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10 Succession Planning Best Practices

Dec 20, 2022 | Estate Planning Legal Blogs | Elder Law P.A

In the simplest terms, business succession planning is not about making higher profits or selling the business to the highest bidder. It has everything to do with selecting the right person who is capable of taking over the business and running it well in the future. While this goal may sound simple, it is no easy matter to find a person with the right skills, experience, and qualifications to run the business you worked so hard to build. Even in a small family-run business, most family members may have no clue how to run the day-to-day operations if the owner is suddenly gone. The key to succession planning is to be organized and develop a checklist of succession planning best practices. Without a plan, it is very difficult to find a successor for your business, and, even then, the chances that you select the wrong person are high. For those of you considering a business succession plan, here are some tips for succession planning best practices.

  1. Know what you are looking for in a new successor. Before you even create a plan, you need to know what type of person you are looking for to succeed you. Does the individual have the right skills and abilities to be a leader? Does the person know how to communicate, and, more importantly, does he or she share your vision? During the interviews, everyone might agree with you, but do they really understand and share your vision? You need to be very careful in selecting the potential successor if you want your business to continue and thrive.
  2. Know what the successor’s role will be. Whenever the owner of a business starts talking about a new successor, employees and stakeholders usually get nervous because they feel the company may be sold to another individual and they may lose their jobs. Right from the beginning, you need to communicate with the employees what role the new successor may play and how he or she may be involved in business operations. Will the new successor just be the CEO? Will they play the role of manager or supervisor, or solely be an executive? By stating the role of the new person at the outset, you can relieve the fears and anxiety in employees so that they know where they stand.
  3. Interact with all people who may be impacted. Besides the employees, you need to ensure that you interact with the stakeholders. You should invite the stakeholders to provide input, draw up a list of interview questions, help conduct interviews, and attend focus groups. The stakeholders may assist/suggest how the potential successor could fit in with corporate culture and values. They are the ones who make important decisions and have a good understanding of the changes needed and challenges faced when trying to make sure a successful business thrives and can keep pace with (and out-pace) the competition. Finally, stakeholders can assist you with the creation of a succession plan that will make it a better experience for everyone concerned, while also helping identify best practices for succession planning goals.
  4. Think long-term. Succession planning is a long-term venture. If you are looking for people to serve as leaders in your business, this means you need to identify the individuals earlier rather than later and equip them with the skills and knowledge they will need to be a successful leader. This process often takes between one and three years.
  5. Go hi-tech. Unlike in the past, today there is technology to help you not only create a business succession plan but help you acquire the best talent. There are many “talent-oriented” software programs that can help you collect, store, and share all the data with others across geographical borders. Further, automation helps make things simpler and more fluid. All changes in the business and the names of key people are stored, and the software program will change the plan as things change in the future.
  6. Continue annual assessments. Seeking a successor for a business should not be a static event, but rather a continual process that is constantly evolving. Succession planning best practices will tell you that you should constantly be searching for candidates to succeed you using a range of competency tools to assess interests, skills, and knowledge. You need to know not only the strengths but also the weaknesses of each candidate so that you can help improve the deficits.
  7. Communication. Do not keep succession planning a secret from your workers and stakeholders. Communicate regularly with everyone so that there will not be a mass exodus of people leaving the business and searching for jobs elsewhere because they are concerned for their jobs and their welfare with the company.
  8. Promote from within. in general, it is far easier and less expensive to choose a successor from within a company than from outside. The current employee(s) will already know your vision, understand the company culture, and have a good idea about the products. Hence, you must have a program in place to assist these employees in building their skills, learning new technology, and being able to take on leadership assignments so that when the time comes, they can quickly step into their new role.
  9. Familiarize yourself with trusted people. Never make important decisions that affect the company’s future on your own. Bring in trusted staff for advice and recommendations. You will also need to work closely with an accountant, tax professional, and lawyer because a business succession plan also has tax and financial implications.
  10. Create support systems. In order for the potential successor to have the needed confidence the role demands, build support systems that not only help identify potential candidates but also will help identify their goals, purpose, and objectives. These support systems should be available to all potential employees considered to be future successors. It also gives them a feeling of empowerment and loyalty.

CONCLUSION

A business succession plan has many fluid parts. You need to know what the current leaders in the business are thinking, their vision for the business, and their long-time goals to help the business not only grow but thrive. You need to identify the best potential successor available to help drive the business forward. You generally want to find a person who is fully aware of the company culture and will stand by your brand. Without a plan, you may be forced to hire someone from outside your business who may know your brand but may not have the same vision. Do you want some advice on best practices for succession planning? If you want your legacy to live on, contact an attorney who can help you create a successful business plan today. Elder Law, P.A. is an experienced law firm that is very knowledgeable about business succession plans. One of our associates can help you define the best practices succession planning can hold. Call them today at (561) 933-4681 to learn more. We will be happy to help you.

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