The importance of succession planning

Running your own business is a bit like riding a roller coaster, except you thought you were signing up for a ride in a chauffeur driven car. Every day brings a new surprise, some good and some bad, but perhaps the worst shock is when your best employee announces that they are off for another job, back to full-time study or going to Tibet to meditate. All this just when you had decided to promote them to a management position. There goes another good day!

Actually, we shouldn’t be surprised when people move on, it is the nature of a life journey. But it certainly can take the fun out of the business day. Given that it happens all the time, I wonder how many of us actually build a succession plan to mitigate the damage. We are expected to plan for risks in the business and this is surely just another risk.

Some level of succession planning happens in the ordinary course of business. We expect people to get ill occasionally and we know they are going to take vacations, so we do arrange cover for them during those periods. It is just that we anticipate they will come back, so our arrangements are only temporary. However, we can extend that horizon with some cross-skilling, regular reassignment to allow people to learn new functions and understand the business better or giving them new challenges to stretch their capabilities. However, in the end there is no real substitute for a full succession plan.

If you need an additional justification, don’t just think of succession as a plan for a termination, think of it as cover to build flexibility into the business. Unless you can free up some of your best resources for an extended period of time, you can’t really take on large restructuring projects such as an acquisition, raising finance or selling part or all of the business.

There are a number of strategic projects which require a dedicated level of effort for a concentrated period of them. Unless the key people can be freed up of their everyday activities, you can’t really pursue these projects. Furthermore, you can’t always plan when they may occur. An acquisition opportunity may simple drop into your lap. Senior managers need to be able to stop what they are doing and concentrate on evaluating, negotiating and managing the new acquisition.

Sometimes you can obtain resources from outside the firm to step in to take over a role, but it is hard to do that at the last minute. These things need to be carefully planned and arrangements prepared.

For the bulk of staff, you need to have a plan for what you would do if they became chronically ill or resigned. This is one of those situations where ‘Sorry!’ really doesn’t cut it. These situations can be anticipated and therefore basic risk management and good governance would dictate that you should have at least considered the situation and decided what you would do if the occasion arises. You cannot effectively drive a growth agenda if you can so easily be disrupted.

Tom McKaskill is a successful global serial entrepreneur, educator and author who is a world acknowledged authority on exit strategies and the former Richard Pratt Professor of Entrepreneurship, Australian Graduate School of Entrepreneurship, Swinburne University of Technology, Melbourne, Australia.