8 Principles of Succession Planning
“Most people don’t plan to fail, they just fail to plan.” – John L. Beckley
Succession Planning typifies long term planning. It is a tactical application that falls within the realm of business planning. Succession Planning works most effectively when the planning begins long before the need arises.
The purpose of succession planning is to recognize (and put into an action plan) the fact that at some future moment in time, the leadership of a business will inevitably need to be replaced. Succession Planning prepares a company with a professional, time-tested protocol when readying for new leadership. Its ultimate advantage lies in the fact that is completed well in advance of the unavoidable event.
No two people define appropriate leadership in the same way. This is because everyone perceives everything differently. These conflicting perceptions are the root cause for following succession-planning practices. While in theory, succession planning appears straightforward. However, problems arise because leadership roles and company cultures invariably evolve from one generation to the next.
The current leadership of a business is tasked with the responsibility of starting a succession plan and, remaining committed to revising the plan as events unfold over time, if necessary. The following principles delineate the requirements to successfully transition to a new leadership team.
A Succession Plan is a Fundamental Part of an Organization’s Strategic Plan
The succession plan is a fundamental part of the organization’s identifiable strategic planning. A succession plan is designed to follow an organization’s overall mission. To begin, define the current leadership objectives and compare them to the organization’s future plans for growth.
Succession Planning Typifies Long-Term Planning
Long term planning strategically considers how an organization will operate in the future. It operates from a set of defined company objectives. Succession planning, therefore, generally begins five years in the future, or beyond. A succession plan works best when the plan is in place before the need arises to transition to new leadership. Succession planning is a specialty due to the many details and nuances that must be considered throughout the planning phase.
Get to Know the Right Talent
Succession Planning requires an organization to remain cognizant of the talent they possess within their current workforce. Each potential candidate must be vetted to determine the raw talent that will fit best with the organization’s future goals. It is important to avoid reducing the pool of candidates unnecessarily.
Consider Future Successors
A succession plan is generally in place for the organization to be ready to transition to new leadership. However, it is prudent to dovetail future plans for future successors. Of course, the further a plan is in the future, the fewer details are required. Consider preparing a working list of candidates at all times.
A succession plan is as good as the information provided to create the plan. Succession planning is often a team effort based on the importance of the task. Team members must work transparently by keeping an organization’s leadership informed of the plan and ongoing modifications. The plan must be distributed routinely to ensure responsible parties know what to do should the transition be unexpected.
Value Fairness, Accessibility, & Transparency Equally
Succession planners are trained to avoid favoritism as it precludes the best candidate from the leadership position by choosing, perhaps, the most popular candidate. The decision-making process must be transparent to each member of the succession planning team.
Where Current & Future Business Goals Meet
A succession plan is a point in time when an organization must merge current leadership methods and goals with future leadership methods and objectives. This moment in time is critical as it often defines a company’s future success. This reality is fraught with risk, which is why a succession plan attempts to reduce or even remove this risk, by its very existence.
Senior Members of the Organization Have a Huge Impact on the Decision.
Ask for input from senior members along the way. Their seniority and authority will impact the final decision. Including them in the decision-making process allows them to buy into the final decision
Succession planning is a critical business management skill. To ensure a successful transition of leadership, it is prudent to consistently plan for new leadership. The next ideal leader needs to be identified before they need to lead.
The First Step
A Valuation. The Valuation of an Insurance Agency tells you more than just the price.
The valuation of an insurance agency isn’t just a figure; it can provide insight into the agency’s goals and help guide operating strategies in addition to its’ role in perpetuation planning. A lower than expected valuation may trigger the need to take certain financial actions. It could also highlight inherent risks in the agency such as an unwanted concentration.
The valuation of an insurance agency can prompt a sale that wasn’t planned, as well as stop a sale that’s already in progress. You may not realize how much value there is within your agency, or you may have overestimated it, but the only way to know for sure is to speak to a financial advisor and go through the valuation process.
Here at Sukay & Associates, we offer free valuations. As a firm, we believe in answering the question is our responsibility and the foundation of a great working relationship – even if that is in the future. Because of this, we are not like most firms. Click here or below to request a free Agency Valuation.