Entrepreneurs are thriving in every industry, large or small. South Africans have found themselves forced to start their own businesses or work on gigs, only to be forced to employ others. Much of this can be attributed to Covid-19, as layoffs and suspensions of employment have prompted many people to change their careers.
Aside from those who started their businesses during Covid-19, there are those who have been in business for decades. Is a succession plan necessary regardless of how long you’ve been in business? It is important for you if you want to leave your heirs a working business that will continue to operate even after your death.
A lack of a succession plan can jeopardize your company’s ability to continue operating as soon as you die or become ill. The agony of watching your business fail is one of the most torturous experiences that any entrepreneur can go through.
Why is a succession plan so important to entrepreneurs? Before we answer this question, let us define a succession plan.
What is a succession plan?
A succession plan is the selection and training of a group of current and future employees to replace the company’s current leaders. A succession plan’s goal is to ensure that key roles in a company are filled by deserving talent when existing talent retires or dies.
Given that a succession plan entails selecting and training individuals to be worthy leaders of a company in the future, let us understand why succession is important.
Why does a succession plan matter to entrepreneurs?
The concept of succession has evolved significantly over time, as evidenced by monarchs who still rule today. Kings and Queens have always been groomed to be future leaders, as are their children, and the cycle continues.
Because capitalism promotes competition, your business may not last as long as the British monarchy; hence, you should implement a succession plan. The Oppenheimers have sold their stake in De Beers Group in recent years, but they have always had a succession plan in place.
The sale of the Oppenheimers’ stake in a company founded by Ernest Oppenheimer does not imply that the Oppenheimers have failed. The Oppenheimers now own one of Africa’s most prominent family offices.
Their stake in De Beers Group may have lasted nearly a century, but they continue to invest in a variety of companies around the world. The Oppenheimers were able to build wealth and sustain it over time by implementing a succession plan.
If you want your business to continue to grow after you are gone, you should have a succession plan in place. Heirs can venture into other areas in the future because times change and so do business opportunities.
Succession planning process
We can see from the above paragraphs that the succession plan exists to preserve and increase wealth over time. As an entrepreneur or the owner of a large corporation, you now understand the importance of having a succession plan. After all, why would you own a business if you don’t consider the next generation?
Steps must be included in a succession plan. As a result, when planning, you must take the following steps:
- Assess the vision and mission of the company. This is significant because you are doing this for the next generation, so future roles must be clearly defined. Candidates who are deserving of consideration must be guided by the company’s vision and mission.
- Determine the qualities required of future company leaders, as well as the level of experience required. This is because you want the best talent to run the company’s affairs in the future.
- Seek talent both internally and externally. You don’t want to throw away your company by just choosing anyone to run it. You need individuals who are deserving and capable of managing the company’s affairs as you see fit. Talent can be found both internally and externally; it could be your children, employees, or someone else who is qualified for the future position.
- The next step is to conduct interviews and choose the successors.
- Once the successors have been chosen, notify the appropriate stakeholders.
- The final step is to train and develop the chosen talent so that each successor is capable of taking over in the future.
Why succession planning is important
Succession planning is important for a variety of reasons, some of which are more future-oriented than others. When dealing with succession, as a leader you will be confronted with a difficult subject. You are not only promoting your own interest in the company, but also the interests of many other stakeholders in the company.
To protect the company from future business risks and other issues, a succession plan is developed to:
- Ensure business continuity and achieve results.
- Provide direction to the company and motivate employees.
- Save money on the costs of hiring a CEO and other top executives.
- Hand over ownership and responsibilities to new company leaders.
If a company has a succession plan in place for those in the C – suite, it will be able to operate with someone who understands the company and the industry in which it operates. Having such talent will help the business maintain its profitability and carry out projects that were previously carried out by former managers.
A succession plan is something that every business owner should have, and it is a critical component when it comes to sustaining and growing wealth. If you intend to give your heirs powers, a succession plan can be an excellent estate planning tool.