Because everything goes into hiatus before the fall season kicks in, late summer is a great time for businesses to do workforce planning. By this I mean taking stock to evaluate the talent gaps within your organization and create a road map for strategic hiring to fulfill your company’s business plan. I spend a lot of time thinking and talking about strategic workforce planning with my clients. One critical aspect of this that warrants a lot more attention is succession planning.
Do you have a transition plan for ending your role in your business? Have you considered what would happen should you unexpectedly become unable to continue in your job or run your business? Do you know what would you like to have happen? Are you mentoring someone within your organization to take over for you? Think of succession planning as having an exit strategy to protect and sustain the business beyond your own career.
Some larger corporations do this very well. They understand that top leaders retire or move on as part of the organization’s life cycle, so they build succession planning into their overall business planning. Several companies have established paths for career growth, recognizing that the best future leaders most likely are already within the organization. They offer training to prepare potential successors to rise through the ranks.
Relatively few small and medium-size companies do career development, strategic workforce planning, or succession planning. In the North Bay, 80 percent of businesses are small companies with 10 employees or less. This means that a lot of people – employees, partners, investors, customers, and the community – depend on the stability and longevity of these smaller companies.
Nobody likes to think about an unexpected end to their career, especially the entrepreneur who started and built the business from the ground up. Usually an owner’s sudden illness or a top leader’s abrupt resignation triggers most companies into reactive mode. For family-owned companies in particular, the owner’s unexpected departure can be devastating. Nearly 90 percent of businesses in the United States are family owned, according to Forbes, yet less than a third of those succeed into the second generation and only 10 percent survive into the third.
Here’s what can happen without a succession plan. Two brothers ran a popular, established business in Sonoma County. The brothers had an understanding and kept critical details about the business between themselves, not wanting to burden their families. The brothers never talked about retirement nor planned for the transition when younger family members would need to take over. When one brother died unexpectedly, his children automatically became partners in the business. In the absence of a written agreement or succession plan, a power struggle developed and erupted into a full-blown lawsuit that now threatens the future and very existence of the business.
Even when you have a succession plan, there can be unexpected developments or conditions to navigate. I’m currently working with small professional service firm owned by two partners preparing for their retirement after 30 years in business. Their strategy is to bring in and groom a new partner who can take over the business within five to 10 years. It’s a good thing they’ve taken the long view because finding the right person is proving to be a challenge. Although there are plenty of qualified potential candidates to step in as successors, most of today’s young professionals have little interest in a partner role. They don’t want that level of responsibility, something the current partners did not expect to encounter.