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5 simple strategies for better succession planning

Profit Engine | Albert Ventura | Dec 24, 2021

Succession planning strategies - 5 simple strategies for better succession planning

No business is immune to the risk of key employees leaving, whether it's through retirement, illness, or simply moving on to a new opportunity. While succession planning can help to ensure a smooth transition of power in the event of such an occurrence, all too often, businesses fail to put in place an effective plan. This can lead to uncertainty and even the failure of the business.

Succession planning does not need to be complicated or expensive. There are many relatively straightforward ways to ensure that they are adequately prepared for key employee absences. There are also several good strategies to prevent some of these situations from occurring.

In this post, we take a look at five effective ways to plan better for a smooth succession and transition in business.

Take out a shareholder protection insurance policy

A shareholder protection policy is an insurance policy that provides financial security to the shareholders of a company if one or more of them passes away or becomes critically ill. This can help ensure that the business is not adversely affected by the departure of a key employee. There are several benefits of taking out shareholder protection insurance as follows:

Having this cover is key in offering financial stability for the stakeholder’s family as well as the business. To the family and beneficiaries, it means that should their beloved pass away or become critically ill, they will receive a payout to soften the blow and take care of any expenses that may arise during this difficult time.

On the other hand, the remaining business owners do not have to worry about losing control of their business. The idea of having this policy in place is to facilitate a smooth transition for change of ownership when a stakeholder departs.

In addition to ensuring that the business is not inherited by an inexperienced or unwelcome beneficiary, the cover also protects the company from using up any savings to compensate the departed shareholder or their family.

Have a formalized succession plan

This is essential – have a succession plan in writing and ensure that key employees are aware of it. The plan should include the name of the person who will take over as CEO or another key role in the event of a key employee's departure. It is also important to have a backup plan if the chosen individual is unable to take on the role.

Roles and responsibilities that can change should include the following:

  • A list of key positions within the business, along with who holds each position, what their job entails and why they are critical to the success of the company.
  • A description of how you will run the business in the event of a key employee's absence
  • Details of who will make decisions when a key employee leaves or passes away
  • How you will transition the employees into new roles
  • Procedures for dealing with the death or incapacity of a key employee.

Conduct regular reviews of roles and responsibilities

The goal here is to keep track of key employees' roles and responsibilities and ensure that these are kept up to date. This will help reduce the risk of unexpected departures that occur when key employees feel underutilised or their ambitions do not match the challenges of their current positions.

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By allocating the right levels of responsibilities to important people in the company, it becomes easier to keep them engaged and reduce their turnover.

Retain key employees through incentives and training

Again, the idea is to ensure that key employees are adequately incentivized to stay with the company. You can do this by offering them competitive salaries, bonuses and benefits packages. It is also important to provide training opportunities for employees, especially if they are in high demand within the industry or their skills are considered a particularly high standard.

Implement succession planning procedures at the board level

Ensure that the key employees identified in the succession plan are represented at the board level to better take care of their interest. Board members should also regularly discuss how the company could cope without specific key employees and review potential redundancy packages.

Conclusion

Succession planning is essential for any business, but it can be especially challenging for small businesses. Luckily, if you properly implement the five strategies we discussed here, you will better manage the risk of losing key employees. The result is better protection of the interests of your shareholders and ultimately improved chances of business continuity even in the face of challenges that come with succession.


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