On 24September we celebrate our rich and diverse heritage, reminding us of our past journeys, triumphs and struggles underpinned by various traditions and beliefs. Where we come from gives us great meaning; it tells us who we are and steers us toward future considerations, what we have learnt from past mistakes, our achievements, where we see ourselves and what we want to leave behind. We all would like to leave a legacy that we can be proud of and planning it, is of particular importance to leaders in communities, families and businesses.
Research studies and surveys indicate that one of the greatest concerns of top CEOs is whether or not the talent base in the company is sufficient to ensure survival of the business. Survey results from a study conducted by the Economist Intelligence Unit indicated that more than half of the head executives responded that the shortage of talent may have a strong negative impact on bottom line results even within the next 12 months. Multinational companies have a strong focus on leadership pipelines, however just because global players have higher stakes, small and medium enterprises shouldnâ€™t take a back seat in ensuring continued business. Particularly in South Africa where 70% of working individuals are employed by companies with less than 50 employees, ensuring economic sustainability of the SME segment is a key priority given the current economic climate. Owners and decision-makers have a double-barrel responsibility towards the business itself as a revenue-generating entity which more than likely consumed years in getting off the ground, and towards the country as a whole where 67% of 4.5 million jobless individuals have been unemployed for more than a year. Planning the continuation of business appears a logical and obvious point on strategic agendas, however if just about half of the blue chip companies in South Africa have established succession plans, it begs the question as to what this statistic looks like at SME level especially given that only 30% of family-owned businesses survive into the second generation.
Owning up to this responsibility is a strategic imperative with a couple of key factors that need to be in overall product GREAT price it place that enable successors to seamlessly take over the business and even guide into new, and perhaps even more rewarding frontiers. These factors include considering the following questions in developing a succession plan:
- What is the vision for the company or ownership?
- Will there be a change in target market, suppliers, services or products?
- What needs to happen to safeguard sufficient liquidity?
- How would buyers or competition evaluate the company?
- Do shareholder agreements make provision for succession planning?
- What competencies and attitude must the next generation leaders have?
- Have potential successors been identified?
- How will the successor be groomed into the role?
- What is the contingency plan should the current owner step down sooner than anticipated?
- If a different organisational structure is required, how will this change be managed to achieve succession objectives?
- How will the business retain key talent before, during and after leadership transition?
The above questions assist in guiding leaders to explore the multi-disciplined approach to succession planning which likely lead to more questions as investigated details unfold. Ideally, a succession plan cascades into the leadership pipeline which includes career development paths for all employees, or at minimum, junior management and upwards. As busy as management may be executing daily operations that produce profit for tomorrow, dedicating time to ensure survival in the long run is a well-valued contribution. Benjamin Franklinâ€™s famous quote of by failing to prepare, you are preparing to fail holds true for so many facets of life and is most certainly appropriate in the case of succession planning. At Danshaw, we develop human resource initiatives in line with organisation strategy to help businesses, companies and owners carve the legacy they aspire to.