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Succession planning

Succession Planning

SUCCESSION PLANNING

INTRODUCTION

In an organization, the process of recruiting to fill a vacant position can be a costly and time-consuming process. The vacant position can be as a result of a partner who has decided to quit, an owner who might have become incapacitated, or a key management personnel who has decided to leave for greener pastures.

When any of these happens, the continuity of the business is always at stake.A company can save valuable time and money by having a successor and a succession plan in place.

WHAT IS SUCCESSION PLANNING?

The State of Succession Planning Report describes succession planning as, “Any effort designed to ensure the continued effective performance of an organization, division, department, or work group by making provisions for the development, replacement and strategic application of key people over time.”

Succession Planning can also be said to be the process of ensuring that the most qualified person is always running the organization. In this process, you ensure that you will never have a key role open for which another employee is not prepared.

Succession planning always aims to attract the best talent, retain those individuals, and develop them through well-targeted development efforts. Succession planning helps build the bench strength of an organization to ensure the long-term health, growth and stability.

Who Needs Succession Planning?

All organizations, no matter their size, need succession planning.

IMPORTANCE OF SUCCESSION PLANNING

When an organization expands, it loses employees as well as also providing job opportunities. Succession planning guarantees that an organization has employees on hand ready and waiting to fill the new roles. Actively pursuing succession planning ensures that employees are constantly developed to fill each needed role in an organization.

BENEFITS OF SUCCESSION PLANNING

Succession planning allows businesses to take a strategic approach to leadership development and recruitment

  • By developing employees’ ability to take over higher-level roles, succession planning gives valued employees a path to career growth and development, and helps companies to retain top talent
  • In developing their talent pool, companies can attract and retain the best people, and also ensure that skills and experience are shared with other employees
  • Succession planning allows companies to avoid disruption that can lead to a loss of productivity. This disruption can occur when a senior leader leaves or reduces his role, moves to a different position within the company or is unwilling to continue the current role
  • Succession planning can also help plans for future development, by highlighting skills that will be needed in the future and making sure key leaders are trained in those areas
  • Keeps up with industry changes
  • Keeps ahead of competitors
  • Easily identifies weaknesses
  • Attracts new talents
  • It helps retain employee from leaving the company
  • It ensures longevity of the company
  • Increases job satisfaction
  • Keeps the organization prepared for sudden happenings
  • Various skill-sets are identified
  • Potential successors can be groomed based on skill-set
  • It increases a positive and relaxed atmosphere within the organization
  • Increases job satisfaction
  • Training gives a sense of value that creates motivation
  • Training benefits a business by motivating employees, improving performance, and maximizing potential

PROCESS OF SUCCESSION PLANNING

Below are some succession planning process:

  • Transfer to different jobs or departments and on-the-job shadowing, so the employee has a chance to observe various jobs in action.
  • Identifying key staff members for possible promotion, stating reason
  • Lateral moves, assignment to special projects, team leadership roles
  • Internal and external training and development opportunities
  • Retaining experienced employees because they appreciate the time, attention, and development that you are investing in them. Employees are motivated and engaged when they can see a career path for their continued growth and development.
  • Hiring of experienced staff
  • You need to identify and understand the developmental needs of your employees. You must ensure that all key employees understand their career paths and the roles they are being developed to fill
  • Retention of key employees
  • Being aware of employment trends in the industry to know the roles that might be difficult in filling externally

A SUCCESSION PLAN SAMPLE/TEMPLATE

A good succession plan creates a smooth transition between old and new ownership and reduces disruptions to businesses.

For a succession plan, the template below can be used as a guide.

Template Overview

The following template overview provides details on each question asked throughout the Succession plan template as well as links to further information.

Title Page

Question/Field Explanation More information
Business logo Adding a logo gives a more professional image.
Your name Enter the business owner’s name. Enter multiple names if there are multiple owners.
Your title The titles of the business owner(s) listed above, e.g. Owner/Manager.
Business name Enter your business name as registered in your state/territory.
Main business address Enter your main business address. This can be your home address if you are a home-based business or your head office if you have more than one location.
CAC Registration Number Enter your registration number
Prepared The date you finished preparing your Succession Plan.

 

Table of Contents If you have changed this template in any way, please remember to update the table of contents to reflect the changes.

The Succession

Business and Succession details

Question/Field Explanation More information
Business Name Enter your business name as registered in your Country
Business Structure Is your business a sole trader, partnership, trust or company?
Current Owner(s) Who is covered by this succession plan? Does this apply to all partners?
Planned Succession Type Detail the type of succession you have planned? Will you be completely removed from the business or only partially? If it is a partial succession, what will be your future involvement in the business?
Successor Details Who will take over as successor – a family member, business partner or other? How and when will you communicate this to the organisation? Do you have an alternative successor in mind if the chosen successor is unavailable?
Succession Timeframe When do you plan to implement this succession?
Restrictions Are there any restrictions placed on the succession?

 

Proposed Organisation Structure

Question/Field Explanation More information
Figure 1: Proposed Organisation Chart Briefly outline what the organisation might look like once there’s an exit of a staff. For example, who is the successor? If they are internal also outline who will fill their current position. Outline any positions that will be vacant after the reshuffle.

Key Personnel Changes

Question/Field Explanation More information
Key Personnel Changes Table List all of the positions in the organisation and the people that are expected to fill the position in the event of a succession. For each position outline:

Job title: Position title

Name: If known, the name of the employee expected to fill the position. If unknown, add ‘Vacant’.

Skills required: Relevant qualifications and/or experience.

Training requirements: What particular training will this person require to fulfil their new role?

Skill Retention Strategies What procedural documentation do you intend on providing to ensure the skills of staff are maintained? Do you have an appropriate allocation of responsibilities? How will the new responsibilities be documented and communicated to staff? What internal processes will you implement to regularly check that the current skills of staff members are still appropriate for the business?

 

Training Programs What training programs will you be organising for possible successors? Are these in-house or conducted by external providers? Have you also considered change management training for the organisation in preparation for the succession?  

Registration Changes

Question/Field Explanation More information
Registration Transfers Which registrations do you need to transfer/change? For example, business name, intellectual property, domain name, local licences/permits.
Change of Business Structure Do you need to change your business structure? For example, if the business was a partnership and the new structure will be a sole trader.
Other Transfers Lease, memberships or other?

Legal considerations

Question/Field Explanation More information
Contracts/Legal Documents Is there a legal document that dictates the terms of the succession? If so, what are the terms? Are there any contracts that need to be modified in the event of the succession, e.g. partnership contract? Are there any new contracts that need to be drawn up?  
Buy-Sell Agreement If you are in a partnership do you have a buy-sell agreement in place? What are the terms? Will the remaining partner(s) buy your partnership share or will it be open to external partners/family members? Does this arrangement apply to all partners in the organisation?  

 

Buy-Sell Agreement If you are in a partnership do you have a buy-sell agreement in place? What are the terms? Will the remaining partner(s) buy your partnership share or will it be open to external partners/family members? Does this arrangement apply to all partners in the organisation?  
Will/Testament As the business owner(s), have you drawn up a will or testament? What happens to the business or your share of the business in the event of a death?  

Insurance

Question/Field Explanation More information
Current Insurance What insurance policies do you currently hold in the event of a disability, death or injury? Visit our insurance page.

Succession timetable

Question/Field Explanation More information
Succession timetable table The timetable provided should detail each phase in the succession process. Phases can include, but are not limited to: planning, business housekeeping (e.g. financial/developmental/legal), successor mentorship/training, handover and transition. For each phase list:

Phase: Brief phase description

Succession action items: What are the succession action items that you need to complete for this particular phase?

Start date: When do you expect to start this phase?

End date: When do you expect to end this phase?

 

Contingency/Risk Management

Question/Field Explanation More information
Contingency/risk management table Detail the risks to the succession and any contingencies. For example: If the sale price you expected is not met, what will happen? For each risk list:

Succession risk: What can go wrong while the succession plan is being implemented? What is the potential impact to your business?

Likelihood: Highly Unlikely, Unlikely, Likely or Highly Likely.

Impact: High, Medium or Low.

Contingency: What is your contingency/alternative plan in the event that this risk happens?

     

The Finances

Question/Field Explanation More information
Current value of the business What is the current market value of the business?
Retirement Income/Payment Detail any retirement payments required on/from the planned succession date for retiring owners. What are the terms? Is it a one-off payment or regular payments?
Sale details In the event that you put your business on the market during the succession, what is the minimum sale price you require? How long do you plan to have the business on the market? Who will receive the proceeds?

 

Buyout details If you are in a partnership and you plan to arrange a buyout, what is the value of your share? What is this in percentage terms? What is the value you will sell to existing partners, family members or external third parties?
Taxation What taxes are payable in the event of a transfer or sale?

Supporting Documentation

Question/Field Explanation More information
Supporting documentation List all of your attachments here. These may include copies of contracts registrations, and resumes.

(Source: www.business.gov.au)

CONCLUSION

Having a succession plan for your business organization will make it sustainable, attract the best talents, retain important personnel of the organization,  and develop them through well-targeted development efforts. Succession planning helps build the bench strength of an organization to ensure the long-term health, growth and stability.

 

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