Succession planning: 5 things to consider
As they say, failing to plan is planning to fail and lack of a succession plan can greatly impact a business for the worse.
Director of CCIWA’s the Entrepreneurs’ Programme, Nick Poll, who has more than 30 years’ experience in the technical, business and corporate development of mining projects internationally, says it isn’t just about who succeeds the current management.
“It’s about preparing the company for a smooth management transition that takes into consideration all stakeholder parties” he says.
He offers these five tips to help chart your course
1. Have a written strategic plan
A succession plan is greatly enhanced by being part of a company-wide strategy to create value.
Sadly, the statistics in Australia suggest that most small to medium sized businesses don’t have a strategy.
Recent studies show that companies with a strategy have a 40 per cent higher chance of success over those that don’t have one.
Creating a company strategy is also an opportunity to agree what types of skills and experience the future company will need. Let’s face it, most new managers would rather have a strategy to work with from the get go than start from scratch, even if changes are required.
At least they can start with an alignment of expectations and a framework for moving forward. And any company strategy needs to be flexible enough to shut down initiatives that don’t work while capitalising on opportunities as they present themselves.
2. Build management skills
It’s often said the best successors should be developed in-house and, indeed, every business should develop their own talent.
Developing a professional development plan for possible successors is a great way to build skills, get things moving and prepare people for change.
Company governance is a great place to start and this can be facilitated with membership and workshops at the Australian Institute of Company Directors.
Even if you don’t have a board, it’s worth understanding how they work, if not just to formalise decision-making processes for the business.
An advisory board is a great intermediate step towards a formal board structure so that management can get a broader variety of professional opinions for their business.
3. Identify skill gaps that are required to achieve the company’s goals
A good strategic plan includes insights into what types of skills a company needs to build, with specific references to roles, goals and expectations.
However, sometimes a business is just too small to develop a full complement of skills, or perhaps family members are reluctant to participate. As a result, succession planning can be presented as an opportunity to update the company’s portfolio of management skills to achieve the company’s goals.
In some cases, new management skills might involve a more data-intensive approach, digitalisation of business management processes or perhaps implementing automation or robotic initiatives.
In addition, a closer examination of management structures could identify an over reliance on one or two people. Spreading roles and responsibilities can help to build resilience, particularly in the face of unexpected changes in management.
4. Develop KPIs for the company and management positions
Often the greatest challenge is measuring the effectiveness of new management. Sometimes weaknesses can be exposed way too late.
A system of KPIs that has been developed over time establishes the expectations for new management. This allows clear communication during the recruitment process and provides early warning signals when things aren’t going right.
5. Develop a culture of continuous improvement
It’s temping for high-level managers to make all the decisions. However, developing a culture of continuous improvement, such as a Lean approach to operations management, tends to distribute decision making so that when the key decision maker is absent, operations can continue as expected.
This means that when new a management team takes over, they can focus on strategic initiatives rather than keeping the company turning over. This greatly reduces the risk of disruption when a succession plan needs to be executed.
More importantly, a continuous improvement culture can free up resources and open up new possibilities to benefit your customers.