When developing plans for the workforce, it is very important to include succession planning in any business strategy. Succession planning covers two scenarios: 1. a transfer of control or ownership to an independent, external agent or agency, e.g., when a company is sold, after the death of its owner; 2. a transfer of power and responsibilities within a company, e.g., as the result of a promotion or transfer of a key staff member.
When employees leave the organization or are promoted, job vacancies are left open. Succession plans cover these second-case contingencies involving the movement of employee talent and provide for employee labor to meet anticipated and possible demands.
In both forms of succession, planning promotes continuity of performance, allays anxieties about personnel changes, reduces risk (e.g., of wasted time and other resources in searches for and confirmation of successors) and sustains employee, shareholder and client confidence in the organization.
Succession, narrowly conceived, refers to the passing down of a business from the current owner(s) to the future owner(s). In broader terms, it can refer to changes in administrative control, apart from ownership, e.g., a transition from the tenure of one C.E.O. to another. Hence, succession planning within an organization today also usually refers to the identifying and developing of individuals already within the organization to take over key and strategic positions that will open in the future.
This practice is an essential part of a talent management strategy for creating high-value employees within the company in order to both reduce costly turnover and maintain or increase productivity. The theory is that through the retention and grooming of talent for replacement positions, the productivity of the company will not only be uninterrupted should a key member be lost for whatever reason, but will, ideally, also be improved. Successful succession planning involves various components and considerations that are essential to smooth transitions. Among those identified in an Ohio Employee Ownership Center of Kent State University study are:
2: Keeping It in the Family
3: Buy-Sell Agreements
4: Gifting of Shares
6: Management Buyout
7: Sale to Employees
8: Sale to an Outsider
9: Liquidation of the Business
One measure of an employee's skills and development is commonly referred to as "bench strength", referring to the back-up talent available on analogy with that of the players on the bench in baseball. Different companies will have different measures for this depending on their needs, but leadership skills are generally necessary for any position that would be considered in a succession plan. Succession plans require much planning, teamwork, and assessment. It is generally a long-term process that cannot be done in a haphazard manner or in a short period of time.
Most companies either do not have a plan for succession or do not implement their plan successfully. Research shows that barely 30% of small businesses successfully pass a business into a second generation, with that figure dropping to less than 15% once it gets to the third generation. In large corporations, available talent is also a huge issue, as more employees are taken from external sources and not built up from within.
Business Succession - Practices and Responsibilities
Information about succession planning and change management to prepare for corporate changes in structure, ownership, or leadership.
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