Succession Planning

Succession Planning

Succession Planning What? Who? Why? When? How? What is Succession Planning? A strategy and management plan for implementing the next generation of o...

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Succession Planning What? Who? Why? When? How?

What is Succession Planning? A strategy and management plan for implementing the next generation of ownership.

Who does Succession Planning? „

Family owned companies with upcoming generations

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Partners

• Burnt out • Retiring

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Entrepreneurs

• No family member interest but employee interest • Planning to sell

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Large corporations at all levels

Why Succession Planning? • Protect company assets and valuation • Perpetuate the family business • Determine optimal exit strategy • Lower cost and improve efficiency • Avoid burn out • Ensure a smooth leadership transfer

When to do Succession Planning?

NOW It is never too early It can be too late

How to do Succession Planning? Determine succession goals and strategy Integrate succession with Strategic Plan Develop succession management plan/process

Sell the business

Develop next generation

Transfer management team (internal, external)

Management Transfer Best Practices „

Clarifying strategic vision, values and objectives

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Determining organizational needs, critical roles and skill sets

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Assessing and identifying possible successors (family, management, outside hires)

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Communicating succession opportunity with key employees

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Developing appropriate skills/experiences – the Plan

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Measuring and managing performance

Common Pitfalls „

Limited sense of urgency and/or perseverance

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Limited leadership support

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Not fully understanding the financial ramifications

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Losing objectivity

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Making assumptions

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Succession not integrated with strategic plan

Case Study: External Management Transfer Situation „

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Professional services firm

Succession Plan „

Senior partner retiring in 3-5 years Senior partner principal rain maker Strong reputation and growth potential Four partners assumed potential successors

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Assessed partners leadership skills business development skills Determined skill gaps in partners Conducting search and hired external partner(s) and/or companies with skill sets

Case Study: Internal Management Transfer Situation „

Large corporation

Succession Plan „

Identified skills to support Strategic Plan

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Senior leaders approaching retirement

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Identified high potential managers with base skills

No structured performance management or training

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Provided tools for growth and development

CEO makes all key decisions

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Five year Strategic Plan drives company

Defined individual development plans to prepare for succession

Case Study: Family Management Transfer Situation „

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First generation seeking retirement

Succession Plan Elements „

Created a family constitution

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Developed retirement funding plan

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Developed a structured operating style

Second generation in charge Third generation emerging with no career paths Family business/mom & pop culture

• • •

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Job\ descriptions Performance management Process management

Defined a third generation career development plan

Case Study: ESOP Conversion Situation „

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Owner has no family members

Succession Plan „

Owner ready to retire „

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Continue maximizing growth and value

Strong management in place Industry leader, strong performance Strategically driven

Involving general manager and key staff in succession planning

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Evaluating ESOP

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Acquisition pending

Case Study: Divestiture Situation „

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Second generation owned and operated Owner is burnt out

Succession Plan „

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Significant untapped growth potential „

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Significant management capabilities untapped „

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Sons are not an alternative

Developed a 5 year strategic plan Provided manager training and career path to include promotion Upgraded reporting and tracking processes Identifying buyers within a 35 year period

Succession Planning Next Steps? Bucket 1: Hopelessly worried stage • Commit to getting started • Succession education among key players • Succession options and financial ramifications understood

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Bucket 2: Kinda Sorta – Somewhat stage • Strategic plan defined and integrated with succession • Organizational needs defined • Key people engaged (family, partners, management)

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Bucket 3: Plan in Place - Implementation stage • Persevere when bumps in road • Remain committed • Measure and monitor performance and progress to plan

Bottom Line Succession planning „

is critical to protecting business assets

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requires a commitment

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involves key players

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is never done too early

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reaps high rewards