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Importance of Succession Planning for Your Business

Dec 16, 2022 | Estate Planning Legal Blogs | Elder Law P.A

The Covid pandemic resulted in the loss of many businesses, culminating in an unprecedented unemployment rate. Without warning, many companies lost a lot of talent and expertise. Today, most businesses are struggling to fill the void left by the loss of staff at every level. This extraordinary development served to highlight the importance of succession planning. With a succession planning strategy, it is possible that many companies may have been able to mitigate the unexpected loss of employees and replace top talent with fewer struggles.

WHAT EXACTLY IS BUSINESS SUCCESSION PLANNING?

Business succession planning is a process used to identify potential successors for a business when the current owners of that business leave, either through retirement, an emergency situation, or even death. The process searches for mid-level candidates with or without skills and knowledge who can fill the position of a leader when the owner or senior leader retires or leaves for another reason.

Succession planning importance means much more than selecting a candidate to replace the leader or the owner of a business. It encompasses the entire business and involves employees, stakeholders, and board members. Simply hiring a new person to lead a company doesn’t equate to success. The vision of the business needs to be carried forward. Leaders in the business should select candidates and train them so that they have the appropriate skills and share the same vision to ensure growth and success. By creating a customized developmental plan, you not only promote employee growth, but also ensure that the potential successor will have all the tools he or she needs to make the maximum impact. More importantly, you will not be left distressed trying to fill in a senior position at the last minute with people whom you know very little about.

THE IMPORTANCE OF SUCCESSION PLANNING

Succession planning is not a one-size-fits-all plan. It is necessary for the long-term success of a business and the plan should be re-evaluated each year to take any changes into consideration. It protects the organization’s health, boosts growth in future leaders, and ensures diversity in the workplace. Here are the top reasons why succession planning importance is necessarily placed upon the current business leaders.

  1. It establishes a program for training and development. The right succession business plan can help train and develop employees within the organization to be future leaders. The program can help develop the right skills and empower employees to thrive as leaders.
  2. It can help lower the cost of recruiting talent. Searching for the right candidates with the right talents and skills needed for management positions can be an expensive venture without any type of recruitment plan in place. Worse, recruiting talent can take a long time, and often the workplace has an important position that may go unfilled for long periods. In many cases, you can be forced to hire individuals whose background you know little about. By developing a pipeline of talent in the workplace, you safeguard the business and save money, especially when your successor is already someone within the company. The money saved can be invested in training other employees in the workplace.
  3. Identify potential successors. The right type of business succession plan can help you identify key employees who have the potential to be your successor(s). This way, you will be able to make more informed decisions on your replacement. In addition, you can ensure that your potential successor(s) also align with the inclusion and diversity goals of the business.
  4. Advanced long-term business planning. By creating a business succession plan, you will promote long-term planning. The plan will create a logical and practical path for the present owner/leader who is about to retire/leave and will also ensure that their skills, knowledge, and expertise are transferred to the new successors. Plus, a business succession plan helps you anticipate any changes in the business or personnel and helps bring stability.
  5. Diminishes risk. One of the reasons for succession management’s importance is that it can help you anticipate any risks in the business. For example, you will be better prepared to deal with the sudden loss of a leader or CEO due to illness, death, or disability. Once you have a plan in place, you can make the changes that are necessary without causing instability and insecurity in the workforce.
  6. Create your legacy. When a leader is aware of who their potential successor will be, he or she is able to share knowledge and provide mentorship. This way, when the top leader exits, the workplace will not be adversely impacted. All the hard work put in over the years will be translated into stability and growth of the organization because the new successor shares the same vision.
  7. Captures talent. One of the biggest benefits of having a business succession plan is that it helps capture the best talent, whether it is internal or external. The creation of a plan helps you search for the best candidates to become potential successors in your organization. Since the plan is created early, it allows you to vet each candidate and determine their skills and knowledge levels. It also allows you time to correct any deficits and improve their skill levels. In an emergency, without a succession plan, you are left at the mercy of the candidate’s resume, about which you may be uncertain.
  8. Helps develop an exit strategy. Succession planning’s importance includes not only ensuring a smooth and seamless transition for a successor but also providing an exit strategy for the current leader. You know precisely when you will be leaving the business and what you will be doing in the future. This way, the workforce does not suffer from any talent loss, and the business is unlikely to face negative repercussions.
  9. Encourages progression. Succession planning helps ensure continuity in the business. Just because a leader is quitting doesn’t mean that the business has to close. The plan helps promote the big picture and makes it more resilient and dynamic even when faced with unexpected events. Having a business plan ensures that there is continuity because you will always have a list of potential candidates that can fill in the role of a successor.
  10. Create a leadership path for employees. When you create a business succession plan, you are also creating a career path for mid-level employees who may one day be selected to run the organization. By identifying skills and competencies early in the workforce, you have a pool of potential candidates from which to choose. By encouraging these candidates to become future leaders, you will create a career path for them. This also helps create loyalty and motivation to do better.

CONCLUSION

A business succession plan is not a static endeavor but involves long-term planning for the organization in the event that you, as the leader retire, or are no longer able. The plan is not only geared toward selecting a potential successor but also ensures that the organization maintains its continuity and continues to provide skills to mid-level employees who may one day become future leaders. To learn more about the importance of succession planning, contact Elder Law, P.A. We have a reputation for knowing what to do and what not to do when helping you draw up a succession plan. Call us today at (561) 933-4681 for a free consultation.

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