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Tips for Creating a Successful Succession Plan

Succession Solutions Explained:

There are many examples in Irish business of long-established family businesses passing to the third and fourth generations and beyond. However, there are significantly more who have not got to that stage, primarily because they didn’t adequately address one or more of the key considerations with sufficient care or regard. Key tips for ensuring success include:

Start Early: Succession planning is a long-term strategy and thus preparation should begin 5-10 years ahead of an expected retirement point and as early as possible if an employee in a key position intends to leave the role. This allows ample time to prepare candidates and alleviates future stress.

Time & Flexibility: There will always be current pressures that appear more immediate and relevant than succession planning. However, it is still essential that adequate time is given to evaluating and developing candidates to ensure the long-term functioning of your organisation. Flexibility is also key as the circumstances that the business and individuals are facing are continuously evolving.

Look for External Advice: It is important to discuss the situation with as many people as possible in order to discover all the options available to you. For example, Renatus provides objective advice regarding equity ownership, bringing family members into the business, remuneration, retirement, and strategic planning.

Involve Senior Leadership: The involvement of senior leadership lends credibility and resources to the succession planning process, and they can help in identifying the skills and qualities needed for future leadership roles. They can also mentor potential candidates  to ensure they have relevant expertise when stepping into the role.

Clear Development Plans: It is key to offer a wide range of development opportunities for potential successors, such as such as training, mentoring, stretch assignments, cross-functional projects, and leadership programs. These plans should be tailored to the candidates’ specific strengths and weaknesses. This can also involve allowing the candidate to make key decisions before they officially start in the role.

Explore All Options: It is important to consider all options as an internal replacement to fill in the position may not always be the most efficient move. For example, you could consider an outside hire that provides experiences, skill sets, and viewpoints that may bring fresh perspectives to the company. You could also consider a minor change in the organizational structure with more than one individual filling in for the position rather than throwing an unprepared candidate into the deep end.

Cost of Poor Succession Planning: Poor succession planning can have several detrimental financial and non-financial impacts on an organisation. Indicators of ineffective succession planning include:

  • The absence of clear succession criteria.
  • Insufficient talent development.
  • A lack of cross-training and skill development programmes.
  • The lack of internal capability and a poor management budget.

The following are some of the costs associated with failing to prepare:

Leadership Vacancies & Business Disruption: If a role is not immediately filled by appropriate talent it can lead to reduced decision-making, a lack of strategic direction, delays and decreased productivity.

Loss of Institutional Knowledge: Without a proper succession plan, retiring or departing employees take their valuable institutional knowledge with them. This can result in loss of expertise, history, and insights that are crucial for effective decision-making.

Loss of Talent / Motivation: If employees believe there is a lack of growth and advancement opportunities within the organization due to poor succession planning, they may seek opportunities elsewhere, leading to higher turnover rates. It can also lead to reduced engagement and declining employee morale.

Loss of Client and Stakeholder Confidence: Leadership transitions that are poorly managed can damage a company’s reputation and erode client and stakeholder confidence in the organization’s stability and ability to deliver on its promises. This significantly damages the company’s future prospects.

Higher Recruitment Costs: Without an internal pool of talent ready to step into higher roles, organisations might need to rely on external recruitment to fill key positions. This can be more costly in terms of time, resources, and recruiting fees.

Legal & Regulatory: In certain industries or sectors such as financial services, failing to have proper succession plans in place can lead to legal or regulatory issues, especially if key roles are required to maintain compliance.

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