Many business owners delay putting together a succession plan — and may not even be aware they need one in the first place. But even small businesses need a plan for the future, and it must incorporate a variety of possibilities such as a leader’s unexpected death or sudden departure from the organization, or a planned and expected leadership transition.
Not having a plan at all puts your business at risk. If you don’t have a succession plan in place, you’ll have to deal with ambiguity and possibly dissension among key leaders, and confusion regarding the roles people will play in the business as time moves on, says Jeffrey A. Asher, a partner at Robinson Brog Leinwand Green Genovese & Gluck P.C.
Erik Gunderson, attorney for Charlton Weeks LLP, agrees. “Future leaders should be identified and put into positions where they can develop their leadership skills, and where everyone can see that they know what they’re going,” he says.
How to Determine What’s at Stake
To determine what’s at stake, follow these three steps:
- Look at your timeline. Do you have an event that’s approaching and you know the amount of time you have to prepare? An example would be an imminent retirement or restructuring. On the other hand, your timeline may be less specific and you simply want to prepare for any eventuality.
- Look at your numbers. How many leaders at your company are eligible for retirement? What is the level of experience of the people coming up behind them? How quickly has your company been growing, and what is its forecast for the future?
- Look at indirect data. This information will include data such as how long it generally takes your company to fill positions, what key skills your team has and lacks, and where potential job candidates might come from.
Looking at the hard and soft data can help you spot red flags. Once you collect that information, it’s easier to show what the repercussions may be.
The Risks You Face When You Put Off Succession Planning
In the event of a leadership change without a plan, your organization could face these challenges:
- Uncertainty about the future. “If the company doesn’t have a clear view of who will step into a key position if a role is vacated and the impact of the associated role shifts, it will be significantly disrupted without key leadership or management during an already tumultuous time of change for the company,” says Michelle Bomberger, founder and managing attorney at Equinox Business Law Group.
- Lack of long-term leadership in a dynamic market. Other leaders may jockey for position to fill a leadership vacuum, and if they aren’t acting with the company’s best interests in mind, the organization could face damage to its reputation, assets or workforce. “Without a leadership succession plan, when a vacancy appears near the top of an organization, it can be something of a free-for-all to fill that spot, and the damage from the political fallout can be enduring,” says Gunderson.
- Institutional knowledge at risk. It’s not just leadership you’re trying to replace — it’s the knowledge and personality the person leaving the company takes with them. “That’s why identification of a successor must involve identifying someone with both subject matter knowledge of the business itself and a track record of loyalty to the business,” Gunderson says.
- Loss of specialized skills. It’s possible leaders at your organization have specialized skills that require training or experience to gain. If there isn’t anyone at the company with similar skills and training would take too long, the organization may have to look outside itself to find someone to fill the position.
A strong succession plan can help identify the risks your company faces and the leaders you need to develop. Read our new white paper to learn more about how to create one at your company:
Success Labs is a full-service, strategic organizational and leadership development company located in Baton Rouge, Louisiana. For more than 25 years, our expert team of consultants has worked with hundreds of companies to explore their business potential and improve their company and cultural performance. Contact us to get proactive about your people strategy.