Succession planning is changing.
Traditionally, business leaders were so focused on managing their business, that they didn’t prioritise succession planning and the eventual transition of ownership. A company was considered ahead of the curve if it had a plan in place at all – even if that plan was just a list of critical positions and potential candidates.
However, as more and more Baby Boomers hit retirement age, this has started to change.
Baby Boomers sparking change
Already independently wealthy, most Baby Boomers are turning their focus to developing proactive, strategic plans as a way to continue their legacy rather than concentrating solely on the business sale.
At the current rate, there are over 5,000 people turning 65 per week in Australia, with this number projected to increase over the next seven years. For these individuals, successful succession planning is at the forefront of their minds, as they aim to retire knowing their employees are cared for and their business can continue without them.
This substantial change in the approach business owners are taking to their exit is largely due to the wealth they possess.
The transition of wealth from the Bay-Boomers exiting the workforce onto the next generation receiving this wealth represents the largest transferral of wealth in history. This means that they do not necessarily rely on the sale of their business to fund their retirement as previous generations have.
What we are seeing now instead, is a large increase of legacy stewardship exit strategies. In other words, their primary focus is no longer on a financial harvest but rather about providing something they can be proud of – that their employees are cared for, the integrity of the business sustains, looking after family members in the business and making sure customers and suppliers are looked after. These issues have become more important than the dollars they might be able to extract.
A focus on culture
Corporate culture goes a long way in ensuring this is done successfully.
While companies are undoubtedly valued for their financial performance, they are also highly assessed on their culture and relative ability to attract and promote the brightest people. There is great business acumen in promoting trust within an organisation and developing people from within. Implementing a good succession plan can ensure this happens.
Here are some tips on how to implement an effective succession plan in today’s world.
Have an Effective, Strategic Succession Plan
Ensure you have an effective succession plan in place as this will guide the course and long-term direction of the company. Don’t forget, people make up companies. An appropriate question to begin with is “What do I need to do to obtain the best efforts from my people, to educate and position them so they may best contribute to the company’s success and their own, and to build a pipeline of well-educated, apept and experienced people for the future?”
Select Target Areas
Define the key areas from within the company which would derive the greatest benefit from continuity and development of human capital. Prioritise succession planning in these areas.
Retrofit then Re-Engineer
First determine how the succession planning concept fits into your existing corporate strategies and then be prepared to redesign parts of strategies to incorporate the concept to produce greater long-term results.
Every year, make it a priority to identify key people from within the organisation to develop and nurture. Ideally, you will create paths that can be customised to fit the abilities and talents of these people. It certainly isn’t necessary to have a plan in place for every position but it is essential for every defined key position.
Action over Reaction
Finally, formulate opportunities for each individual as they grow, thereby keeping them challenged, stimulated and less likely to move to other companies.
Not a one size fits all
As business leaders consider strategies for the succession planning process, they must realise that there is no universal plan that works for everyone. their approach should depend on the variables within their company, such as culture, individual’s capacities and capabilities, and the structure and operations of the company affecting the plan.
Before companies determine how they will approach succession planning, we suggest they talk to a professional advisor.
That’s where we come in.
Our team of trusted advisors can help you shape the best strategy that suits your business, it’s culture, and it’s people. Get in touch today and get the peace of mind knowing your company will be in good hands once you’re gone.