Tips for Developing a Business Succession Plan

Small businesses are an economic powerhouse in Illinois, employing nearly half the private workforce. There are about a million small businesses in Illinois, which make up the vast majority of businesses in the state. 

If you run a small business in Illinois, you probably already know how important your company is to the local economy and the employees who work for you. But, do you know who will replace you and other key members of the management team in the event of sudden death or planned retirement? Identifying and training the next generation of leaders in your business is crucial to keeping your company going. That’s why this article focuses on succession planning, a process that gets your business ready for the future.

Think about the future of your business

The first step is to contemplate the future of your company, your industry, your community, and figure out how you want to grow in the next few years. Are there any big changes coming up within your company that will need to be taken into account during your planning like expansions, new product launches, opening in different markets, etc.? What is the goal of your succession plan?

Your succession plan is part of your business’s overall strategic plan, which communicates what you’re about, where you’re going, and how you plan to get there. If your succession and strategic plans are out of sync, you’re setting yourself up for failure.

Remember that succession planning should be an ongoing effort. You can’t just spend a few hours on it and then return to regular business and forget all about your succession plan. Review and refresh as needed. Experts recommend revisiting your succession plan at least once a year to make sure you’re on track and account for any changes within your company.

Do this:

Create an organizational chart with the names and job titles of your current employees. Next, create your future org chart for two years from now. Who is ready to fill the top leadership positions in case someone leaves?

Be proactive with your succession plan

The earlier you can start your succession planning, the better. It’s especially important to get started before your departure from the company is imminent and announced. This gives you time to test and adjust the plan so that you can hand over the reins with confidence, rather than rushing to put together a succession plan at the last minute. 

A big part of being proactive is anticipating any factors that could support or sabotage your succession plan in the future. For example, what trends are forecasted for your industry? Is there any need for new competencies in key positions? Will there be generational and cultural shifts taking place in your workplace? Does HR need to work on new ways of nurturing internal talent?

Sometimes you have plenty of notice before a hard-to-replace employee leaves, but other times it takes you by surprise.

Do this:

Review the key roles in your organization and answer these questions:

• What is the day-to-day impact of this person on your company?
• If this person gave notice tomorrow, how would our operations be affected?

Put together a team

Succession planning is a complicated process with lots of moving parts, so we recommend putting together a team that can work together to build the plan with you. You want to surround yourself with people who are competent at various functions within your company and who can provide valuable insight into different facets of how the company runs and what may need to be considered during a succession. It can be helpful to get a variety of opinions about future considerations so that you can cover all angles of the succession.

Do this:

Make a list of people in your organization who are:

• Process-oriented
• Strong communicators
• Knowledgeable about job competencies and competency development
• Well-connected in the company to help grow support for your plan

Consider a variety of qualified candidates

This is a major part of the process and where it will be most helpful for you to get opinions from members of your succession planning team to find a candidate that is qualified. You may want to consider external candidates as well as internal ones. If you are choosing to promote someone from within, then this might cause a shakeup in other departments; by promoting one person, they will then need to promote someone to their old position, and so on and so forth down the line.

Do this:

Think “outside the box” when choosing potential successors. Instead of just looking at the next person in line on the org chart, ask yourself:

• If we were to hire internally for this position, which employees would be the strongest candidates for stepping into this role?
• Would those candidates need training? And, if so, what type?

You should also talk to prospective candidates to confirm they are interested in advancement to senior management before you proceed. 

Create career paths

The succession planning process is an opportunity to create succession plans for various employees in your company so they know what steps need to be taken to achieve a promotion. This can help automate future promotion decisions since you'll know exactly what requirements will need to be met for someone to move into a higher position.

Do this:

Create a career roadmap for each job title in your company. This should include:

• The skills, knowledge, and experiences needed to advance from one rung of the letter to the next
• How these things can be acquired
• Next roles in the career ladder

Encourage professional development

As you create career paths and the overall succession plan, professional development (PD) is likely to come up. You can utilize external PD programs or create internal ones to help employees learn new skills and make connections as part of the new job opportunity. You may want to make personal introductions to specific colleagues or mentors who are important to your business. Likewise, make sure that they read any books or other educational programs that will be essential to helping the business thrive.

Do this:

Step up your professional development efforts by assigning employees to job rotation, assigning them to a mentor, or signing up for an external program.

Execute a trial run of the plan

As with most big decisions, you may want to test out your plan before you implement it in full. Allow the succession to commence for a limited time and see how the company fares under this new management structure. This can allow you to identify weak points in the succession plan and gives you enough time to patch up those weak spots before you finalize the plan.

Get help from Town and Country Bank and Peoples Prosperity Bank!

Proper succession planning can help you attract and retain the best and the brightest workers. At Town and Country Bank and Peoples Prosperity Bank, our experienced Commercial Bankers are here to guide you in meeting all of your business banking needs.

Developing a business succession plan and exit strategy isn’t just for mature companies. Startups and early ventures should also have a succession plan as part of their business plan when meeting with bankers and investors. Contact us or schedule a Business Financial Review today to learn more!