What Is a Succession Plan?

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Whether company leaders' retirement is on the horizon or years away, a succession plan prepares a business for a transition to new leadership. Even if the transition is several years away, having a plan in place helps the company move in a direction that facilitates a leadership change. An assessment of the company's current position gives you an idea of how to approach the succession plan.

Purpose

A succession plan ensures continuity of the company's operation by defining how the power will shift when company leaders leave. While an immediate retirement or leadership change might not be planned, unexpected events can arise quickly. Without a succession plan, a company may struggle if a manager or company leader suddenly dies, experiences health problems or leaves for a different company. The succession plan helps make day-to-day decisions based on where you want the company to go in the future. It also gives you a look at the big picture for the company.

Components

Naming the successor to key company roles is a primary component of succession planning. It allows for the selection of qualified employees to move into those positions. Identifying those backups also allows knowledge transfer to begin so the employees are prepared for their new position. Include an outline of how that knowledge transfer will occur to ensure the new leaders have the necessary information to succeed in the role. The vision for the future of the company is another component to include in the plan.

Process

Evaluate the company's current successes and weakness to begin the succession planning process. This gives you a starting point to develop goals for the direction of the business. It also helps you identify the employees who will fill the top positions as current leaders leave the company. Plot each successor's path to her new role through a training plan. All partners and key company leaders should participate in the succession planning to ensure that everyone is aware of the plan.

Tips

A simple yet realistic approach to succession planning makes the goals more attainable for the company and future leaders. Use straightforward verbiage in the plan to make it simple to decipher and execute. For larger companies, create a master succession plan and additional plans for each department. A universal format for the plan creates a cohesive outline to guide the entire company. Evaluating the succession plan periodically to ensure it is still relevant increases its significance.

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