The Six Biggest Fallacies about Succession Planning
I meet lots of business people who want to talk about putting in place an Exit Strategy, and planning for this as well as grooming their companies for value growth prior to exit. Surprisingly its less common to find folk prepared to talk about succession.
Why don’t people like to talk about succession – here’s some understandable reasons.
- Its not a crisis yet so let’s defer it.
- I don’t have a suitable successor – so I don’t feel I can retire
- I don’t have any obvious and outstandingly good candidates – how can I chose – better to wait until I find a suitable candidate
- How do I get paid out?
- It’s the wrong time to sell – so I’ll wait till things improve
But its important – like death and taxes the need for succession won’t go away. So here are some things not to do – or the six biggest fallacies about succession planning. Listen carefully – you may here some of these in the corridors of your company.
“What this place needs is more people like me” – Leaders who hire or promote in their own self-image run the risk of creating a band of “Mini-me’s” rather than a well-balanced team in which the challenges of one member are balanced by the strengths of another. Good leaders surround themselves with individuals who have complementary skills and strengths.
“What this place needs is new blood” – Bringing in new people may “shake things up” but it can also de-motivate the individuals who have been contributing for years by robbing them of their opportunity to shine. Before adding “new blood” to the team, assess the skills and potential of existing employees – the company’s next CEO may be languishing in another role.
“Managing ‘things’ qualifies you to manage people” – Promoting the best functional specialists without assessing and strengthening their management skills can be a recipe for disaster. Make sure you have a process to identify which of these performers have the potential to be effective people managers.
“Let’s keep this to ourselves” – Identifying high potential candidates for future leadership roles is the first step, but not letting them know about it is a mistake. You run the risk of losing top performers to a competitive job market, but you also miss a valuable opportunity for development.
“Blood is thicker than water” – Just because a son or daughter is in line to take over the family business doesn’t mean they’re qualified to be an effective leader. Call it the third generation curse but only 24% of UK Family Businesses survive as such through to the second generation and only 14% make it beyond the third generation.
So start planning now, whether your business exit options are through a trade sale, or through a management buyout, you will need to have a plan for succession in management as well as succession of ownership. To address these issues we are running an updated version of our Business Exit Strategies Seminars. They will also cover tax mitigation, management buyouts, grooming, and selling your business. The events are practically focused with interactive sessions, and are aimed squarely at business owners. This time around we are holding them in Hemel Hempstead, Milton Keynes and Brentwood. Have a look at our events page for more details.
With acknowledgment to John Szold of www.planningforsuccession.com