Every entrepreneur who starts a business dreams of their firm outliving them. In many cases, founders are more prepared to start a business than how to pass it along when they age and can no longer provide sufficient value in leadership. At times, a leader decides to leave a corporation and move on, creating a need for new leadership. The question of who takes up the mantle next comes into sharp focus. So, business transition planning is necessary.
The need for stability in continuity has the potential to create anxiety if not managed well. Issues around strategy, employees’ security and company direction influence any succession efforts. Any successful plan seeks to preserve what the enterprise has been able to accomplish so far. It should look to provide means by which a company will sustain this progress. This article takes a look at that what business transition planning is. You can also read on best practices when approaching it and suggests solutions to some common challenges that arise.
What Is Business Transition Planning?
Business transition planning is the creation of a process that puts in place the necessary steps to facilitate a complete succession.
By its very nature, a transition plan is defined and features quantifiable objectives that are easy to measure. An objective plan factors in the firm’s present and future goals in a bid to ensure their continuity.
5 Best Practices for Business Transition Planning
To successfully carry out a business transition, a firm needs to be aware of and benchmark against some best practices. Some of them include:
1. Start with the Business Strategy
An organization should begin by first identifying and articulating its present and future strategy. The objectives of the company will play a fundamental role in helping assess potential candidates. Any party under consideration should be able to demonstrate how they will assist the firm to achieve its strategic goals.
2. Place the CEO and Board at the Center
For any succession plan to be fruitful, the CEO needs to own it. The firm should find ways to get his other buy in from the get go as they will be in charge of it. HR doesn’t and shouldn’t run the exercise. They should only be a compliment to it when needed.
The board also needs to commit to the process from the start to avail their resources in full. It can either be the full board or an appointed subcommittee that takes up the task. Members should hold the CEO accountable for the process. They should also provide feedback concerning the process and any prospective candidates. Both the CEO and the board should be constant communication to ensure their goals align.
3. Development Programs
A company looking to addressing the business transition planning issue should look to do more than just identify candidates. A program to groom future successors should be instituted. Also, potential candidates need to go through it for training and assessment.
4. Start Early
Business transition planning is a time-consuming process that bears the best fruit when nobody rushes it. The leadership organs responsible for it should consider an ample time frame that gives room for the process to work at an optimal pace. A rushed succession results in bad judgment. A process that drags on without any concrete time expectations becomes complacent. A recommended time window is two to five years.
Succession planning is only as good as the degree of accuracy in its execution. Clear duties need to be assigned and regularly followed up on, to avoid stagnation or complacency.
4 Solutions That Business Transition Planning Offers
As with any other organizational process, business transition planning is bound to face some hurdles. How well these you surmount challenges will bear significantly on the outcome. Here are a few ways firms can resolve problems that arise:
1. Emotional vs. Objective Decisions
Any process that looks to hand over the power and responsibility of business ownership is bound to elicit varied emotions. It is easy for critical decisions to be influenced by emotion and non-objective reasoning.
- Engage external consultants or other independent advisers throughout the process. They will offer nonpartisan insight into the process.
- When there is a lack of consensus on an issue, involve a mutually agreed upon mediator to move the process forward.
2. Lack of Transparency
Transition processes are vulnerable to being plagued by opaque operations.
- Plan the process in a manner that lets all parties involved view every step as it happens.
- Consult widely to engender a feeling of ownership.
- Disseminate any relevant information from a central point that all parties can access at any time to build trust.
- Put down the transition plan in writing for all sides to see the path it will take clearly.
- Articulate a clear plan of action to all stakeholders after appointing a successor.
This will ward off any negative issues that might crop up if they don’t know what happens during and after the transition.
3. Lack of Competent Successors
Family businesses that are attempting business transition planning commonly encounter this problem. The children or other family members under consideration may not have the requisite skills or qualifications to move the firm forward. This poses a danger as the temptation to keep power in-house may give way to poor leadership.
Companies that strongly prefer promoting internally face a similar problem if the talent pool within their ranks is inadequate. Being open to external candidates that are well qualified is an approach that will move the business forward.
4. Sustaining Staff Morale
News on any business transition planning has the potential to threaten the morale of the workers. Employees wondering about the fate of their jobs in light of what happens next will be less productive. Clear communication throughout the process to paint a clear picture of the way forward helps prevent low staff morale.
Business transition planning puts mechanisms in place to secure the continuity of a company and its progress. Despite the various challenges it faces, best practices help to overcome these difficulties.
Have you been part of a business succession plan? What thoughts do you have on managing transitions? Share with us in the comments below.