By Kristine Loomis, CPA, CVA, Cordell, Neher & Company, PLLC
Wenatchee Certified Public Accountant
Succession planning is defined as the process in which an organization ensures employees are recruited and developed to fill each key role within the company. For many organizations, this is an overwhelming task that gets set aside year after year. Many business owners do not start their succession planning until the owners are ready to retire. By this time, it is too late to design and implement a plan to accomplish all of their goals in their retirement timeframe. There are many different models of succession planning, this article focuses on the transfer to existing employees who may or may not be family members. As Susan Wojcicki, the CEO of YouTube says, “It’s the people in power who pass the power to the other people”. She was speaking about diversity; but, I think it is applicable here. In order to execute a successful transfer to existing (or future) employees, the work must start long before the desired date of transfer. Here are four key considerations owners should consider when building an internal succession plan.
- Evaluate your current team: Begin the process of identifying key employees early. It will provide you with ample time to identify and groom the right candidate(s). Begin by identifying whether you have employees who have the skills or the potential to acquire the skills necessary to take over the company. Assess not only their technical skills but also their leadership potential. This will help you decide whether you need to search for someone from the outside to augment your management team.
- Training: Training is one of the most important ways that you can ensure a successful transition. Many owners do not know where to start, so they avoid it. Other owners have serious trepidation about letting an employee in on the inner workings of the business too soon. Sometimes this is out of fear of losing control and other times out of fear of losing their key employees and company secrets to a competitor. Both of these are legitimate fears, but by giving in to them and not training your employees to take over, you risk the future of your legacy and your retirement. Develop a training plan that looks five years out to make sure all the necessary tasks and responsibilities have an employee assigned to them.
- Training and Development: Once the individual or group of individuals is chosen, you will want to begin to develop them into your future leaders. Cross-training them in all aspects of the business is a great place to start. This helps them learn the inner workings of the company and become more well-rounded leaders and problem solvers. Beyond just the workings of the business, train them in the soft skills and leadership skills that will make them successful. Invest in a program that will provide those skills to your future leaders. Once a transfer begins to get closer, some companies may even find benefit in bringing in an executive coach to continue to develop leadership skills for transferees.
- Mentoring: One of the most important steps that you as an owner can take is to impart as much knowledge as possible about the company to your successors. As the old adage goes, ‘knowledge is power.’ Leaving a company without a good knowledge base can spell its demise. Transferring knowledge can be one of the most difficult parts of the succession process. It is also one of the most vital.
A mentorship program can produce great dividends. The program must offer young, future leaders access to the business owner(s) or other senior members of your leadership team in order to ask questions and receive advice from a trusted source in the upper echelons of management.
Succession can certainly be a difficult bridge to traverse. The professionals at our Firm have insider knowledge (we manage these sorts of transitions for our own Firm on a regular basis), and we can help you.
Kristine Loomis is a Certified Public Accountant with Cordell, Neher & Company, PLLC, a Wenatchee public accounting firm. Kris may be reached at 509-663-1661 or firstname.lastname@example.org. www.cnccpa.com