Successful Succession Planning in 2023
Succession planning is a critical component of any organization’s long-term strategy. Whether it’s an internal promotion, a family member taking over, or an outsider being brought in, a plan is necessary for a smooth transition. With that in mind, how can you ensure successful succession planning in 2023?
Prepare for Succession Early
Retirement isn’t as simple as it once was as more people work long past retirement age, while others retire early or take “miniature retirements.” Unforeseen illnesses and other emergency situations can also complicate business matters. That’s why it’s important to plan for succession well in advance. In some cases, this process should begin 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 discussions with individuals in leadership roles can help build trust and prevent surprises in the future. Additionally, ensuring that periods of succession go smoothly, allowing for seamless transitions 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. However, it’s unlikely that prospective leaders will be carbon copies of their predecessors. As such, it’s important for the business’s board, management, and human resources department to develop a working set of guidelines. These guidelines can include the abilities, characteristics, and experience that a successful leader in the company should possess. Spend time to think critically about the skill and talent “gaps” new leaders will need to fill.
Establish a Network of Observation and Motivation
While human resources will be an invaluable component of any successful succession plan, it’s advisable to have multiple outlets for observing and motivating potential leadership candidates. Encourage feedback from managers, coworkers, and subordinates, and conduct monthly or quarterly reviews as well as informal discussions. This will help you identify 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 Succession Mergers, Strategic Partners, or Stock or Asset Sales
Any succession plan discussion should include an analysis of potential transactions with 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.
Succession is a complex issue, involving more than just 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.
For more information or to consult with one of our legal representatives, we urge you to contact us today at 410.337.5340.