Proactive planning for the long-term future of your business gives it staying power. The surest way to secure the legacy of a business is to have a strong succession plan in place for ownership and management. But what makes up a ‘strong’ succession plan vs. an ineffective one?
Pinion succession advisors share five common pitfalls they see when it comes to succession planning and simple steps to overcome them.
5 succession planning pitfalls to avoid
Succession planning may not be ‘rocket science’ in nature, but there are hurdles that deter businesses from starting and succeeding. Some of the most common mistakes and pitfalls include:
- Not having a long-term vision for the company.
- Only preparing for CEO or CFO level transitions.
- Treating succession planning as a one-time project.
- Not knowing the value of your company.
- Planning in a vacuum.
Ensure a healthy succession plan
Develop a long-term business plan and vision. Start with the end in mind, looking 20 years into the future and then working backwards. This is critical to understanding how roles will need to change and expand, what skills and abilities you need on the team and who can help carry that vision forward.
Start succession planning before you feel ready. Don’t wait until you have the perfect plan in place. The longer you wait and the more perfect you try to get the plan, the further behind you’ll feel. Get started and work your way through, ironing out the details as you go.
Identify and prepare the next generation of leaders. Identifying a successor for any role takes times – developing a successor takes even longer. Form a development program to help the next generation grow in their business acumen, technical expertise, and interpersonal and leadership skills.
Look inside your organization. While looking at a wide pool of applicants inside and outside your organization is important, be sure to consider your existing team. Studies show that CEOs brought in from the outside have an 84% greater chance of turnover in the first three years. So don’t overlook existing talent – the answer may be sitting just down the hall.
Perform a business valuation. Understanding the true, current value of your business is critical when planning for succession. If a stakeholder leaves and needs to be bought out, how much will it require? What is the fair amount for a new leader to buy in? Knowing the numbers simplifies those conversations.
Involve multiple layers of leadership. Succession planning should not be done in a vacuum. Bring multiple levels and perspectives to the table – managers, executives, owners, etc. Challenging viewpoints can sharpen and hone the plan better than a narrow, siloed view.
Succession planning can be overwhelming. Many times, it’s easier to kick-the-can down the road and focus on the current demands. But preparation will only benefit and strengthen your company, ensuring you are able to weather the changes that come.
Building a leadership pipeline is a crucial first step. With nearly 65% of businesses reporting that they have no succession plan in place for critical roles – it’s often the obvious place to start. It takes time, intention, and months of training to get new leaders up to speed. On average, it takes a minimum of 12-24 months to successfully transition job duties. Businesses can do this simultaneously with the other steps in a succession plan.
For guidance with your succession planning journey, connect with a Pinion Next Gen advisor.
To learn more about succession planning, watch the video: “Succession and Legacy: Insights on Plan Successes and Challenges” where Pinion experts share real-world scenarios they’ve encountered through the succession process.