Succession planning delivers payback

Succession planning eliminates problems.

Succession planning can remove many problems and frustrations

Succession Planning takes a comprehensive approach to assist in structuring an orderly transition of management, key employees and organisation sustainability. Deciding where the business will go in the future should be a primary objective is because you want it to have a smooth journey. Family, employees, contractors and other people will depend on it for a smooth transition. It can take many years to build a successful organisation. Yet it can come to an abrupt halt without succession planning.

Nobody likes to think about it, but it’s inevitable that one day someone will leave the organisation. Whether to retire or for health reasons. Your organisation can struggle or even fail and leave its dependents stranded if you don’t have a succession plan. A succession, or exit plan, outlines who will take over the management of the company and who will take over ownership when someone leaves.

Careful analysis will uncover conflicts inherent in your organisation. Only by planning and communication in a structured way, will these issues be resolved and acrimony avoided.

You’re currently witnessing the impact of new and emerging succession management approaches. Modern succession planning processes no longer simply think about the replacement of the owner(s). Today the focus is on the ongoing talent and infrastructure being utilised. They also examine development options in the new global economy.

There can be complex structures and financing involved with succession planning, so it’s a good idea to ensure the succession plan is attainable. This may require you to seek some external professional advice. Setting a realistic timetable, measurable milestones and sticking to them can be difficult. A succession plan can be a real problem and source of frustration because it is not put together well and appropriately resourced and managed. 

The three key aspects of succession planning

Management succession planning

Modern management succession planning is the process of preparing the organisation for a transition in leadership. It is helpful when a management change  occurs due to unforeseen circumstances, such as the sudden death of a General Manager or Director. But it is also important in ensuring a smooth transfer of power under normal circumstances.

Management succession planning will allow you to keep moving forward so when the inevitable occurs everyone is prepared. Retirement, career mobility, ill health, termination, or death will require the appointment of a new management at some point.

The succession plan documents provide for the continued operation of a business in the event of an unexpected change. It details the changes that will take place as leadership is transferred from one generation to the next. In the case of small businesses, succession plans are often known as continuity plans, since without them the businesses may cease to exist.

Key employee succession planning

Employee succession planning is particularly important in smaller businesses, non-profits and communities. If a key person is a good marketer and responsible for the majority of sales, the business could be in real trouble if they are suddenly not there.

Your business could have invested in advanced systems and technologies. Unfortunately, nothing works without the right people in place to manage them.  If the manager of your systems and technology leaves without warning, what would happen if you had no one to back them up. Or no key man insurance to help with a replacement?

Grooming a successor for each role from within the organisation is important because it can save the time and expense of hiring new talent from outside. It also aids in continuity, as an insider might be more likely to follow through with current plans and strategies.

Business succession planning

Your business will be passed on or sold off at some point, so everyone needs to be ready. The original owners either become incapacitated or want to move on. Sometimes succession planning can be problematic, sometimes expensive and even painful. It is vital therefore to ensure the continuity, even the continued existence of the organisation following the departure of the owners.

Many business leaders are reluctant to plan for what will happen when they are no longer with the business. This is because they usually find it unpleasant to confront their retirement or mortality. It may be helpful for smaller organisations to consider succession planning as an extension of an employee development program.

Start planning with the end in  mind

With very little risk, money, time and effort, you can have a new business up and running. Opportunities are boundless, but so are the risks once you have started the biggest risk is not having a clear succession plan. When the owner dies the business dies, and good luck to the family and others who depend on the business.

You can look for difficulties in the opportunities succession planning provides or, you can look for opportunities in your current difficulties. Whatever you choose you will find something so why not start with the end in mind?

Supporting documentation

You will find a Succession Planning Template in The FAQ Support Planning Kit. Other supporting documentation may include copies of:

  • The business plan so everyone knows what is going on.
  • Details of the business model.
  • Budgets.
  • Details of the organisations value chain.
  • Insurance documents.
  • Lease documents.
  • Business evaluation.
  • Any valuation documents.
  • Market evaluation of the business.
  • Customer listings.
  • Supplier listings.
  • Partnership agreements.
  • Employee agreements.
  • Buy-sell agreements.
  • Retirement payout agreements.
  • Contracts details and agreements.
  • Major projects details.
  • Will and Testaments.
  • Resumes of potential successors.
  • Business name registration certificate.
  • Organisation  registration details.
  • Government compliance documents.

 The real risks start to appear as you grow

One important aspect of succession planning involves evaluating the skills of people in the organisation. Identifying those employees who have the potential to ascend to bigger roles. Succession planning encourages staff development. It sends a message to employees that the organisation is serious about developing people and providing for their future so it is worth staying on.

Big risks can be averted. Involvement in succession planning can persuade talented employees to remain with the organisation. Rather than looking elsewhere for personal growth opportunities.

The value of Succession Planning

A good succession plan enables a smooth transition. There is less likelihood of disruption to families and the operations that the person was involved with. By planning the exit well in advance you can maximise the value of the situation and enable you to meet the future needs of the stakeholders.

In the case of smaller organisations, succession plans are often known as continuity plans. Since without them, the businesses may cease to exist. Succession plans can provide a number of important benefits for those who have developed them. For example, a succession plan may help you to retain key employees, and maintain the value of its shares and assets during ant transition.


Succession planning helps you to manage future growth problems.


Succession planning may also prove valuable in allowing a business owner to retire in comfort. Even though they might continue to provide for family members who are involved with the organisation.

In addition, succession planning can

  • Assist in giving everyone involved the peace of mind they so desperately crave.
  • Preservation of harmony in the organisation because everyone knows where they are going, they have direction.
  • Survival and ongoing profitable growth so the organisation maintains sustainability.
  • Maximises the value of the business for all stakeholders so everyone gets what they deserve.
  • Helps in the minimisation of risks because without succession planning they are often overlooked.
  • Reduces the tax burden which so often causes the family grief.
  • Help in understanding the legal position while saving expensive legal fees.
  • Unlocks value since it can enhance the marketability of the products and services with increased motivation.
  • Ensures the organisation will look after people involved since that is the way you would want it to be.
  • Help to ensures the organisation will continue to look after customers because they looked after you.
  • Leadership is and has always been a relatively scarce commodity so it needs protecting.
  • Good succession planning ensures any assets will go to the people you choose because it becomes law.

To lose a strong, effective talent is a serious blow to any organisation, but the impact can be minimised.

Unfortunately most businesses die when the owner dies

It’s true many small businesses are not inspiring, engaging, fun, productive environments. Many cultures are not healthy and unhealthy cultures negatively impact customer engagement, services, experiences, results and profits. So why would you want to worry about any succession, and why would your children or anyone else want to be part of it?

The only way to guarantee the best ongoing outcomes is to create the best working conditions possible. Ensuring there it is an integral part of the succession planning. The best working conditions backed up with good succession planning lead to:

  • Your best team using the best systems and processes.
  • Which leads to the right customers and profits for those customers and the business.
  • Identification of the outcomes you want and any new people would want for your business.

Succession planning must be driven by good governance. Governance of profitable growth and sustainability of the business become easier with good succession planning. Employees who trust each other and are accountable are more likely to provide outstanding customer service.

Not only that they will cover for each other better and your succession planning will become easier. A simple way to gauge what type of employees you have is to ask yourself. “Do they look like they want to be here for the long-term?”

The most important thing that I’ve learned when working on succession planning projects. Is to assess the founder’s attitude to employees and contractors and the information and knowledge held by them. This information and knowledge must then be assessed as to its value to the future of the business and be allowed to remain with the business.

Succession planning for the family business

Much attention is placed on the technical elements of succession planning for family businesses. After all, the economic value of business transfers can be significant. While the tax and legal implications of business transfers are important, they aren’t a founder’s only concern.

There is a tendency for business owners to misplace priorities. Putting the technical aspects of tax, estate, and legal planning ahead of the aspects of leadership. Communication and control ahead of decision making.


Unfortunately, most people in business think life will go on forever.


Putting these priorities in the wrong order is a recipe for a failed succession plan. Most business owners are unaware of the value of a formal plan to manage family relationships. They are not planning for the softer side of a business transfer which can quickly lead to disaster.

The founders letting go

Family business founders face an interesting challenge when it comes to finding how tied up in their organisations they are. They find it hard to admit they’re ready to step aside. Especially when they aren’t sure of how the business will continue without them.

It is generally too late when founders decide to pass the business to their children because assumptions have been made. Assumptions that the children are capable of taking over the business. Even though the dynamics between siblings may have started to deteriorate.

By way of an example, a company where the founder had four children in the business and split ownership evenly among them. The situation became nightmarish as disagreements surfaced about leadership, control and direction. This situation can become even worse when the children married and their spouses started to interfere. In the absence of a proper decision-making structure, and no clear rules, a power struggle emerges and the problems really begin.

The business could lose direction and fall apart, ensuring there was nothing left to pass on to the next generation. Under such a scenario, no one’s needs are met, families have pulled apart and business legacies are destroyed.

Business owners looking for a way out of their organisations are often seeking a new challenge. But unless the power transfer includes solid planning on both the technical and human aspects of succession, it’s difficult for them to move forward.

There can be problems with new roles

It is hard to move into new roles, relationships and opportunities when you are not feeling like the owner. Equally, it can be difficult and frustrating for the children if they are suddenly thrust into new roles without any prior knowledge or preparation.

When there are new challenges ahead. A  balance must be reached by remaining in touch with your business and moving forward with new ideas and activities. But this requires careful consideration and a well-prepared succession plan that goes beyond tax and legal mechanics.

Summary of the key issues

Survival and growth of the organisation could depend on your succession planning:

  • What are the work expectations?
  • Who will be the leader?
  • Identifying the entrepreneur?
  • How will decisions be made?
  • What positions and titles will be given?
  • Who will be given control?
  • How will responsibilities be shared?
  • What are the compensation plans and should they be changed?
  • Don’t leave your affairs to chance.
  • What are the rules?
  • Objectives and strategies must be set.
  • Where are the Wills of the shareholders?
  • Preservation of relationships and family harmony.
  • Building future capacity.
  • Independent facilitation is fundamental.
  • Understanding conflicts that are there and likely to be?
  • Considering the family members involved?
  • Who resolves any conflict?
  • What about unplanned partners and partnerships?
  • Corporate governance is important,
  • Who will monitor and evaluate the performance of the succession planning and the final plan?

The challenges associated with succession planning

Every organisation needs a Succession Plan to be in place, but very few have one because they keep putting it off. It is needed because of the age of the owners and managers and because in many cases the organisation’s success is dependent on one person.

Due to lack of experience, people think, the future owners and managers will just work it out by themselves. That is, until a key person suddenly dies, or becomes unable to manage well. I have experienced firsthand, the impact of major health issues and inadequate succession planning and it is far from desirable.

The best succession plans are development oriented, rather than simply replacement oriented. Your plan should become a proactive vehicle to reflect on the progress of talent. Along with the opportunities required for genuine development, profitable growth and sustainability. Any innovations the organisation is involved with should be carefully documented.

Don’t leave your affairs to chance

You want people to be happy so when they reach their use-by-date you want them to be able to take a lesser role with reduced responsibility. They also want them to feel utilised, challenged and fulfilled as well as being able to receive some compensation. This doesn’t happen by chance.

You must manage the risks associated with people’s lives. Apart from the key things that impact your financial position and your succession plan. Also, identify the risks and insure against them, fire, loss of profit, key man, theft. “She’ll be right mate”, attitude can cost everything and all your hard work goes down the drain.

Around half of all Australians die without leaving a valid, legal Will. If a person dies intestate, rules contained in legislation will decide how assets are distributed taking into account family situations. Without a Will, the government could well intervene if substantial contracts are in place.

Goals, objectives, strategies and actions must be set

The succession planning process should begin with a clearly articulated set of goals. What is it that you wish to accomplish for family members, the organisation, key employees, and other stakeholders?

Both goal articulation and communication of goals are crucial. There are usually unspoken aspirations about certain key management personnel or family members becoming future leaders and owners. This must be all out on the table.

Will you consult with the persons involved to ensure that goals and visions are shared? Or are you just assuming that everyone knows what is wanted and where everything is, and how it works? You may understand, but are you the only one that has put any real thought into your aspirations for the organisation and future roles. Regular planning meetings need to be held.

Survival and growth of the organisation depend on it

Getting the company started was hard enough, but getting out can prove even harder. Retirement is difficult enough, but it is even more burdensome if you want continuity in the organisation you have helped to  build, or are a part of.

There are some common factors in how best practice engages current and future leaders and infrastructure in developmental of functions and activities:

  • Believe that the most important developmental activity is practical work experience in helping people to grow and develop their potential.
  • Use a variety of developmental activities because they work.  These might including mentoring, coaching, job rotation, education programs and feedback processes.
  • Try new approaches to development. Including special projects, action research, action learning and web-based educational activities so there is a smooth transition.
  • Know the right Internet-based technology infrastructure. Including the cloud and mobility because they are critical to the smooth succession of the company into the future.
  • Understand modern information technology and communications because it expands people’s ability. It helps them to effectively and efficiently monitor developmental activities across the organisation.

Preservation of harmony

It is very dangerous to make assumptions, or just think that things will work out. You must all work together to create and plan the future. Resolving difficulties requires communication, fairness, accountability, caring, sharing, openness and faith. No discussions and divisive behaviour behind closed doors.

You should be willing to do whatever it takes to stay together to achieve the goals. Focusing on cooperation and always coming to a resolution, not a compromise. Be flexible in your work, able to change if what you’re doing is not working. Ask for help when you need it and show empathy to others who ask for it.

Lack of vision and purpose as well as failure to establish, or communicate individual goals, will eventually lead to the organisation breaking up. Usually sooner rather than later.

Building future capacity

All organisations need skilled people. When the current owners or managers reach retirement age, or there is an illness, then the situation becomes much more critical. But on the other hand, it can open up new possibilities and opportunities.

Do the potential new people possess the necessary skills to succeed? Have you considered a management capacity assessment? Should key employees be identified now? Can necessary skills be obtained through training or special assignments, or are new people required? If you mess up, it’s not anyone else’s fault. You shouldn’t whine about your personal problems or mistakes, but learn from them and get on with the job of planning your succession.

Developing leadership talent and infrastructure is a long-term investment. Tracking the progress of individual participants and the systems they use are a necessary dimension of a best practice succession process. The systems must also measure personal records, identify developmental opportunities and spot looming shortages. Identifying gaps in both talent and infrastructure development in order that these gaps can be rectified quickly.

You need to employ a variety of qualitative and quantitative methods of measurement and assessment. This will ensure that desired outcomes are achieved and provide perspectives on real effectiveness. The long-term success of these processes is the product of your willingness to constantly revisit and redesign the systems themselves. Continuous improvement in both process and content is required for true success.

Independent facilitation is fundamental

Facilitating, presentations and training share some common behaviour and skills, but there are differences. Facilitators are there to identify and resolve issues. An agenda is used to structure the meeting for effectiveness. Objectives are based on process improvement and questions are used to develop individual involvement.

A facilitator manages the meeting structure, not content. They record team member inputs and ideas and structures them into a working document while using tools and processes for team problem solving. The facilitator’s set of skills should be consistent with establishing the conditions for change, helping you to change when necessary. And then stabilising the new and more appropriate patterns of behaviour and attitudes for the group to move forward.

Facilitators are primary organisers and communicators but should have special expertise in succession planning. They ensure there is a culture of two-way and trusting communication among you. They should be encouragers of your team’s behaviour in planning, organising, disciplining and monitoring the team’s activities.

A facilitator must have patience and a tolerance for ambiguity. There is a need to develop a sense of timing that aids in knowing when to push for more ideas, more information, and more participation. And equally important, when not to push. Finally, they should have the ability to organise, handle details and bring events to closure.

Management of succession planning into the future

Many people think that the extent of succession planning is about retirement. However, it is equally important to always pay attention to management issues, the families involved and the organisation’s sustainability. Here is a simple question to ask. “Who will be taking over from you when you are not around anymore”?

Leaving the business without an effective succession plan in place can be devastating. Staff morale can fall, funders and partners can become nervous and your employees, volunteers and members may leave. This means it will be difficult to realise the long-term value of your investment. Can you afford for these things to happen?

Most people make the grave mistake of failing to plan their exit, which ideally should commence from the day they start. New management can take years to train in the operation and culture that you have been building over many years.

For the sake of all the stakeholders, including your family, a smooth transition is what you should all be aiming for. You need to be protecting what you have built up and maximise your situation upon retirement and that of your family and employees.

External support needs to be ongoing

Succession planning without external help is like Do It Yourself (DIY) surgery. There are very special sets of interactions that occur between owners, directors, family, employees and other stakeholders, while many will overlap.

Sometimes relationships are difficult to see by the inexperienced. In other cases, people find it very difficult to discuss such issues and are unable to express, or bring out their true feelings without an external facilitator. As an example, a non-executive may have different goals and expectations about decisions than those of active executives.

Life is not fair but you must get used to it. There are more issues than ever before and you need to be aware of all stakeholders’ feelings, goals, and desires.

Where to start

Building a great succession plan takes time, energy, intention and attention. Start with creating the best working conditions and build from there. Instead of approaching succession planning with doubt, consider involving your team and making a start with optimism. The sooner you start, the sooner you finish and the sooner you can get on with your new life.

Quotable quotes

“Being specific about who is accountable for succession planning, goes a long way toward preventing problems in the future”. Peter Sergeant

“If you wait for the right time to do succession planning, it will probably never happen”. Peter Sergeant

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