Failure to plan for succession is planning to fail.J.K. Williams, President/CEO (ret) – Williams Buggy Whip Co. Inc; 1902
A major problem that SMEs face is how to ensure the business survives after the business owner/founder retires or for any other reason exits the business. The challenge is how to build businesses that will last. One of the elements of this challenge is the issue of SUCCESSION.
Once you have taken the decision to retire or relinquish your position as CEO, who takes over from you? As an SME, this issue is usually not addressed until it is too late. Some business owners look forward to their children or family members taking over the business, some look to long-serving employees. Others will hire from external sources, head hunting likely talent to fill the position which they are about to vacate. SMEs face this problem ill-prepared for the change and the business ultimately dies with the exit of its Founder/CEO.
How to Succeed at Succession
SMEs and Business owners must identify potential candidates very early in their careers. The candidate’s career development must align with on-the-job experience and the emerging landscape.
These candidates must progress through positions within the business that have profit-and-loss responsibility. A candidate might start from the lowest management position in the firm (junior or assistant manager) which may involve managing a single product or customer segment, and grow into handling larger markets, multiple products, a business unit, division etc.
If your business is not set up to provide such opportunities for the grooming and development of a CEO then you must create jobs, projects or internal units that will help to provide experience for the candidate to be responsible for the profit and loss of the business. Otherwise, you risk employing or elevating a CEO who is quite unprepared for the job.
If your business has a very inflexible functional structure, you may find yourself head hunting and employing from external sources. To reduce the risk of failure on the part of the new CEO who has been recruited from external sources, you should bring these candidates into the company three to four years beforehand.
However, leadership development is only part of the solution. For those SMEs with functional boards, these boards can play a significant role in identifying candidates for the position of CEO. The Board should set up a committee for the purpose of identifying the new CEO from the choices available. This committee should receive regular updates from the HR department on potential CEO candidates from within the business. The Board should at a minimum dedicate two of its meetings in a year to considering at least five candidates both internal and external.
The Candidate Should Fit the Position
When you have identified and created your pool of candidates or you have picked your successor (in the case of a child, family member, long-serving employee etc.), you must ensure that the candidate’s strengths and experiences match the business’s needs. This means they must fit the business. You must define some elements of know-how, talent and experience that are non-negotiable.
Where the candidate is internal, whether it is a child, family member, long-serving employee etc., it takes about ten years to develop such a person for the position of CEO. Therefore the abilities sought should fit with the business’s needs over the next several years and should relate to the future growth of the business.
You must be willing to invest time, energy, and money into the development of this/these individual(s). A career development plan must be designed and the candidate closely monitored.
An executive coaching or mentoring program in addition to specific technical and management training as well as on-the-job experience will go a long way to preparing the candidate(s) for the position.
Do not expect that you can wake up and overnight decide that your son, daughter, children, or family member(s) should take over the business and as such should make a success of it. SUCCESSION PLANNING should be an integral part of your strategic plan for the growth of your business.
THINK ABOUT IT. TAKE ACTION NOW AND PLAN!