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To keep growing a business, it’s vital to preserve the trust of customers, employees, partners and investors.

No matter how small or large your company is, a strategically written succession plan for leadership is critical for sustainability.

A poorly managed transition leads to financial loss. The most-commom reason for small business failure stems from poor successtion planning. It often coincides with unexpected departures, which means decision making stalls. It results in internal conflict and disrespect from clients and customers.

A strategic plan identifies and leads to the development of internal talent for leadership in the organization. It ensures continuing business success and reduces operational risks.

Six additional benefits:

  1. Minimizes the likelihood of any interruptions in operations.
  2. Identifies potential leaders and clears the way for development of leaders.
  3. Employee morale stays high and institutional knowledge remains in the organization.
  4. Reduces the likelihood of unanticipated gaps in leadership.
  5. Maintains the retention of institutional knowledge.
  6. Eliminates or at least reduces the cost of onboarding executives.

A quality succession plan includes talented employees and starts with the chief executive officer. Otherwise, if a CEO vacancy occurs without a succession plan, it creates an emergency and critical trust issues.

The succession plan must be designed and implemented well and take in consideration the opinions of key stakeholders.

It must also be reviewed every six months to prepare for any possible volatility.

Planning should include anticipated challenges and solutions regarding risks such as trends in competition, supply chains, customer preferences, and other marketplace forces.

Four elements of an effective strategic plan:

  1. Identifies the organization’s positions that are important continuous operations and strategic planning.
  2. Evaluates skill gaps and the potential successors for leadership
  3. Investments for leadership development — mentors, training and creation of development opportunities.
  4. Ongoing, periodic updates to ensure success.

Six essential steps in implementation:

  1. Identify essential positions for both daily operation and long-term strategy.
  2. Assess the organization’s talent and potential for a talent pipeling.
  3. For the development of successors, implement job shadowing, rotation of assignments throughout the organization, provide trainging and mentoring.
  4. Develop a timeline — a transitional roadmap three to 10 years in advance.
  5. Test a candidate’s readiness by mplementing trial runs with temporary responsibilities. Ideally, during the leader’s vacation or during important projects.
  6. Reassess the plan on a regular basis for changes in business-goals, personnel or marketplace conditions.

Despite these planning benefits, data has shown that more than half of all organizations do not have a formal succession plan, leaving them vulnerable to instability. A proactive approach, however, secures the organization’s future, as exemplified by successful CEO transitions in companies like Microsoft.

With a company’s human capital being so important, it’s noteworthy that “90 percent of young workers say their engagement levels improve if the company they’re working for has a clear succession plan,” according to Davitt Corporate Partners.

The company, based in Dublin, Ireland, naturally points out the importance of intellectual capital.

“If all the best people end up leaving your company without sharing their knowledge; 40 years of experience is just walking out the door and lost forever,” says a company statement.

“A succession program will ensure critical positions are filled more quickly and that there is reduced staff turnover,” the company concludes.

From the Coach’s Corner, here are relevant strategies:

Home-Grown Succession Planning Helps Financial Performance — Companies that promote their chief executives from inside vis-à-vis recruiting from the outside have a much higher financial-success rate. In other words, successful companies identify and nurture their intellectual capital. It’s not just my experience. It’s been confirmed by a global human resources study.

Management — Big Banks Provide Lessons in Succession Planning — Many businesspeople are so focused on operating their businesses, they forget about human capital – their most important asset. Organizations from small to large should strategically make a succession plan. 

For Best Performance, Inspire Employees with Non-Financial Rewards — Money talks, of course, and is a way to motivate employees. But money is not always the chief motivator. Here’s why with some ideas.

Rules to Successfully Bring Your Kids into the Family Business — Naturally, in bringing your kids into your family business, the key to long-term success is to do it the smart way. Here’s how.

Remove Guesswork for Promoting Talent within Your Business — In baseball to win the World Series, there’s often a correlation among a team’s management, talent and its farm system. That’s true for business.

HR: Overcoming Tech Trends, Boomer Retirements — There are ominous implications for human resources departments — from the same tech trends that have empowered consumers to force businesses into the digital age.

“Succession planning doesn’t start with people. It starts with the requirements of the position.”

-David Ulrich

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Author Terry Corbell has written innumerable online business-enhancement articles, and is a business-performance consultant and profit professional. Click here to see his management services. For a complimentary chat about your business situation or to schedule him as a speaker, consultant or author, please contact Terry.