The exit strategy is key to many owner managers to realise cash for them and most accountancy practices can provide good tax advice to do so. What we specialise in is moving the company to a place where the existing owners can exit it whilst providing for its future success under new ownership. This involves understanding people more than finance and tax breaks.
However succession planning is much more than simply exiting the owner managers from the business, it is the process of identifying and developing potential future leaders or senior managers, as well as individuals to fill other business-critical positions, either in the short- or the long-term. In addition to training and development activities, succession planning programmes typically include the provision of practical, tailored work experience relevant for future senior or key roles.
Succession planning schemes may include individual senior or key positions or to take a more generic approach targeting a ‘pool’ of positions for which similar skills are required.
Individual positions or groups of jobs
Succession planning typically covers the most senior jobs in the organisation, together with short-term and longer-term successors for these posts. The latter group are in effect on a fast-track and may be developed through job moves within various parts of the business.
While some jobs will always require specialists, there is a growing focus on identifying and developing groups of jobs to enable potential successors to be identified for a variety of roles. So jobs might be clustered by role, function and/or level so that the generic skills required for particular roles can be developed. The aim is to develop pools of talented people, each of whom is adaptable and capable of filling a number of roles. Because succession planning is concerned with developing longer-term successors as well as short-term replacements, each pool will be considerably larger than the range of posts it covers.
‘Insiders’ versus ‘outsiders’
All organisations need a certain amount of new recruits directly at senior levels to bring in new ideas and approaches, and fill newly-created or unanticipated roles. Many, however, seem to rely either too much on outsiders or too much on insiders, suggesting that it is difficult to find the right balance.
It is also sometimes argued that outsiders should not be brought in at board level but somewhere below it, so that people with outside experience can become accustomed to the corporate culture and undergo development before making the next step up. Others, though, argue that if an objective business case can be made for bringing in outsiders at board level, this should be done where appropriate, and in particular that a failing business needs to recruit from outside – and to be seen to be doing so – to satisfy investors.
Links with business planning
Those responsible for succession planning need to be highly knowledgeable about how the business is likely to evolve, and how such change might affect the numbers involved in succession planning and the skills they must possess. This requires a close relationship at a senior level between top managers responsible for shaping the future of the business (including the chief executive) and HR.
It’s important for employers to avoid talent tunnel vision where the focus is purely on current skills needs, and to ensure they develop a good understanding of future business needs for leaders, managers and business critical positions.
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