Succession planning: A competitive advantage strategy
Sidestep the negative effects of change with thorough succession planning and you’ll put your business ahead of the curve. Not only does this improve your company’s value, but it also provides something every good business manger strives for: your employees’ peace of mind.
You know this is true – succession planning is the cornerstone of any business that lasts. It smooths the way as one leader leaves and another takes over, creating an environment in which the new management – and your business – can be successful, while reducing the effects of the unavoidable turmoil of change.
Yet succession planning is so often overlooked.
According to Deloitte, 86 percent of leaders see leadership succession planning as ‘urgent’ or ‘important’, but only 14 percent believe they do it well.
This is something that I’ve seen regularly as the CEO of Star Business Solutions – an MYOB business partner.
Here it is in a nutshell:
- Succession is inevitable
- Planning is imperative to manage risk
- It can affect your entire business
- Consider the emotional aspects
- Data provides objectivity during uncertainty
Succession planning for a family business is especially important, because the organisation is more than just a company – it’s a legacy, tied to the life’s work of just a couple of people. It’s so complex that there have been entire books written on the subject.
But even in traditional businesses, the process of letting go and handing over the reins to a successor can be surprisingly painful for the exiting leader.
Managed poorly, it’s not uncommon for the process of succession to stir up feelings of resentment, resistance and even hostility in otherwise level-headed business people.
In the middle of all that upheaval, the organisation and your team are left struggling to keep the doors open and the lights on.
A great succession plan doesn’t just create organisational stability, market confidence and value, it also comes with a raft of other benefits.
- More diverse leadership – with the objectivity that comes from succession planning, you’ll be able to more clearly see what your company needs, rather than simply replacing leadership like for like.
- A career pathway mapped for emerging leaders – this means you’ll be more able to attract and retain top talent with the promise of genuine opportunities to come.
- A strong and healthy culture – panic-purchasing leaders is the fastest way to erode staff good will, and damage that intangible, yet utterly important element: culture. When you have time to consider your options, you’ll be able to choose leaders who will embody your company values and maintain a strong and healthy workplace culture.
Why succession planning will get you ahead
Having an eye on those inevitable future changes means you’ll transition more smoothly, and your new leadership will get fully operational faster. But that’s not all.
A succession plan is about more than just planning for the future – since so many businesses fail to do it, it actually gives you a competitive advantage.
You’ll be sidestepping the messiness, infighting and underperformance that so many of your competitors will deal with.
Systems ready for change
While software isn’t the be-all and end-all of business, an old or inefficient system can make a succession process far more difficult.
At the most basic level, when BAU relies too heavily on the knowledge of one leader, it creates risk – when that leader leaves, even with the best preparation, it’s likely they’ll be leaving gaps through which leak money, time and good will.
This is especially important if you’re replacing first-generation leaders, who’ve built the business almost from scratch. They may not even be aware of how much they know – the ratios, the leading indicators and warning signs, for example.
These can, and should, be taken out of leaders’ heads and embedded into the business intelligence reporting. This will mean the system plugs the knowledge gaps, and keeps everything ticking over, while staff and new leadership get their feet under them.
These systems should also enable leaders to track progress simply and quickly. This delivers much-needed oversight, allowing others in the leadership team, the board and any consultants to keep an eye on the business as the incoming leaders learn the ropes. This gives new leaders a safety net – they can trust that any major misses will be caught early by those in the business with more experience. Similarly, during a hand-over period, it allows the outgoing leadership to stay engaged with performance, without feeling like they’re breathing down their successor’s neck.
The data objectivity can also help minimise resistance and resentment. Planning for and finding a successor based on transparent, accessible data will let all management be engaged in the process, and more readily accept outcomes.
Plan for changes of leadership team, not just the CEO
Succession planning is so often focused on protecting the business when the CEO is replaced.
The reality is that this role, while truly critical, is only one piece of the management puzzle.
Any sudden or poorly planned exit of any of your senior leadership team can create problems. The new leaders, underprepared, could have gaping holes in their knowledge of your business systems and processes, and in their understanding of the new team.
At best, this will mean they take much longer to begin working at capacity. At worse, they’ll lose the respect and support of the people they’re leading, and make decisions that abjectly affect their department and the business as a whole.
A well-prepared leader will be equipped with the context and understanding needed to be successful in the role from day one – and for that they need to be entering the business under an agreed plan.
Establish long lead times
The ideal time to plan for succession of an organisation as a whole is when a business is established.
For senior leadership, preparing for their departure should begin as part of their induction process. Obviously, that rarely is the case, but it indicates how critical early preparation is.
With long enough lead time, preparing for this change becomes BAU for everyone in your business, rather than something that seems to come out of nowhere. It also gives you time to properly develop criteria for evaluating candidates and gives the outgoing leader a chance to prepare for the change – both practically and emotionally.
There can be huge problems with the outgoing CEO not letting go emotionally and practically. It can make the new leader’s job impossible and they’ll go elsewhere.
In a best-case scenario you’ll have five years to prepare for a change in CEO, with three years being the minimum. Succession plans for the remainder of the executive, and other management will need less time.
Establish accountability and advocacy
According to research from Deloitte, succession planning is often overlooked due to a lack of ownership – it’s not clear who bears responsibility for creating the plan or for finding top talent.
This means that while people acknowledge the importance of succession planning, they’ll assume it’s someone else’s job until told otherwise.
Similarly, having advocates at executive level will help build a succession culture into the organisation – staff at every level will expect succession planning as a normal part of growth and success.
Design for where you’re going
Most succession planning looks at what you need in order to maintain the status quo.
A moment’s pause will reveal the flaw here – succession planning should be about the future of the company, not its present.
Focusing on the needs of your business in the future won’t just better prepare your next leaders for the changing world but can help remove a barrier to successful planning itself: fear.
In most businesses, staff at all levels are incentivised to appear irreplaceable – and that butts up against the most basic goal of succession planning, which is, quite literally, to replace people. That often leads to leaders spending time protecting their patch and holding back from preparing people to take over.
If the goal is to build leaders for what the business is next, it removes the feeling that leaders are replaceable now.
This makes it easier for the outgoing leadership to accept that their replacement will – and should – do things differently. This can be particularly difficult if the outgoing leader still has an ongoing financial relationship
You might think, ‘It’s my money so I have a right to be involved here’, but it becomes counterproductive. You have to trust that you’ve made the right choice of leader, and then let them get on with their work.
Sidestep the messiness, smooth the transition
A successful business doesn’t stand still – it grows, innovates, maybe even diversifies. Meanwhile, your leadership can either stand still, or move forward with the future of the business.
A great succession plan, not just for the CEO but for all the individuals on the management team, creates an environment of stability, confidence and value in a business – definitely a competitive advantage. Not only that, but it diversifies the leadership, offers career paths for promising staff, keeps an eye on the future of your business, and maintains a healthy work culture for the present.
A smart leadership team will recognise the emotional and cultural risk of a poorly planned succession. You’ll manage a smoother transition by keeping software systems up to date (retaining specialist knowledge that’s currently in the heads of the Old Guard), assigning responsibility and advocacy for succession, and establishing clear future goals.
Most importantly, your plan will begin long before it’s needed, so when succession time happens, everyone is well prepared and ready for the inevitable.
Who knows? They might even look forward to the fresh air of change.