Passing the torch: Planning required

As a business owner, how much thought and effort have you put into succession? Not many leaders do so. It can be hard to turn over the reins or recognise when it may be time to do so if you’ve built a business yourself or if your position in a company has become integrated into your very identity. And yet, what is the point of your efforts dying with you or your company failing because you can’t recognize your limitations?

An Enterprise Insight Series article addresses how important succession plans are. When you address succession, by default you end up improving performance, profits and morale among your employees in the here and now. If you don’t plan, you could end up scrambling when the task of choosing a new leader becomes necessary and make mistakes. Many companies end up finding new leaders outside the ranks, an expensive undertaking that can erode morale.

Curt Richardson, former CEO of Otterbox, wrote an article about succession for Inc.com. He explained that while he was integrally involved in the evolution of the company, he eventually realised that his passion and strength lay elsewhere. He took on the role of chairman rather than overseeing the day-to-day operations of the company. Today, the company can succeed without his direct oversight because of his efforts and past work. That is a success for him personally.

Richardson points out that this transition can be hard for some leaders, that being honest about how they can best serve a company is difficult because we so identify with our positions. He emphasises that the successful business is one that relies on innovation and doesn’t simply identify with the leadership of a single person. Rather than guarding their position, leaders must share knowledge and act as mentors to others in order for a business to evolve, innovate and become better.

The consequences of not doing so can be profound. The business school division of Baylor University describes how lack of succession planning affected German shoe suppliers and brothers Adolf and Rudolph Dassler. After a family feud, the brothers split, one developing Adidas and the other Pumas. Their feud divided the entire city. Customers loyal to one company wouldn’t deal with or serve customers of the other. School gangs developed along Adidas or Pumas lines. To this day, reports Baylor, city dwellers look down to see what shoes someone is wearing before they are willing to initiate conversation with another.

Baylor professor Bill Worthington points out that succession is a very serious issue when it comes to family business. Worthington and his colleagues have studied succession in family businesses and discovered that succession considerations are often low on the totem pole of priorities even though they are so important. The reason for this, for family businesses, is that succession discussions are difficult matters to address among family members.

Worthington and his teammates studied family businesses in India to find out if leadership succession and ownership transfer affected companies in other countries in the same way. They found that over half of family business leaders in India planned on working until the day they died. That greatly differs from the 16 per cent of US family business owners that planned on doing so: most US owners planned on enjoying a work-free retirement. Owner in India also intended on handing over the company to a son. Baylor researchers stress that behavioral considerations in terms of succession planning matter: family members aren’t always the best choice for business success.

Houston Chronicle contributor John T. Williams emphasises some of the benefits of authentic succession planning. Such plans reassure employees and stakeholders, customers and suppliers. Creating a succession plan so that business isn’t disrupted helps the stability of the company and covers tax considerations.

The Enterprise Insight Series article emphasises that succession planning improves communication along the ranks in companies and helps companies to grow as their employees do. Succession planning equals employee development.

The authors more specifically identify the positives of such a plan: looking at potential and talent gaps can help your business realise what you need and what will be needed for success; helping employees in terms of relevant self-development can improve engagement, morale, productivity and retainment; succession plans save lost money in terms of time and interviews when someone leaves and they can help a business to avoid the adjustment and learning time an outsider may encounter.

How should you go about creating a succession plan?

Figure out who will take charge, whether temporarily or permanently. Have leaders set a target date for their exit and identify what successors need to learn before that date. That requires that leaders define their role and the tasks and skills that are involved. This work can lead to definitions of roles throughout your business and can help improve business success and employee development. You can create a ladder of development within your company, solving the succession issue for many years to come. This requires an ongoing assessment process, both of your employees and the roles that are applicable as your business evolves. Williams emphasises that soft skills must be considered as equally important, if not more important, than technical qualifications when it comes to leadership.

Do you have a succession plan? Are you standing in the way of your company’s progress?

The writer is an executive coach and HR training and development expert. She can be reached at oksana@academiaofhumanpotential.com or www.academiaofhumanpotential.com. Views expressed are her own and do not reflect the newspaper’s policy.