First Federal Bank Blog

The concept of business succession is having a unique moment of public interest thanks to the popular television series. But if you run a business, the need for a succession plan is very real and important. Taking steps today to put a succession plan into place won’t just prevent drama — it’ll ensure your business is continually run by people who want it to succeed as much as you do and have the skills to make it happen.
 
What is succession planning?
 
In its step-by-step guide to succession planning, the National Institutes of Health (NIH) defines succession planning as the action of figuring out how to fill key positions when a vacancy occurs. Whether it’s retirement, departure, or death, losing a key officer or director without having a backup plan in place can spell disaster for your business.
 
The objective of a succession plan, as NIH explains, is to create a pipeline that ensures these positions are filled by qualified, capable individuals. A successor is not necessarily a full-time replacement for a role, either — it’s merely someone who can take the reins and ensure a smooth transition until a permanent replacement is named.
 
Succession planning is the process of identifying these critical roles, determining who within your company is qualified to perform them, and empowering them to do so in the event a successor is needed.
 
How to establish a succession plan
 
The Society for Human Resource Management notes building a succession plan can be a time-consuming process that takes up to three years, but will require about a year at minimum. In your approach to succession planning, you’ll have several points to focus on, including ensuring key knowledge about your business, its products, and its services is maintained through the process.
 
Because a succession plan is future-oriented, it’s crucial you have some idea of where your business may be when the time comes to install a successor. The University of Washington’s human resources department recommends looking ahead to the potential challenges your business will face within the next five years. Whether it’s adapting to automation or international expansion, your succession plan should empower the people who can help you overcome these obstacles and meet new challenges head-on.
 
When you’ve identified the people who will be important to your succession plan, you’ll need to begin putting them in a position to succeed. You’ll measure these individuals’ potential on the skills and knowledge they lack as much as what they have, which is why the University of Washington recommends developing ways to pass that information on to the people who need it.
 
One of the most notable benefits of establishing a succession plan is that it provides employees incentive to stay with your business. As Investopedia contributor Will Kenton notes, giving contributors a clear path to career advancement, showing you already have them earmarked for better things, and making investments in their potential will help you retain talent and create a workplace united around common goals.
 
A good succession plan accounts for all the people who are critical to the success of your business — including yourself. If you have a plan in place to keep things running smoothly no matter who the company loses and how, you can breathe easier knowing that your business is primed for longevity.
 
Establishing a functional succession plan is an involved process, so you’ll want to do as much research as possible to ensure you’re taking the proper steps. You should also consider working with an attorney who is familiar with succession planning as they can ensure everything is in place and taken into account.