Business owners, executives and other professionals who hold key roles within organizations are difficult to replace even with months of prior notice. If they have to step down suddenly due to health challenges or a personal emergency, the company may end up floundering.
Succession planning is a way to help smooth any significant leadership transitions that may occur in the future. A succession plan is typically a written document that outlines a professional’s job responsibilities, explores the training and experience necessary to fill their role, nominates specific candidates within the company to step into that position and offers guidance for helping them assume that new position successfully.
Much like estate planning, which is the process of preparing for death or a personal emergency, succession planning is easy for professionals to procrastinate about or ignore entirely. Leaders within organizations may need to consider whether it is time for them to draft a succession plan or if they need to include rules about succession planning in critical employment contracts.
When do leaders typically need to consider succession planning?
Shortly after onboarding
Many organizations hiring executives and other key professionals include requirements for succession planning in their contracts. The company requires that each key professional draft a succession plan that the organization can use when they quit, retire or become unable to perform their job.
New hires may need to establish a succession plan within their first year or two of employment. This arrangement gives the professional time to move into the position and understand what it requires. It also ensures that the company has a plan in place and has begun working with potential successors to ensure they have the training and skills necessary to move into a different position.
After learning about challenging situations
Not everyone has an obligation to establish a succession plan. Instead, they do so out of loyalty to and concern for the business. Business owners running their own organizations often only start thinking about succession planning when something in their lives changes.
A concerning medical diagnosis, a spouse’s medical challenges, a new business opportunity and a host of other scenarios could inspire a business owner to start thinking about retirement and transitioning the company to new leadership. People can handle their personal affairs more confidently when they know their choices, including retiring, are unlikely to cause hardship for the business.
Establishing a succession plan can be as important as estate planning for business owners and executives. Putting together effective succession plans can help business leaders feel secure about the future success of the organizations that they have helped create or operate.