The Importance of Succession Planning for SME Boards

Strong leadership is one of the key factors in sustaining a successful business. Those who build successful companies tend to have the skills necessary to achieve their goals. However, the challenge comes when trying to develop and maintain the leadership credentials of more junior team members to allow the founder to complete a successful exit.

You may be surprised to learn that a significant percentage of businesses have no formal Board succession plan in place.

More than 80% of the clients I posed this question to last week had no succession plans in place at all and 10% had only undertaken informal talks, certainly nothing comprehensive or properly formalised as you may expect.

Putting a solid succession plan in place isn’t just good for your business, it’s good for you. Having the correct people lined up helps you to spread the workload more evenly whilst you are at the helm and looking to the future, it can provide you with more secure retirement options setting the foundations for continued success.

So, what are the finer details of succession planning and why is it so important?

What is Succession Planning for Boards?

In simple terms, succession planning is the process in which new Board members are selected in advance to fill crucial roles within a business, and perhaps to culminate in a full or partial buyout of the shareholders in place

With the prospect of retirement fast approaching for many people in the baby boomer generation, we’re in a transitional period. Alongside this, COVID-19 has not only altered the economic landscape prompting many approaching retirement age to re-evaluate their positions, but it has also transformed the way people think about work, and how close they need to be to an office location, there are certain people choosing to work entirely remotely avoiding the stress of busy cities

With this in mind the need for clear, concise and effective planning is undeniable. By acting now, the chances of a smooth transition increase exponentially. This is crucial, as the main goal behind succession planning is to allow a quick and seamless transition when key senior people leave, affording business continuity and improvement.

In the next section, we’re going to take a look at some of the best ways to plan ahead for this kind of situation.

1. Be Proactive

The worst thing you can be when it comes to this area of business is reactive. If you’re busy trying to fill certain roles due to the necessity, you may find yourself under unnecessary pressure, which draws you away from the exit planning process Prioritise this process NOW, rather than reacting further down the line.

2. Identify and Choose Outstanding Candidates

In order to get this right, the HOW is so important, you have to consider the most vital qualities the individuals you’re looking for will possess. Despite the importance of change, a good succession plan should go unnoticed. Any sudden or drastic alterations would indicate an unsuccessful attempt to transition smoothly. This is why picking somebody who knows what they’re doing is essential. First, you should make sure that they are completely competent and ready to take over when the time comes. You should also prioritise candidates who understand the values and ethos behind the role they’re stepping into. This allows the business to continue to operate within the same parameters and a consistent culture whilst reaching and stretching growth targets.

3. Prepare Your Candidates

The process of succession planning is never ending. People will always enter and leave roles within companies of all shapes and sizes, so preparation is key. There are various ways in which you can prepare for succession to take place. Trial runs are an excellent way to do this. Take the opportunity to pass on some managerial responsibilities when a key member of the team takes a holiday. This will allow you and those around you to determine whether or not you have made the right decision without making any formal or permanent changes that cannot be undone. Alongside this, you can’t always plan for what happens in life. Temporary illness, or a whole host of changes in circumstances, could force you to take a few months away from work. If this happens, it’s key to have successors ready to step in for the time being. This isn’t just helpful to the business, it also allows your successor the opportunity to gain invaluable experience within the role and prove themselves.

4. Include Succession Planning in Your Hiring Strategy

Including your succession plan within your hiring strategy is another excellent way to stay ahead of the game. You might not always get it right but thinking far into the future is helpful in the long run. It’s essential to hire based upon equal, fair, and open policies.  An experienced Search firm will be able to help you think through your approach carefully and from an independent position too, which will add great value to the process.

Final Thoughts

Overall, it’s clear that preparation is key for building upon the foundations of a strong business.

Always prioritise the qualities that will result in outstanding performance and identify the people who possess these qualities in advance.

Talk to specialists who have experience in Board or senior appointments and use their expertise to help determine the role specification.

When the time comes, you can implement your succession plan with ease and reap numerous rewards.