December 28, 2021 | 4-minute read (748 words)
As an entrepreneur, you have become accustomed to running your business as you see fit, and it no doubt plays a significant part in your day-to-day life. But there will come a time when you want to hand over that business, whether it be to spend more time with family, retire or pursue a new interest.
As a result, you need to develop a plan for a day when you will hand over the reins. Succession planning takes time, and it should begin sooner rather than later. Consider the alternative: If something were to happen to you, employees might be put in jeopardy and the business forced to close.
Below is a guide to get you going on creating a succession plan of your own.
Step 1: Identify candidates
Start your future planning by shortlisting prospective successors. Speak with each one to get a sense of whether they truly qualify for the leadership role and whether they want to take on the responsibility.
Step 2: Do a forecast analysis
Build an understanding of the most critical issues your company and sector will likely face in the next five to six years. What skills will your successor need to overcome these challenges? This forecast analysis is the sensible approach to begin mapping out your succession strategy.
Don’t just assume that a younger version of the present CEO will be the obvious successor. Before choosing a successor, assess each candidate's vision, plan and grasp of the business.
Step 3: Develop resources
For internal team candidates, identify a limited number of candidates who show promise for taking over the top leadership role in four to five years. Consider rotating selected candidates through several functional areas, such as leading a division. By investing this time, you will be better equipped to identify the best successor for your company.
External candidates are usually identified by an executive search company. These applicants are generally employed to handle different roles inside the organization as prospective successors. This allows you — and, if applicable, your board of directors — to make strategic investments in the development of these executives, as well as evaluate their likely leadership effectiveness.
Step 4: Make a selection
As the transition approaches, the next steps entails inviting candidates to present their vision for the company's next five (or possibly 10) years to the board of directors. After witnessing their presentations and engaging in discussions with each one, you’ll be able to choose your potential successor from the pool of candidates.
Step 5: Perform a test run
Don't put off involving your successor in day-to-day responsibilities until you've decided to step down. Instead, delegate some of your responsibilities to your chosen successor while you're still on the job. This will give them vital experience and let them demonstrate their abilities, as well as allow you to assess where they may need more training and development.
Step 6: Make the transition
After a successful trial run, it’s time to begin the transition. The onboarding process and the first year of the new leader's term should focus on making it a seamless transition. While the onboarding process will be different for internal and external successors, the goal is that by the successor’s first day, they are up to speed.
Make sure they have enough time to complete the needed hand-offs with the outgoing leader and have a sense of which areas need their immediate attention. They should also begin cultivating relationships with the board.
Tips for selecting a successor
When selecting a successor, you must remain objective in assessing the candidate's abilities, attitude, and readiness to take on the role.
Here are some other pointers to consider when choosing a successor:
- Make a list of essential characteristics you want to see in your successor. Be realistic, though, and don't hunt for someone just like you. Expect to meet someone who shares your enthusiasm, some of your attributes and, most importantly, your vision for the business.
- Almost invariably, experience outweighs education. It's best if you choose someone with real-world experience as your replacement. Such individuals are solution-oriented and able to solve problems without extensive supervision.
- Make sure your successor understands and will embody your company’s culture. If your successor rejects the culture you've built over the years, a new one will emerge and your firm will change.
- Don't let your emotions or personal biases affect your decision. If your favorite candidate lacks the attributes and skills for the position, don’t consider them.