One of the biggest challenges facing many organizations today is finding the right successors once key leadership positions have opened up.
Great leaders, despite investing countless hours and efforts into honing their skills and helping their companies attain financial goals, will eventually leave. Whether it’s a forced resignation, transition, or traditional retirement, it’s a given that a leader will depart or get replaced at some point.
Without a suitable successor waiting in the wings, a sudden departure of a key leader can seriously hurt a company’s performance. That and more are the reasons why succession planning is critical and should be a priority for every business.
What Is Succession Planning in Business?
A succession plan is a blueprint for creating a culture of leadership and preparing successors within an organization for the changes ahead. It’s also the key plans and documents that the key leaders need to run the company after the owner’s exit and eventual sale of the business.
Yes, training and educating successors requires upfront investments and efforts from the current leadership, but it’s well worth it. Here are a few more reasons why succession planning is crucial to the success of your organization:
Strengthen Investors’ Confidence In Your Company
Unstable leadership is a source of worry for many investors. With a succession plan, you’re sending a message that your company is proactive and prepared.
Savvy investors understand that it takes a strong commitment to put a succession plan in place and that by having one, a company is better equipped to tackle any leadership challenge that may stem from a sudden departure or retirement of top executives. The investors also know that succession plans are designed to address incentive compensation programs, stock option vesting schedules, phantom stock and more to keep key managers and employees in the business through the sale.
Identify The Most Suitable Candidates
Experience alone does not guarantee success when it comes to leadership. With a succession plan, executives can see who really has the qualities and temperament necessary to lead.
In today’s business climate, savvy organizations place a high value on qualities such as interpersonal skills, charisma, and emotional intelligence. They understand that experience alone is not enough to lead an organization or manage a 21st-century workforce.
Having a succession plan will help you identify the most suitable candidates for leadership positions within your organization instead of hiring from outside, ensuring that you don’t waste time and resources on the wrong people.
Preserve Your Legacy For Future Leaders
It’s a waste of resources to invest in leaders if they don’t pass on their wisdom to their employees, who will be future leaders within the company. A company may suffer a brain drain when its highly skilled employees retire or seek employment elsewhere. Succession planning, especially leadership training and mentoring, are great ways to pass on a legacy and ensure that your organization is stable should a key leader depart suddenly.
Reduce The Cost Of Hiring And Training
With the soaring demand for high-skilled talents, hiring capable executives comes with a high price tag. Without formalizing your succession plan, you risk putting your organization at risk in the event of a sudden departure of key executives. Candidates from other companies can also take advantage of the situation and demand higher salaries if they see that you’re desperate or have no choice. Certain roles by design are in high demand, and attracting and retaining the right leaders to grow your company and take it to the next level can come with signing bonuses, expensive recruiter fees, rich benefits and more.
Having a successor take over the reins comes with many benefits, but the biggest is that a successor can get up and running immediately since he’s already familiar with your business processes and operational procedures, while a newcomer will have to go through a learning curve to understand your company’s vision, priorities, and values.
Maintain Brand Continuity And Customer Loyalty
Change is great, but rapid change can have unintended impacts on your brand identity. Hiring a leader from outside means that the new leadership will not have learned what your core value and brand identity are.
Without understanding your organization’s core principles and values, a new leader can imperil your brand’s image, which can affect your revenues, profits, and long-term growth. Hiring within your organization reduces the chances of things going awry and eliminates the risk of the unknown. Promoting from within as part of a carefully managed program to cultivate and develop strong leadership from within, with the right mindset, soft skills, and values you’ve created for your company, is worth its weight in gold on maximizing your value and positioning your company for long-term success before, during and after your exit.
Build A Stronger Future For Your Business
Succession planning can help you plan ahead in the event your company experiences unexpected challenges. The process can help detect problems early on, set new objectives and create an innovative team that can lead the future of your industry. If any member of your team requires new skill sets and training, succession planning will identify that need and help ensure that your employees, your future leaders, are well-prepared for the future.
Prepare Your Organization For The Unknown
Businesses are good at what they do. Many have systems in place for almost every process, yet very few are well-equipped to tackle leadership issues.
The challenges facing businesses today are immense — some of the more critical ones include high employee turnover, shortage of qualified executives, retirement (as many as 10,000 boomers retire every day in America), and the high cost of hiring. Without a succession plan in place, events like these can hurt the future of your business.
Why Succession Planning Is Important?
Succession planning ensures that a company has a strategy in place in case of the unexpected. With so much happening in the labor market, any company can lose key employees to competitors. Thus, it’s critical to have a plan in place or risk losing your competitive edge.
Like every worthwhile endeavor, you have to be proactive in order for your succession plan to be fruitful. Whether you’re looking to transition or you want to create a robust succession plan for your organization, Raincatcher – one of the leading M&A, brokerage and exit planning firms in America — can help you get there. Contact one of our specialists today for a free consultation and other perks.