A succession business plan is defined as a process for identifying and developing internal individuals within an organization that have the potential to fill key business positions of leadership. The goal of succession planning is to enable an organization to continue in their efforts of conducting business even in the occurrence of a key leader’s departure ? whether it is planned or unplanned. While having trained employees to take on specific leadership roles is crucial for all organizations, it is also imperative to the retirement objectives of all business owners.
Commonly in the manufacturing industry, there is a great deal of family-owned businesses that are passed down from generation to generation. A lot of which, fail or conflicts start to occur because there isn’t a clear transitioning process in place when a leader steps down. According to the 2015 Financial Planning Association/CNBC Business Owner Succession Planning Survey , 78 percent of the respondents said they plan to sell their businesses to fund their retirement. However, less than 30 percent have a written succession plan.
Having a developed succession plan in place is important for a number of reasons:
Choosing a Successor
Manufacturers must develop a strategic succession plan for when a business owner steps down to retire, ensuring that someone will be able to take on the role as leader and keep operations, rules/regulations, procedures and goals steady and consistent without any discrepancies.
Manufacturers must also have a succession plan in place for top and middle management as well. Say a c-level executive suddenly ups and leaves, someone must be able to fill their position with ease and continue with their daily procedures.
- Succession Planning helps manufacturers to choose experienced and capable successors that are equipped to take on these important roles as they become available.
In both B2B and B2C business, consumers become brand loyal to a company often due to their admiration for the company’s consistent work culture, level of productivity, and/or quality of output. Manufacturers must be able to remain consistent in order to stay in fine tune with their customers’ expectations.
- A succession plan in place will ensure that an organization is readily prepared to meet customers’ needs and continue normal operations and procedures on all functional levels including engineering, marketing, purchasing, human resources, supply chain, commercial, logistics etc.
When a company’s culture, rules, ethics and daily routines suddenly change, employees may become very flustered and disengaged, increasing the likeliness of mistakes, reducing the degree of motivation and diminishing the level of productivity. The abruptness of new implemented leadership may also cause an employee to become disconnected and may lead them to feel marginalized, deprived of support, and left wanting to quit.
- A succession plan in place will allow employees to adjust organically to the new leadership and transition with ease, while maintaining their level of satisfaction, productivity and motivation.
From a financial perspective, preparing for retirement can be extremely complex, time consuming, and costly. Planning for retirement requires a substantial amount of time and resources for determining the company’s value, as business values fluctuate drastically over the years based on a number of factors (gross revenues, tax code changes, profit margins, economy conditions, and etc.).
- A succession plan in place will aid in evaluating these variables and determining the right agreement/partner to pursue, allowing for a proper settlement and timely retirement.
When planned and prepared effectively, change can be very exciting and may bring a company numerous unanticipated rewards. Developing a succession plan helps companies identify all the positive aspects of their business and inspires employees of all levels to maintain their work ethic, drive and passion ? not to mention, ensures that the success of the company will never be at stake due to a planned or unplanned departure of a leading figure.