important to have a structure in place that facilitates the succession of new individuals into management positions upon the departure of former leaders. Here, the business law specialists at The Law Offices of James A. List, LLC detail ways to ensure success in succession planning for businesses.
Retirement is no longer a cut-and-dry issue, with some working long past retirement age, others retiring early and some taking “miniature retirements.” Coupled with unforeseen illnesses and other emergency situations, such as Covid-19, it is wise to ensure that succession plans are set in place long before it needs to be implemented. In some instances, it begins when the business is created. Discussing where current leaders see themselves in several years can aid in the creation of a viable plan: while some may find it uncomfortable, having frank discussions with individuals in leadership roles can help build trust and prevent surprises in the future. This can also ensure that periods of succession go smoothly, and will allow transitions to occur seamlessly, with minimal harm to the company.
Determine What the Company Needs in Leadership to Be Successful
Current members of your leadership team likely possess valuable qualities for the business. It is unlikely that prospective leaders will be carbon copies of their predecessors. As such, it is important for the business’s board, management and human resources department to develop a working set of guidelines of the abilities, characteristics and experience that a successful leader in the company should possess. While this need not be an exhaustive list, spending time to think critically about the skill and talent “gaps” new leaders will need to fill can be important to ensuring prospective candidates can move the business in the right direction.
Establish a Network of Observation and Motivation
While HR will be an invaluable component of any successful succession plan, it is advisable to have multiple outlets for observing and motivating potential leadership candidates. Encourage feedback from managers, coworkers and subordinates, monthly or quarterly reviews and informal discussions to ascertain not only who possesses the qualities and traits necessary to succeed in leadership positions, but also who would be passionate about taking on such a role.
Allocating resources to both internal promotion considerations and external hiring is important to finding an individual who is the best fit for the role: while internal candidates are often favored to move into leadership positions, external candidates may be necessary should internal candidates not be prepared for the change. Board members or third-party executive search firms can be utilized to detect and screen potential external candidates, if needed.
Consider Mergers, Strategic Partners, or Stock or Asset Sales
Any succession plan discussion should include an analysis of potential transactions with your competitors or potential strategic partners. A competitor may have a tremendous salesforce but lack infrastructure or manufacturing capability, where your company excels. Or a company in a related field wishes to expand their products/services into your realm of expertise, creating a natural fit. The key is to explore all of these avenues when creating or updating a succession plan.
Measure Results and Alter Plans as Necessary
Put systems in place to track the results of your succession plan, and have regular meetings to discuss the effectiveness of the plan. Use reward-based compensation, training and a series of ascending assignments to help keep candidates on the path to leadership and maintain motivation.
Employ the Attorneys at The Law Offices of James A List, LLC to Facilitate the Succession Process
Succession is a complex issue, involving more than the act of placing individuals into leadership roles. A company’s value, tax concerns and interpersonal dynamics all come into play, making a strong plan essential for business success. As such, a knowledgeable and experienced business attorney can be a necessary ally in the process. At The Law Offices of James A. List, our business attorneys have a long and successful history of helping businesses in the succession process.
For more information, or to consult with one of our legal representatives, we urge you to Contact us today.