When you start a small business, it’s important to consider and anticipate possible changes in the future. A well thought out succession plan can ease the process of change as your business evolves.
What is a Succession Plan?
A succession plan is basically a written plan that outlines how one leader will replace another within a business in the future. Positions of leadership are often–though not always– filled internally, with people who have the potential to improve upon their current position and assume a leadership role.
How a leader exits a business and how that change is managed reveals the character and effectiveness of the business as a whole. As a small business owner, you’ll want these transitions to go as smoothly as possible. A clearly defined succession plan in any small business not only reduces potential conflict, but it increases the availability of capable employees that are prepared to assume leadership positions. It also helps with employee retention and motivation, especially if employees see a clear path to advancement in their future.
How Do I Create a Succession Plan for My Small Business?
- Assess internal candidates first. These are the people who know your business best. It doesn’t always mean they are the best fit for the job, but it’s a good idea to start analyzing a group of people you already know and trust to possibly fill leadership positions within your company. Try to view all employees objectively in this process. Note the positive characteristics that could make each candidate a leader, while also taking notice of the characteristics that could hinder their ability to take on a larger role within your business.
- Develop a written criteria.
- Consider all stakeholders. As you are developing a succession plan for your small business, consider how a change in the leadership will affect the other employees that work for you, as well as your business partner if you have one. Ponder these questions as you develop your succession plan:
- Is there an emergency candidate who could take the reins if you were to leave tomorrow?
- Who do I need to invest in today so that he or she will be prepared to take on a leadership role in the future? How do I best prepare this person?
- Is the company organized enough to ease the transition of a new leader?
- Is there a seasoned leader in place who is willing to coach a potential successor?
- Prepare the potential leadership candidates. Perhaps the most neglected step in the succession planning process is to prepare the candidate after he/she has been chosen. There is no such thing as a “ready now” candidate; all will need mentoring and training to assume a leadership role. Make sure the candidate for the position has the support they need to learn, grow, and stretch their capabilities to assume a role that will include more stress and responsibility.
- Refresh as needed. Your succession plan should be a living document that is changed and modified as market conditions and/or strategy change. It should go beyond the traditional position description and delve deeply into both the competencies and experiences required for the next leader. The succession plan can then be used as a tool in grading succession candidates objectively.
When in doubt, consult a professional. An accountant or attorney can provide a fresh, objective viewpoint and can advise you on the potential profitability of certain candidates. Developing a solid succession plan now can help ease the transition of changing roles later on.