Have you considered stepping away from your business? Having second thoughts or sleepless nights about stepping away? Let’s dive into some challenges and steps to help you prepare for and navigate through the journey of succession planning.
Challenges Leaders Face in Succession Planning
In my 26 years of experience in leadership and development roles, I’ve identified three of the most common challenges leaders have when appointing an effective successor.
They Focus on the Position, Not the Big Picture
Many leaders have been in their company for decades and have held various positions as they climbed the ranks. Therefore, when it’s time to step away, their focus is on simply filling the position rather than appointing a successor who aligns with the strategy of the company. When you replace an individual, regardless of tenure and talent, this makes the change transactional. The goal when naming a successor should be to install someone who has the ability and a proven track record to carry on the strategy of the company.
They Struggle to Make Tough Decisions
I’ve seen managers struggle with making hard decisions. At some point, a manager has decided to promote an individual to find out quickly that their decision wasn’t the right one. This can and will happen the longer you’re in a leadership position. The struggle comes when the elevated employee doesn’t perform at the level of expectation, and the manager either leaves the individual in the position or finds a lateral role for the individual as a “soft landing.” Don’t let yourself fall into that trap. Once you realize a decision is not working out, own it and pivot fast. It doesn’t mean you terminate the individual; it means you must make a swift decision to find the right position for that talent within your company. The longer you wait, the harder and more expensive it becomes.
They Don’t Develop Their People
Often, leaders struggle with developing their people. Many succession success stories are internal candidates, and if company leaders want to promote internally, employee professional development must be prioritized. While external succession candidates could also be successful, internal candidates often understand the culture of your company, which is important to the tenured mid-level employee base. Internal candidates also show the talent pool and trust of leadership within the organization.
When choosing an internal candidate, consider: Has your successor shown they have executed and achieved performance metrics within the organization? As with any other employee in the organization, performance in various roles should carry considerable weight through progression. This also shows other leaders your eventual successor wasn’t just handed a position or given special treatment. Showing favoritism is a sure way to wreck your company culture and retention of key personnel.
Considerations for Family Business Succession Planning
Communication is arguably the most important aspect when planning for succession. This can be particularly challenging for family-owned businesses. Conversations become awkward when centered around family, money, and control. This does not mean you should avoid early and frequent conversations about a successor, though. If you are considering a family member to become a successor; you must have consistent, clear, and open dialogue of the process with all family members (directly involved or not). This allows everyone to have a better understanding of and engagement in the selection process.
Allow Potential Successors to Think at the Next Level
When thinking about potential successors, ask yourself: Have they been around executive leadership and learned how to maneuver in a room? Having the experience of being in rooms where critical questions with major financial implications are asked is invaluable. It allows the employee insight into how to prepare, plan, respond to feedback, and precisely communicate strategies and goals. Allow future successors to attend executive meetings as they mature into that role. It’s all about thinking at the next level before you get there!
The use of stretch assignments is also a good indicator that a potential successor has learning agility. Just because an individual performs well in their current role is not always the best indicator of a person’s ability to pivot when needed.
How Involved Will You Be?
Something else to consider when deciding the path of succession planning is your future role. Do you still want to be involved in the organization? Do you want voting rights and any control (if applicable)? Are you looking to have disbursements to support your current lifestyle? Is there an option for share redemption over time (if applicable)? If you are expecting compensation for life, is the company set up for that along with the added compensation of your successor? Have you considered any tax implications when it comes to your successor? Have you consulted a tax professional to guide you through tax efficiency and best options? This can all feel overwhelming. Speak to a professional advisor or consultant to help you ensure the continued success of your business.
