What is Succession Planning, And Why Does My Business Need It?

Succession planning isn't at the top of many business owners' minds. But it's a critical aspect to engage employees and prepare the future for success. Moreover, it allows companies to attract— and keep— top talent. 

Many companies are perpetually short-staffed at all positions and trying to hire new employees quickly. Why? Because people have discovered they'll get raises and promotions faster by doing the same job at another company. 

Unfortunately, this is incredibly expensive for companies in the short and long run (it costs 20% more to hire a new employee rather than promote from within!) It's much cheaper to retain and promote talent than bounce employees from company to company.

So what goes into succession planning? And how does it apply to day-to-day business practices? We'll answer that and more in this FAQ rundown of business succession planning.

What is a Succession Plan?

Succession planning describes intentionally hiring and developing employees to take over critical business roles in the future. It's a strategy that focuses on promoting from within the company and developing long-term careers with your hires.

Without clear succession planning, you lose momentum, culture, and company identity. All of which have a massive and measurable negative impact on sales, profitability, and longevity. From hiring managers to mid-level directors to the C-suite itself, you should be planning for the next person to take their seat in these roles.

Why is Business Succession Planning Important?

Interview any great business owner, and they'll tell you that the greatest asset of their business is their employees. That's because great employees will increase sales, reduce waste, and attract new consumers without coercion. 

Every role in your business will eventually experience turnover. So succession planning incentivizes employee loyalty, increases employee buy-in, and invests in your company's long-term, stable future.

How to Find Qualified Succession Candidates

Business success experts agree— you can teach skills, but you can't teach attitude. So when push comes to shove, your search for qualified candidates will center on good culture fits over a long list of experience. 

Your culture represents your company values and vision. It guides how you do business. For example, Apple embodies the phrase "Think different,” which means they hire employees willing to experiment.

Only some talented developers enjoy experimenting. So Apple has to sort out a pool of talent from the collaborative tinkerers and those preferring straightforward assignments.

Both groups may have a lot of experience and come from titled positions. Yet those who do not value or enjoy the risk of creation will not be happy working at Apple and will not be good candidates for succession.

Incorporating Professional Development and Succession Planning

If you prioritize culture fits during hiring, you must prioritize professional development afterward. A great culture fit without training and mentorship is unlikely to reach their full potential-- and neither will your company.

Break down the career paths that lead naturally to your end-goal succession position. Then list the requirements you'd hope a candidate has. Now you can provide opportunities to gain a defined level of experience and training to help the employee shine.

Testing Your Succession Plan

The best plans are ones that you can test before full implementation. You can test drive your succession plan by handing over new responsibilities to your succession candidate before giving them responsibility for the entire job.

You'll have a chance to see if the candidate is ready to take responsibility, identify holes in training, and determine an appropriate timeline to finish the job transition.

Ensure that the people you promote throughout the succession plan are on a trajectory that matches their talent and amplifies their ROI on the company– and beware of the Peter Principle.

Succession Planning in a Family Business is a Unique Process

Many small business owners got into business to create financial stability— a legacy for their children and grandchildren. It's a great way to preserve and grow family wealth without all the taxes.

However, family business succession planning can get sticky quickly. Children and grandchildren may not necessarily be culture fits, have an interest in the business, or have management skills.

Ensure that your family business succession sets the next generation up for success. Proper training is critical. You can also find other ways to maintain wealth for your family without them necessarily becoming CEO.

Working with a Trusted Business Succession Advisor

Planning the future of your company doesn't happen once every few years. Your success plan needs to be formally reviewed annually, with new hires, training, and turnover happening year-round.

With so many critical positions to fill, years between significant position moves, and maintaining a clear vision the whole time, managing proper succession strategy is a full-time job alone! 

So partner with trusted business succession experts. We'll help you create a clear plan, maintain it, and create a solid future for your company.

Contact us for a consultation today!

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