Business Succession Planning

Many business leaders expect to someday pass on the leadership of their companies to their subordinates. This change in leadership is a common strategy to maintain the continuity and direction of the organization. But every business leader faces roadblocks that threaten to thwart his or her plans.

1. Waiting too long to start planning

In a national survey, of manufacturing and distribution companies, we asked business leaders how prepared they are for a leadership or ownership transition. Just 19 percent said they are “very prepared,” 54 percent said “somewhat prepared,” and 27 percent said “somewhat unprepared.”

Many business leave succession planning until the last moment — if they plan at all. Yet an ideal succession plan requires laying the groundwork over many years. Some experts recommend planning your exit strategy from the day you become the leader. How you want to leave the business tomorrow strongly influences how you structure and operate the business today.

2. Assuming a subordinate will take over the business

If this is the assumption, you will want to hire employees with future leadership potential. Future leaders will need to be identified several years before the leadership transition is scheduled. A plan will need to be in place to get the potential successors the training and experience they will need to succeed. Also, thought must be given to look outside the organization for future leaders. Many times an organization may want to seek outside leadership potential with experience and skills not present within the organization.

3. Waiting too long to give real authority to the potential leaders

Another common roadblock is waiting too long to give genuine responsibility and authority to a potential leader. Many managers never give it up until the day they retire — only to learn painfully that the successor isn’t up to the task. Involve the person in your decisions and let him or her make real decisions. Let the future leader build relationships with vendors, employees, and customers. After all, you made mistakes when you were starting and growing the business. Let the next generation make mistakes and learn from them, just like you did.

4. Trusting your successor

This goes along with the failure to give your successor genuine authority. While you don’t want to trust someone blindly just because that person is familiar, don’t be so suspicious that you’re constantly peering over his or her shoulder. This creates an atmosphere of distrust. Whether you are working with an employee or an outside party, there is always a level of risk in leadership transition.

5. Being secretive about your plans

Business leaders frequently play their succession plans close to their chest. Perhaps they’re worried about stirring up conflicts. This is a disservice to your successors and potentially a disaster for the company. The sooner you can reveal your plans, the sooner everyone can get on board. It also gives you time to modify the plan, if necessary. Keep all parties informed, perhaps through periodic staff meetings.

6. Dreading retirement years

Retirement can be difficult for a business leader because the business is often the all-consuming center of the leader's life and personal identity. Without a clear sense of what they want to do in retirement, they will defer succession planning.

7. Planning on your own

Business succession planning is complicated and fraught with landmines. Outside advice can be invaluable, particularly from consultants who have experience in succession planning and who have the knowledge, experience, and an objective perspective.

8. Avoiding the journey and looking for a cookie cutter process

There are no short cuts to a successful business succession plan. It is more like a journey than a destination, and like many journeys in life, it can be fun and fruitful for all who go with you. From a distance, every business may look the same, but like snowflakes, no two are really alike when you look at them closely. That’s why it’s so important to create a customized succession plan that addresses your unique needs.

(Source: CliftonLarsonAllen - Agribusiness Perspe