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Succession Planning Prepares Teams for Smooth Transitions if Posts Vacated
In the employment world, passing the ownership torch or bringing new young leaders through the ranks by way of “succession planning” is seen as a key business strategy.
Succession planning in human resources terms is the process of preparing people for future roles to support continuous business functioning.
Much like coaching a competitive basketball team, a bench player can jump in as a replacement when a first-string player gets injured or needs a break so the game can seamlessly continue.
Similarly, HR leaders train, or identify, people to fill various positions in the company, supporting smooth functioning during departures, transfers, or promotions.
Succession planning is a long-term, strategic investment that buffers both large and medium-sized businesses against inevitable future disruptions or sudden job vacancies, with the preparation process educating people so they can assume new positions with confidence and poise.
Graham Dent, president of Bend-based Compass Commercial Real Estate Services, says his company is constantly upgrading the skill set of staff members, whether for personal professional development or positioning for moving up within the firm or assuming a vacated post. “We do have a philosophy of promoting from within whenever possible and spend a lot of time and energy in training. It also makes sense from a financial point of view in decreasing hiring expenses.
“We now have 60 employees, with divisions including construction and property management as well as brokerage, which itself comprises 16 real estate brokers,” Dent continued. “Overall, the company is managed by ten partners, but each division has a large degree of independence. A lot of time and funding goes into continuing education, which means there is a depth of knowledge in that bench so that if we lose one person another can replace them seamlessly.
“For example, if, say, a senior property manager retires, that person has long-term relationships with owners and having a well-qualified person in place to take over avoids disruptions to important client connections. The partners rely very much on each other for time management and the sharing of responsibilities, and we have worked to scale up to a vertically integrated company covering the full range of commercial real estate activities. Part of that in construction has included developing from project management initially to the ability to perform complete ground-up construction.”
Dent says continuity planning is an essential business strategy for passing leadership roles on to one or more other employees. Across the business spectrum, the strategy is used to ensure that companies run smoothly after employees retire or otherwise leave an organization.
Succession planning often involves cross-training employees to help them develop skills, knowledge, and an understanding of the business. As a key part of talent management, it allows an organization to prepare for the future, grow smoothly, nurture diversity and inclusion, and reduce disruptions in workflow and processes. It also promotes engagement and retention and benefits people by boosting their confidence, involvement, and motivation as they strengthen their competencies and enhance their careers. Plans can be long-term, which are meant to account for future changes, or for emergencies whenever anything unexpected arises.
There are many benefits to succession planning, including inclusivity if companies have a strong plan to diversify their workforce. In small companies, the owner alone may be responsible for succession planning. There are several advantages for both employers and employees to having a formalized succession plan in place:
- Employees know that there is a chance for advancement and possibly ownership, which can lead to more empowerment and higher job satisfaction.
- Knowing there is a plan for future opportunities reinforces employees’ career development.
- Management’s commitment to succession planning means that supervisors will mentor employees to transfer knowledge and expertise.
- Management keeps better track of the value of employees so positions can be filled internally when opportunities arise.
- Leadership and employees are better able to share company values and vision.
A new generation of leaders is needed when there’s a mass exodus of people from the workforce into retirement, particularly relevant as the baby boomer generation departs the workforce. Succession planning can also cultivate leaders providing an exit strategy for business owners who want to sell their stake.
Every company has its own approach to this area. For example, architecture firms offer a different perspective on the business spectrum. They have a structure somewhat particular to the industry, which differs somewhat from other organizations while retaining many elements of traditional business. Not having a succession plan can have short-term and long-term consequences for a business, including:
Short-term: A business can lose employees and customers, and its value can decrease quickly. Without a plan, a business may not be able to pay employees, vendors, or the bank, and it may be unable to operate.
Long-term: A business can experience uncertainty, instability, and poor decision-making, which can harm its performance and financial results. This can lead to a decline in market share or profitability. Succession planning can help a business identify critical positions, select key skills, and develop individuals to meet future needs.
Legal and financial: Without a clear plan, a business may face disputes among stakeholders or family members, which can lead to costly litigation. Estate taxes and other financial liabilities may also reduce a business’s assets, potentially forcing it to be sold or liquidated.
Leadership Vacuum: One of the most immediate risks of needing a succession plan is the creation of a leadership vacuum. Without a clear path for the next generation of leaders to step into key roles, your business may struggle to maintain stability and continue its growth.
