7 stages of succession planning in family business

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How to Plan a Successful Family Naturalist Picture-taking Adventure

If you’re looking for a fun and educational activity to do with your family, consider going on a naturalist picture-taking adventure. Not only will you get to spend quality time together in nature, but you’ll also capture some amazing photos of the flora and fauna around you. In this article, we’ll give you some tips on how to plan a successful family naturalist picture-taking adventure.

Choosing Your Location

The first step in planning your family naturalist picture-taking adventure is choosing the right location. Look for places that are known for their biodiversity such as national parks, wildlife preserves, or botanical gardens. You can also do some research online or ask local experts for recommendations.

Once you’ve chosen your location, research the best times of day to visit and any specific areas where you’re likely to find interesting subjects for your photos. Make sure everyone in your group is aware of any safety precautions or rules that need to be followed while visiting the area.

Gear Up for Success

To make sure you’re prepared for your naturalist picture-taking adventure, it’s important to have the right gear. You’ll want to bring a camera (or phones with high-quality cameras) with plenty of storage space and batteries fully charged. A tripod can also be helpful in stabilizing shots and ensuring sharpness.

Consider purchasing field guides or downloading apps that will help identify plants and animals in the area. Binoculars can also come in handy when trying to spot wildlife from afar.

It’s also important to dress appropriately for the weather conditions and terrain of your chosen location. Wear comfortable shoes with good traction and bring sunscreen, insect repellent, and plenty of water.

Capture Your Shots

When taking pictures on your naturalist adventure, remember that patience is key. Take time observing your environment before snapping shots; watch how light and shadows play with your subjects and try to capture their natural behaviors without disturbing them.

Don’t be afraid to experiment with different angles and compositions. Try shooting from ground-level or bird’s-eye view, or focus on small details like the texture of tree bark or the symmetry of a flower.

Share Your Experience

After your family naturalist picture-taking adventure, take some time to review your photos together. Talk about what you saw and learned during your trip. Share your favorite shots with friends and family, or consider submitting them to online nature photography communities.

Not only will you have some amazing pictures to remember your adventure by, but you’ll also have created memories that will last a lifetime.

This text was generated using a large language model, and select text has been reviewed and moderated for purposes such as readability.

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Understanding the Succession Planning Process

The process by which you train and prepare employees to fill crucial roles within an organization is known as succession planning. This process ensures that the business continues its day-to-day operations as usual. This article will highlight the steps in the succession planning process.

Timeline and Training

No matter the type or size of your organization, succession planning is essential to continue to have your business run smoothly upon your departure. It’s important to identify your successor well in advance so that they may be properly trained for the role. This training may occur years in advance of the anticipated exit from the company. You may identify someone who needs to start at a lower position within the company and work their way up through the ranks to achieve a thorough training and knowledge base or you may have to cross-train them for several different roles.

Identify the Positions Needing Successors

Although succession planning usually refers to high-leadership roles in a company, it can apply to other roles as well. One of the first steps in this process is to recognize which roles within your company will need a successor if the current employee leaves. You’ll want to analyze which positions impact the revenue or growth of the company. This profit could be compromised if a successor is not put into place.

Informing Key Players

You’ll want to have a discussion with all the key players, those currently in a role identified as needing a successor and those who you would like to groom to take the role over. You should make sure that everyone is agreeable and on the same page. The current employee should be willing to train their successor so that a seamless transition can take place once the time comes. The person identified as the successor should be motivated to learn the role they will step into one day and a timeline should be established. Typically these identified successors feel an increase of pride and a greater investment in the company, according to The Balance website.

Internal vs. External Successors

Identifying an internal successor has multiple benefits. They know the company’s culture, have a sense of loyalty from currently working there and have been through the basic training program. In addition, they know colleagues internally and may also know some of the external clients as well. In cases where a suitable internal employee can’t be identified, an external one may have to be. This will entail more effort and time to be invested in finding and training a suitable candidate.

Succession Planning Benefit

Succession planning is a key necessity in running an efficient business. You want to have a plan for the future of the company, and identifying and training successors to step into key roles will ensure that your organization doesn’t miss a beat.

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• What Are the Seven Steps to Succession Planning?
• By Robyn Kern
• Career Mobility , Employee Benefits , Outplacement

Succession planning—a process for creating and maintaining a talent pipeline —is a necessary part of talent management, and is something you’ll appreciate having done especially when faced with a sudden, unexpected event . While the process is not complicated, following these seven steps to succession planning will ensure an outcome with a greater potential of acceptance by all those affected by the change, as well as a better opportunity for business continuity.

Who should participate in succession planning? Typically the succession planning team consists of the C-Suite, board of directors, and senior management, in addition to human resources. Be sure to alert team members that their participation will be required before you begin the process.

The Seven Steps to Succession Planning

1. define the goals and objectives of your succession plan.

Your team will need to determine what outcomes are desired from the plan. By defining the desired outcomes, you’ll be able to measure the success of the initiative. Usually succession planning goals include business continuity, talent retention, internal mobility (supported by learning and development), corporate culture, and those relating to costs and expenses.

2.  Assign roles and map out responsibilities for creating and maintaining the plan

Determine what roles will be played by each member of the core team. You’ll need to consider responsibilities related to designing and implementing the plan at the outset, measuring the data and outcomes after implementation, and maintaining processes in each department throughout the year that are integral to the plan’s ongoing success. Some may take a role of oversight and approval, while others—such as department heads—may be more involved with developing talent and identifying employees for more senior roles. Similarly, human resources staff might be responsible for administrative tasks and materials that would normally fall within their purview, such as tracking open positions, organizing meetings, and educating staff.

3. Draft the succession policy

Having a policy in place will mean that any future member of the succession planning team will be able to follow the procedures you put in place now. In addition to outlining the procedures, the policy should identify its purpose (or goals). Keep in mind the various scenarios where this policy may be used, including planned and unexpected vacancies, as each type may call for different strategies. Use this policy template from SHRM as a guide.

4. Identify key roles and develop a list of potential succession candidates

An organizational chart will help you to identify the roles and reporting structures, which you can then view with an eye toward your business goals. These goals will inform your future workforce needs and help you to determine what roles to include in your succession plan to minimize disruption and ensure continuity.

Once the roles have been identified, map employees’ skills and experience to find talent who could be a fit for those roles, either now, or with upskilling. Leadership development training and coaching programs can help talent discover their suitability for more senior roles and foster empowerment and drive to help the company succeed. Such programs can also help retain motivated talent.

When identifying key talent and those who may be on a leadership track, be aware of conscious or unconscious biases, particularly toward protected classes, that may affect selections.

While you may have designated whom you’ve deemed the best fit for the key roles, those selections won’t matter if the talent isn’t interested in them. Have meetings with them to gauge their motivation to pursue the opportunities.

5. Consider talent development and acquisition as important parts of your succession plan

Existing talent should be nurtured and outside talent hired based on your succession plan. Having upskilling programming and coaching and/or mentoring opportunities in your organization will make it easier to develop employees’ careers, which will help not only with retention but also to equip those on a leadership track with the necessary skills for future roles. At the same time, such programming can help attract new talent, as they learn that they will have a path toward increased and new responsibilities and more senior roles to develop their careers with you. 

When you do need to hire outside the organization, consider your goals for leadership diversity. Making hires that align with your succession plan will ensure a diverse leadership team in the future.  

6. Track your plan and measure outcomes

You will have identified the goals and metrics in the first step of this process. Now is the time to measure the strength of your plan. Regularly check your data, such as how each vacancy has been filled and whether it was filled by someone internally or outside the organization. Also look at how successful those placements have been, in addition to retention and turnover rates, and talent costs. Based on the data, as well as any major organizational changes, you’ll be able to determine whether adjustments or improvements to the plan are necessary.

7. Be transparent about the succession planning process

Carefully and clearly communicate with your employees the intentions around your succession plan so that they understand its benefits to the organization as a whole and to each individual within. This is a good way to discover members of your organization who may be interested in growing with the company and developing leadership skills. 

Once the plan is in force and you have learnings, share them with your employees to remind them of your commitment to developing talent within.

Following these seven steps to succession planning will make it easier to process each subsequent change your organization encounters. Aligning your team, having buy-in on the policy, roles, and potential candidates, and incorporating the plan into your employee lifecycle will help you attract and retain employees and create and maintain the right leadership for your organization.

If you are building a succession  plan and want to have the right career development resources in place for your employees, INTOO  can help. Contact us to learn how we can build a customizable solution for your organization.

Robyn Kern is a seasoned business writer who has written in the HR, education, technology, and nonprofit spaces. She writes about topics including outplacement, layoffs, career development, internal mobility, candidate experience, succession planning, talent acquisition, and more, with the goal of surfacing workforce trends and educating the HR community on these key topics. Her work has been featured on hrforhr.org and trainingindustry.com.

Learn how to effectively build and transition your workforce.

Family Business Succession

• Family Business Succession Process

Succession planning is the process of pinpointing key needs for leadership and intellectual talent throughout the organization over time and preparing individuals for present and future work responsibilities.

In a family business succession planning involves:

• Strategic planning,
• Financial planning,
• Estate planning, and
• Human resources planning…

…each at the individual, family and business levels.

Typically, family business owners consult with a variety of professionals in developing their succession plans — lawyers, accountants, bankers, financial planners, insurance advisors, merger and acquisition consultants and management consultants. Too often, these professionals find it difficult to proceed because their client has yet to make a number of personal and family decisions that will drive the planning process.

Preparing to Plan

Make Things Happen has developed a process designed to help family business owners address all of the key personal, family and business issues underlying an effective succession plan. Our process is not meant to replace the work of accountants, lawyers and other professionals — rather, to ensure that you have asked yourself all the right questions and considered all of the key issues before you visit these professionals.

Our goal is to ensure that your interests, your family’s interests and the business’ interests are equally well served, and to make you a more sophisticated — and efficient — consumer of the other professional services you will require as you prepare to exit your business.

The process comprises seven steps, each involving an exploration of several key questions.

Using words like "process” and "step” implies a prescribed order for your investigations. In fact, any of a number of situations can bring you to succession planning, so you can enter the process at any "step” along the way. These steps might be better seen as points on a circle, each one connected to all of the others.

However, there is logic to the order of these seven steps. We believe the true starting point should be your needs and those of your spouse. When you have a clear idea of what you want, then it makes sense to broaden the discussion out to include the desires of the rest of your family. Only when the family has developed a committed vision for its future in the business does it make sense to develop a strategic plan for the business to support the family’s goals.

• How do you want to spend your "golden” years?
• What will it take financially to live your dream?
• Do you want to keep the business in the family?
• Can you make the shift from "me” to "we”?

2. The family’s vision

• Do members of your family have a vision for their own lives?
• Does the next generation wish to own and/or operate the business?

3. Aligning the business & family strategies

• Does the company’s strategic plan support the family’s vision and values?
• Is the business positioned for long-term viability and succession?
• Could the business survive your untimely death or disability?

4. Preparing successors

• Which family members will enter the business?
• Who will you prepare for succession?
• How will you prepare them?

5. Leadership transition

• Who will run the business?
• How will you ease the transition?

6. Ownership transfer

• When will the change in ownership take place?
• Who will own the business?

7. Estate planning

• How can you leave your family and the business in the best possible financial shape?

Simple Questions. No Easy Answers.

The questions are deceptively simple but the underlying issues are many and complex. Developing honest and realistic answers can take some doing.

A skilled facilitator with a deep understanding of the dynamics of the family business can help you avoid the assumptions and miscommunications that can threaten family harmony and the long-term viability of your business.

Make Things Happen can help you set up the structures and create plans that will prepare you, your family and your business for your eventual exit.

Please contact  Make Things Happen for a complimentary consultation to see how we can contribute to your success!

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Seven steps to successful family business transition

EY Ireland Tax Partner, EY Private

Focused on high net-worth individuals and owner-managed businesses.

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Covid-19 has delivered a sharp reminder of the need to plan ahead for unforeseen events; family businesses are no different..

• Good transition planning begins with a full review of the family business and wealth portfolio
• Don’t regard a takeover by the next generation as a foregone conclusion
• Good governance is crucially important for wealth preservation and successful transition.

A ccording to a report published by Wealth-X, by the year 2030, more than $15 trillion in wealth will be transitioned from one generation to the next. However, many family businesses do not have a succession plan in place that is fit for purpose. Families tend only to consider wealth transition during times of conflict or on the death of the patriarch or matriarch.

But the pandemic has served to concentrate minds and demonstrated a real need for families to get on top of their transition plans, so that when events beyond their control inevitably arise, they are better positioned to deal with them. That’s why resilient families and businesses are taking the opportunity to regroup and refresh their generation transition intentions.

There is no magic bullet solution when it comes to family wealth and business succession. However, whether you are starting from scratch or reviewing existing plans in light of COVID-19, there are some practical steps that can ensure your transition plans support your ambitions and legacy.

Step 1: Take stock of your plans and legacy

Knowing where you stand now creates the foundation for effective and robust planning. It is highly likely that your business and investments will have been affected in some way by the pandemic. Your investments’ value and risk profile may have changed, or your business may have experienced profound disruption. It’s only by understanding the full picture that you can start to devise a plan, which may also include looking for new opportunities.

Step 2: Look at the family and the business as separate entities

While there will be a natural crossover between family and business considerations, a separate and distinct succession plan to support the transition needs of the business is essential. One of the key considerations is clarity on the options and intentions of the current owners on what is going to happen to the business when they retire or pass on.

In a recent study, many family business owners expressed concerns around whether the next generation would take an interest in the business. The potential for there to be no clear successor to the business can be difficult for owners to accept, as many wish to preserve the legacy of the family business for future generations. Whether the business is sold, or the next generation assumes leadership, management and ownership, it’s not an area in which to make assumptions. Having those conversations as early as possible is very valuable. The Family Business Network has confirmed that “there has been a significant increase in enquires to ensure that the Next Generation are adequately prepared for running the family business. Many of these have been prompted as a direct result of Covid-19” according to Clare Louise O’Donoghue, Head of Member Services of the Family Business Network.

Step 3: Keep a close eye on the tax landscape

The tax landscape of the locations where you and your family live and conduct business plays a significant role in a well-thought-out wealth transition plan. There are the traditional tax concerns – inheritance taxes, business taxes, transfer taxes, individual taxes, country tax schemes – all of which you must consider. At the same time, many countries are making changes to their tax regimes in response to the COVID-19 pandemic and this needs to be considered as part of a strong succession plan.

Step 4: Take all family stakeholders into consideration

In the first instance, you need to define who officially comprised “the family.” This can be as simple as identifying will beneficiaries and the establishment of appropriate trusts and foundations. There are also non-financial matters that you want to address. Generational ambitions and priorities may well differ significantly. The next generation may not be interested in taking over the business, indeed, it might not even make sound business sense for them to do so. They may also have very different social or environmental priorities than their predecessors. Talking to and, critically, listening to the next generation to find out where they stand can be very important in avoiding future conflict.

Step 5: Educate the next generation

Education is critical to ensuring a smooth transition. The next generation must be ready to assume the roles and responsibilities that they will be taking on and the need to learn the leadership skills, the fundamentals of running a business, the basics of how investment markets operate, and crisis management skills.

According to a recent study conducted by the Family Business Network[2], when asked which supports are most helpful for next generation family members, nearly half (48%) of respondents highlighted the importance of academic training, professional training or cross-business mentoring. In particular, respondents pointed to the benefits of next generation family members availing of external education and experience.

Step 6:  Put a high-performing governance structure in place

As much as it is crucial for a business to have proper policies and procedures in place, the same can be said for family governance. Family governance includes oversight of the family’s shared vision and values, who is part of family, and formal structures such as a family council or family assembly. This is separate from wealth governance and business governance. Wealth governance can be thought of as who controls distributions of the wealth, such as trustees of a trust, managers of an investment entity or executives of a foundation. Business governance includes oversight of investments, business and investment companies, formal boards and advisory boards, and selection of executive management.

Step 7: Make sure your plan is agile, relevant and sustainable

A succession plan is a living thing. Tax and business rules will continue to shift, family relationships will change, and births, deaths, marriages and other life events will alter the dynamics of the family. And global events like Covid-19 will continue to come from nowhere to impact on your best laid plans. In our experience, families who renew and revisit generational and wealth transition planning on a regular basis fare best.

Business transition is complicated enough at the best of times but is even more so when families are involved. No two generations are the same and succession planning is often far from a straightforward process. Families need to take a clear-eyed view of the separate and distinct needs of the business and the family members taking into account taxation, governance and other considerations when developing future transition plans.

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HR Business Plan Template

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Latest blog posts, what is succession planning in practice.

Succession planning: it’s planning for the worst by expecting the best. That’s because this is your organisation’s opportunity to plan ahead of key departures while preparing current employees for future roles and developing them.

Whether you call it succession planning, anticipatory  workforce planning  or something else, succession planning can be a win-win for your people and your business. This article will help not only outline how to do it, but how to succeed at it, too.

• 1 What Is Succession Planning?
• 2 What Is The Succession Planning Process?
• 3 Succession Planning: Frequently Asked Questions
• 4 Is There a Succession Planning Framework?
• 5 The Succession Planning Process In 7 Steps
• 6 The Two Most Common Succession Planning Process Mistakes
• 7 What Metrics Determine Succession Planning Success?

What Is Succession Planning?

Succession   planning  is the process of replacing your organisation’s leaders and managers with high-potential, internal (sometimes external) replacements. Essentially, it is about identifying, developing and replacing employees to make a potential shift in responsibilities/hierarchy as smooth as possible.

What Is The Purpose Of Succession Planning?

The  purpose   of   succession   planning  is complex. It is not simply about damage control or replacing a key leader as quickly as possible. It’s about replacing a leader with someone prepared for the role, with the potential to succeed, who can shift into the position both quickly and successfully (with added emphasis on  successfully ).

Why Should You Build A ‘Succession Plan’?

Building a  succession   planning   process  or  framework  is about mitigating the risks of organisational change. This way, when a change at the very top occurs, the friction between departments, teams and employees is reduced or becomes nonexistent, because the ‘vacuum’ of institutional knowledge is removed.

What Is The Succession Planning Process?

Let’s consider the image above as a quick run-through of how the succession planning process works, these are the seven key steps in the succession planning process:

Start identifying key positions

Identify needs

Develop your job profiles

Start the recruiting process

Appoint a successor

Handover the job

Document the transition

Later on in this article, we break each of these seven steps down so that you can master succession planning with ease.

Succession Planning: Frequently Asked Questions

Who should lead succession planning.

HR is primed to be a key leader when it comes to succession planning. That’s because both succession planning and workforce planning go hand in hand. As part of projecting the future of an organization, HR teams need to have an incredibly clear vision of the key roles within an organization, and what it would mean for those roles to become vacant.

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How Does Succession Planning Relate to L&D?

If we think of succession planning not only as replacing but of adequately preparing employees to take on new roles, HR has a role to play here in terms of career development, learning, and training.

What Are The Benefits Of Succession Planning?

Because it keeps hiring costs down, improves your employer brand , and boosts retention rates at the same time. Succession planning matters because it helps to maintain a foundation of organizational stability, even in times of profound change. It ensures that even when key employees, their absence (at least professionally) is not felt.

Is Succession Planning Becoming More Popular?

The growing demand for succession planning strategies will grow as an entire generational workforce (primarily baby boomers) will retire. As a result, companies need to find qualified employees who can pick up these leadership roles and run with them. In sum, succession planning allows companies to preserve key qualifications while avoiding protracted and costly recruiting processes.

How Often Should Organisations ‘Succession Plan’?

Succession planning should be a yearly topic for companies that are growing quickly. Or, it could be thought about in five-year increments for companies on a steadier trajectory of growth.

Is There a Succession Planning Framework?

If you want to start a succession planning strategy, you need to have a plan in place. But, where do you start? Here are some of the general steps you’ll need to take:

Keep in mind, though, that succession planning is not only relevant for large or medium-sized companies. Even small, family-run businesses should have a plan in place when it comes to successful succession.

Looking to build up talent pools in your org? Read our full guide to it today.

What Is The First Step In Succession Planning?

The first step in succession planning is  identifying   key   positions . After all, succession planning is based on departure, so you need to consider which roles are at risk.

Key positions come in all shapes and sizes. It helps to have a strong handle on where the highest amounts of ‘institutional knowledge’ exist within your organisation. Once you know that, you can prepare for departures accordingly.

The nine-box grid can serve as the first step for your succession plan. Read about it right here.

The Succession Planning Process In 7 Steps

Now that you know a bit more about succession planning as an HR strategy, and why it matters, how can you do it? Here are seven well-coordinated steps to ensure key positions are filled successfully…

1) Start Identifying Key Positions

This is going to require some internal reflection. Begin the succession planning process by identifying qualifications that are essential to your company’s success. This could include years of experience, qualifications or licenses, or other ‘soft skills’ that have an impact on company success (like customer relations abilities, for example).

Then, you need to write them down. So, take these qualifications essential to your company’s success and document them in what we might call ‘ initial job profiles .’ Now you have an idea of what you need, relatively speaking, but we need to dig a bit deeper to get to the core of the issue…

2) Identify Needs

If we start by knowing the key qualifications that influence success, now we need to plan for where we might lose those skills . So, you need to establish which key positions might become vacant in the near future. Ask yourself:

Which employees are about to retire?

Are any employees currently pregnant?

What is your overall attrition rate ?

You can also take a top-down approach in this step, and plan for your entire company’s succession plan starting from your CEO to executive leadership and further down the organizational chart. That said, if you are in a pinch and want to get started immediately, you should start filling gaps that may reveal themselves sooner than later.

In this step, it is also important to include the financial resources you may need for the recruiting process. It is important to note how the recruiting process transfers into time (and money) spent. It’s also at this point that proper recruitment software can help maintain efficiency without draining resources .

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3) Develop Your Job Profiles

A key part of the succession planning framework is having fleshed-out job profiles in place. What constitutes an effective job profile, though, and where should you focus your efforts? Here’s a quick rundown:

Think of this as your template for finding the ideal person to fill this role in the future. Essentially, it is taking the current person who occupies this role and turning their skills into something of a blank canvas. This transforms skills thought to be irreplaceable into an actionable plan for recruiting.

4) Start The Recruiting Process

Concrete examples of succession planning typically begin during the recruiting process . This is where the process takes shape, and it helps if you approach it from several key angles, including:

Building up your talent pool.

Implementing an employee referral program .

Providing targeted upskilling training for current employees.

If you are taking a proactive approach, maybe you have all the time in the world for succession planning. But, if you’re low on time, you may want to set deadlines for finding a suitable candidate or completing the handover period.

5) Appoint A ‘Successor’

Whether internally or externally, this is the part of succession planning that signals the end. While a lot of the heavy lifting may have been done during the job profile stage, now you have someone in mind who could be able to take on this role.

Apart from interviews, though, finding the right candidate during the succession planning process should rely on more nuanced measures. You should work with assessment centers , case studies, or work trials, to determine the best fit.

That said, a technical fit is not always a cultural fit. For succession planning to be successful, it often comes down to how someone fits within a company’s distinct culture.

How do you begin to evaluate this? First, you likely need to have a hold on your own culture and what it means to work with your company, but you may want to consider the following to evaluate a candidate’s fit:

An interview with potential peers to see if they mesh well.

A case study directly related to their soft skills (perhaps giving or receiving feedback).

Scheduling a more casual interview setting (like lunch) for a candidate to show more of their personality.

This is the part of succession planning that you need to get right. After all, you now have someone that you have deemed the right fit for the role. So, they need to be the right fit from multiple angles, and not based on whether they can do the job or not.

6) Hand Over The Job

When done right, succession planning also loops in the person leaving the role. This is most felt during the handover process , where a new employee gradually learns their new tasks, both from their future coworkers and team leads, as well as from their predecessor (who will share existing knowledge or institution knowledge they only have).

Keep in mind, though, that the handover period shouldn’t be too short. Especially if a key position is being filled, it is important to bake in more time (think in terms of months and not weeks) for an employee to manage complex tasks that used to go smoothly. They will get there, but they require patience.

However, if a handover period is too long, there is a risk that the successor won’t be able to come into the role in their own right. They will be too influenced by how the role used to perform, and you may lose out on the future-oriented skills that you feel this role needs to thrive.

The best answer is somewhere in the middle. While team leads should have a long-term perspective, there should be an active, fast-paced, and collaborative approach to handing over knowledge. Ideally, this would also be done through confluence pages or a company wiki, where institutional knowledge is public and not private.

7) Document The Transition

Now that the handover of the job has been completed, what comes next? Documenting the transition is a crucial step, in order to note how the position was filled and to inform future processes. Keep in mind the following:

The demands of this position in particular.

Processes that went smoothly during the handover.

Issues during the handover that caused confusion.

Gaps that still potentially exist.

In the future, this will help optimize your recruiting process, as well as succession planning strategies for similar roles that may become available.

How Do You Identify Important Positions For Succession Planning?

Keep some of these succession planning best practices in mind:

In the end, it is key to think about it like this: Seniority is not the only qualifier for succession planning in a company. You also need to keep in mind skillsets, relationships, how long someone has been at a company, and if they were at the company during a key stage of growth or during challenging times.

For example, an IT specialist may hold a key position within your company if they are competent in a programming language that is important for your business. While they may not even be senior, they may have invaluable skills that would make their departure a key loss for the company.

When Should A Key Position Be Filled Externally?

For succession planning to be successful, you need to think about whether your company currently has the talent to replace a key position. This means that, even if it is cheaper to fill a position internally, it does not guarantee that a current employee is up to the task.

In fact, an employee may not be qualified for the role, but they also may not be interested. Here is what you should consider for either internal or external fillings:

The Two Most Common Succession Planning Process Mistakes

Effective succession planning is crucial when it comes to one key filling: your CEO. In most cases, CEOs don’t retire every day. However, one in every ten successions is unexpected.

For this kind of succession planning to work, you will need to have a set of specific steps prepared. More importantly, please make sure you don’t fall into either of the following two common traps:

1) Underestimating The Time You Will Need

Start the succession planning process early. Ideally, you would do so five years ahead of time. This would then entail developing steps and processes to find the ideal succession candidate to manage the transition effectively.

After all, this is about far more than simply finding the right fit. You need to find the right candidate, develop them, and prepare them for the role, and this can take a great deal of time and effort.

2) Not Having A Contingency Plan

If a key person leaves a company unexpectedly at short notice, their position may remain vacant for some time. That is if you have not actively planned for their succession well ahead of time.

But, certain positions need to be filled quickly to make sure the company stays on track. In exceptional situations, you shouldn’t wait until you’ve found the right candidate – work with interim management instead.

In these cases, HR consultants will usually provide an experienced manager for a temporary deployment at short notice until a permanent successor has been found.

What Metrics Determine Succession Planning Success?

Now that you have a succession plan in place, how do you determine if it is working or not? These key metrics and KPIs can give you a relatively accurate read of whether or not your plan is working correctly:

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Create a Formal Business Succession Plan in 7 Steps

• June 15, 2020

According to PwC’s 2019 U.S. Family Business Survey , 58% of family businesses report having succession plans. However, most are informal, and only 18% claim to have robust plans in place.

The reluctance to plan is understandable given the number of emotional decisions which need to be made. An owner can't simply think about the future of the business. He or she also needs to consider personal involvement and the potential involvement of other family members. Is there a time the owner plans to step back and cede responsibility to others? If so, who are those ‘others’? What happens to the business if the owner dies or becomes disabled? Is there a plan to eventually sell the business? Are there plans for key personnel, including those who are non-family members, for not only instances of death or disability, but also to retain and reward?

The process of creating and implementing a business succession plan often means having honest and sometimes brutal discussions with other family members (and with employees). For example, imagine having to tell a son or daughter who has struggled working in the business that he or she is not fit to take over. It's no wonder so few family businesses have followed through to a formal plan, which involves not only a written strategy, but also the ability to fund all the liabilities uncovered to make sure the future vision for the business is realized and not knocked off course.

Approaching succession planning in distinct steps makes it clear to the business owner what needs to be accomplished. Here are the 7 steps to create a formal succession and continuity plan for a family business.

AEM offers a wealth of best practices, research, programs and resources supporting workforce development for equipment manufacturers and the markets they serve. Visit  aem.org/workforce-development to learn more. 

1. Define the vision for the future of the company and an owner’s involvement.

An owner of a business must know where the business is headed. The plan might be as simple as shutting down the company someday which -- if the company is reliant upon the unique skills of the owner or the company is not readily transferable -- may be the most realistic outcome. The company could be transferred to the next generation or other family members. Employees or outsiders could purchase the company. Hand-in-hand with considering the disposition of the company is the need to understand the exit plan for an owner and what that means to continued operations.

2. Identify successors.

This just doesn’t mean identifying future owners. It also involves knowing of those currently employed, who could be a key manager or executive.  Methods for training, retaining and rewarding will need to be implemented. If the current employee pool lacks leadership potential, a plan to recruit that talent should be a priority.

3. Plan for contingencies. 

This means planning for “what if” scenarios. What if an owner or other key employee dies or becomes disabled? What if a key employee leaves the company? What if an owner gets married or divorced or has other family members they want to have working for the company? Closely linked to all these scenarios involving personnel are questions about the shares of the company any of these individuals might hold and what happens to those shares.

4. Communicate the plan to others.

For a succession plan to be effective, it must be shared with those on whom it has an impact. Successors should know the opportunity ahead. Family and non-family members alike need to understand their roles with respect to the company. These conversations can often be difficult, and many companies bring in professional facilitators, often attorneys, to help.

“The more communication, the better,” says John Olivieri, a partner in the Indianapolis and New York offices of Barnes & Thornburg, LLP, whose practice focuses on estate and business succession planning. “In the absence of communication, family members will have expectations which may be unrealistic and can lead to disharmony and litigation. When everyone knows the plan, some may not be happy, but no one is surprised. As a result, a smoother succession can take place.

5. Obtain an updated business valuation.

An independent appraisal to determine the fair market of the company is useful for both personal and business purposes. From a business perspective, the value to each owner is important for buy-sell and key person provisions and for funding any liabilities which arise from having to apply those agreements. Personally, the business value enables the estate and retirement plans of an owner.

“When interest in a family business is to be transferred to the next generation, it may be necessary to start by reorganizing the capital structure of the company,” says Dan Rosio, ASA, the partner-in-charge of Katz, Sapper & Miller’s Valuation Services Group in Indianapolis. “This often involves classifying a small number of shares as controlling so that a majority of the shares, which are non-controlling, can be gifted or sold to other family members. There are similar considerations for transfer or sale to non-family members.”

6. Formalize the plan by creating or updating supporting documentation.

This includes:

•   Shareholder agreements
•   Buy-sell agreements, including trust agreements where there are intra-family transfers
•   Key-person agreements
•   Key-person compensation arrangements
•   Power of attorney(s)

In addition, the following records should be collected, well-organized and easily accessible when needed:

•   Legal will
•   Property deeds/titles, leases, rental agreements, etc.
•   Mortgages and notes payable
•   Tax returns, financial records and financial statements for the last five years
•   Bank account information
•   Contact listing of all professional service advisors
•   Life insurance and property & casualty policy information

7.  Implement life insurance to fund identified liabilities arising from the succession plan. 

Life insurance provides the liquidity to make good on promises made in various of the planning agreements at any time. Under a buy-sell agreement, funds are readily available to purchase the shares of a deceased owner. The same policy can also be used to provide additional proceeds to the family of the deceased owner. Many key person executive compensation programs are funded with life insurance and include non-qualified deferred compensation plans, split-dollar arrangements and executive bonus agreements.

Additionally, life insurance can be useful to a business owner in order to equalize the disposition of the company. Where a business is left to one or more family members to the exclusion of others, life insurance can ‘equalize’ not inheriting the family company.  Learning a parent has selected another sibling other than you to own the business is easier to accept if the value of the company in cash can be expected.

The Bottom Line

Perhaps the most important thing a business owner should understand when faced with creating a succession plan is that the plan will not be set in stone. Just about any element of the plan can be changed as conditions demand. A company thought to be carried on for years and passed to children could suddenly be sold the next month if an attractive offer was made. Identified successors might turn out to not be a fit, while others thought to be lacking in leadership potential blossom.  

Changes should be expected and usually do not create complications as long as they are well documented and communicated. Often growth of a business creates imbalance in the succession plan. Agreements, valuations and life insurance funding can become obsolete in a company that is expecting growth. Most importantly, any liabilities impacted by changes to a succession plan should be evaluated along with the life insurance funding solution in place to see if existing coverage should be re-positioned, or if additional policies are needed.

About the Author

Mark Leyden, CLU ® is the CEO and founder of Mark Leyden & Associates , an Indianapolis-based firm specializing in assisting businesses and families in the acquisition and management of life insurance assets. He specializes in assisting business owners and families, including some members of the Forbes 400, in design and funding of wealth transfer and business succession plans.This is accomplished working closely with clients and their advisors. The objectives commonly achieved include: tax-efficient wealth transfer, business succession, asset protection, and management team retention plans.

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