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Succession Planning: Identify Your Company’s Future Leaders Early

  • 27 January 2016
  • Author: Cari Holbrook
  • Number of views: 2979
Succession Planning:  Identify Your Company’s Future Leaders Early

Who will carry your business into the future? Do you have your successors identified? Do you have a succession plan? How will you know whether or not to look outside the family for the future of your company, even if you run a family business? These are difficult questions to answer but they’re also extremely important to address when it comes to the long-term success of your business. It’s easy to assume that only small family businesses suffer from poor succession planning. But that’s not true. Consider these recent findings from Aberdeen Group:

  • Regardless of size, organizations are only capable of delivering two thirds of the leaders that their businesses will require in the coming five years (much less further down the line).
  • Best-in-class organizations have identified ready and willing successors for only 56 percent of their organization’s key positions.
  • Just 10 percent of large organizations’ first-level leaders (C-suite executives) have successors identified.
  • It takes an average of 29 months to turn a high-potential, mid-level manager into a senior leader.

Aberdeen Group’s research points to a lack of alignment that is killing succession planning efforts—even for large enterprise organizations—with the root of the problem caused by a misunderstanding of how early and often successors should be identified and trained. Succession planning, according to the report, is most commonly an annual process used to identify key leadership roles an organization cannot afford to have vacant and/or are highly critical to the success of the organization. The focus of succession planning is compiling a list of possible replacements. But is periodic planning enough?

Succession management is a newer term, used for an ongoing process to both identify and then develop high-potential leaders needed to execute on the short- and long-term strategies of an organization. According to Aberdeen Group, the focus of succession management is on tracking critical roles and proactively sourcing and developing a strong talent pool of future leaders.

While this particular Aberdeen report includes large organizations, lessons can be gleaned by all businesses, regardless of size. A recent survey by The Boston Consulting Group found that more than 40 percent of family businesses have not adequately prepared for succession during the past decade (much less annually). This report also points to the importance of managing succession, not just planning for it, by actively recruiting, training and preparing the future leaders of a business well before they take the helm.

The best way to start is to ask yourself these four key questions posed by San Antonio business consultant John Dini, one of the nation’s leading experts on business ownership and exit planning, from one of our most popular posts

1.       What will your role in the company be?

2.       Is your successor ready, willing and able to handle change?

3.       Does the company have the financial strength to thrive without your personal signature?

4.       Is your business entity flexible enough to minimize the taxes and maximize your security when transferring your business to your successor?

The answer to the second question is often a stopping point for family business owners when a certain son or daughter they always envisioned running the business one day ends up either not wanting to run it or not being an ideal candidate. However, with regular succession management, stumbling blocks like this can be identified early and successfully overcome, even if it means recruiting leadership from outside the family. Revisit our Golden Handcuffs Series and, in particular, “Can a Family Business Survive With Only Passive Heirs?” for inspiration. And, as always, contact us for specific questions when it comes to planning for the future of your business.

Image Copyright: highwaystarz / 123RF Stock Photo




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