A well-developed succession plan
is like the smooth, graceful exchange of a baton between runners in a relay
race. The new runner still has maximum energy; the concluding runner has
already spent her energy by running maximum speed. The athletes never come to
stop to exchange the baton; instead, the handoff takes place on the move. The
race is a skillful blend of the talents of all team members; the exchange of
leadership is so smooth and powerful that the business never falters but
accelerates, fueled by a new source of energy at each leg of the race.
below are some tips on how to develop a management succession plan.
1. Select the successor: there comes a time for even the most dedicated company founder to step down from the helm of the business and hand the reins over to the next generation. Entrepreneurs should never assume that their children want to take control of the family business. It is critical to remember at this juncture in the life of a business that children do not necessarily inherit their parents’ entrepreneurial skills and interests (sometimes). By leveling with the children about the business and their options regarding a family succession, the owner will know which heirs, if any, are willing to assume leadership of the business.
When naming a successor, merit is a better standard to use than birth order.
When considering
a successor, an entrepreneur should consider these actions;
- Make it clear to every family member involved that he or she is not required to join the business on a
full-time basis. Family members’ goals, ambitions, and talents should be
foremost in their career decisions.
- Do not assume that a successor must always come from within the
family. Simply being born into a family does not guarantee
that a person will make a good business leader.
- Give family members the opportunity to work outside the business
first to learn firsthand how others conduct businesses. Working for others allows them to develop knowledge,
confidence, and credibility before stepping back into the family business.
One of the worst mistakes
entrepreneurs can make is to postpone naming a successor until just before they
are ready to step down. The problem is especially acute when more than one
family member works for the company and is interested in assuming leadership of
it. Sometimes founders avoid naming successors because they don’t want to hurt
the family members who are not chosen to succeed them. However, both the
business and the family will be better off if, after observing the family
members as they work in the business, the founder picks a successor based on
that person’s skills and abilities.
Groom the successor.
Typically, founders transfer their knowledge to their successors gradually over time. The discussion that set the stage for the transition of leadership are time-consuming and require openness by both parties. Grooming a successor is the founder’s greatest teaching and development responsibility, and it takes time and deliberate effort. To create ability and confidence in a successor, a founder must be:
- Patient, realizing that the transfer of power is gradual and evolutionary and that the successor should earn responsibility and authority one step at a time until the final transfer of power takes place.
- Willing to accept that the successor will make mistakes
- Skillful at using the successor’s mistake as a teaching tool.
- An effective communicator and an especially tolerant listener.
- Capable of establishing reasonable expectations for the successor’s performance.
- Able to articulate the keys to the successor’s successful performance.
Create a survival kit for the successor.
Once she identifies a
successor, an entrepreneur should prepare a kit a survival and then brief the
future leader on its contents, which should include all of the company’s
critical documents (wills, trust, insurance policies, financial
statements, bank statements, key contracts, corporate bylaws, and
so forth). The founder should be sure that the successor reads and understands
all the relevant documents in the kit. Some other steps that the owner should
take to prepare the successor to take over leadership of the business include;
- Creating a strategic analysis for the future. Working with the
successor, entrepreneurs identify the primary opportunities and the challenges facing
the company and the requirements for meeting them. The goal is to help the successor understand the company’s history
and traditions while viewing it through the lens of the current and future
business environment.
- Explain the strategies of the business and its key success factors.
- Discuss the values and philosophy of the business and how they have inspired and influenced past actions.
- Discuss the people in the
business and their strengths and weaknesses.
- Make a list of the firm’s most important customers and
its key suppliers or vendors and review the history of all dealings with the
parties on both lists.
- Develop a job description by
taking an inventory of the activities involved in leading the company. This
analysis can show successors those activities on which they should be spending
most of their time.
- Document as much process
knowledge – “how we do things and why” – as possible. After many years in their
jobs, business owners are not even aware of their vast reservoirs of knowledge.
For them, making decisions is a natural part of their business lies. It is easy
to forget that a successor will not have the benefit of those years of
experience unless the founder communicates it.
Promote an environment of trust and respect.
Another priceless gift a founder can leave a successor is an environment of trust and respect. Trust and respect on the part of the founder and others fuel the successor’s desire to learn and excel and build the successor’s confidence in making decisions. Developing a competent successor over a five-to-a-ten-year period is realistic. Empowering the successor by gradually delegating responsibilities creates an environment in which all parties can objectively view the growth and development of the successor. Customers, creditors, suppliers, and staff members can gradually develop confidence in the successor.
Grooming a successor can begin at
an early age simply by involving children in the family business and observing
which one has the greatest ability and interest in the company.
By leveling with the children
about the business and their options regarding a family succession, the owner
will know which heirs, if any, are willing to assume leadership of the business
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