Key points
- Succession planning is vital for all businesses, big or small.
- The stigma around people moving on can hinder preparations.
- For a successful transition, start planning early to prepare the team.
- AI and new technologies will play a crucial role in succession planning going forward.
Succession planning ensures a smooth leadership transition and can also maintain continuity in operations within an organisation. By integrating this planning into the risk management function, future leaders can be developed, improving a business’s likelihood of ongoing stability.
The benefits are clear, but the figures are concerning. Recent research from Azets found that just 9 per cent of businesses have a succession plan fully integrated, while 6 per cent have given it no thought at all. Meanwhile, research from Grant Thornton revealed that just 29 per cent of FTSE 350 companies considered succession planning a priority.
Put simply, if there is no succession plan in place it puts the business’s sustainability and viability at real risk. Accountants have an important role in advising businesses to develop a succession plan that can manage the risks and ensure long-term business success.
Work to remove the stigma of people moving on
Identifying the right successor in business is a sensitive and complex process that can lead to internal tensions. There is an emotional aspect to the changing of the guard, with leaders potentially hesitant to plan for their own succession, and employees feeling uneasy about the changes. As Sara Daw, co-founder of the CFO Centre, says: “Don’t underestimate the emotional ties these founders have with their businesses. For some, it’s like giving their child up for adoption!”
Daw says that to deal with the sensitivity, it is important to develop a culture where the business is seen as bigger than any individual within it, even the founder. “That way, everyone knows they are the guardians and there to make sure it is in good shape when the time comes to pass it on.”
Anita Rasheva, owner of AD Accounting and Business Solutions, says internal politics can complicate succession planning, as decisions can be influenced by personal biases. She says: “It is important to approach succession planning with fairness and objectivity to avoid skewed judgements.”
Start embedding the idea of succession planning early
Successful succession takes years to prepare for, but many leave it to the last minute. As Daw notes, “entrepreneurs know they need to prepare for succession when they want to sell or move out of day-to-day operations. I believe this is far too late”.
Accountants should advise building succession planning into business as usual. This normalises the approach, ensures the business is as ready as it can be for new leaders and owners and gives founders confidence that “their legacy is safe”.
Anita Rasheva, Owner, AD Accounting and Business Solutions
Rasheva says integrating succession planning into daily operations creates clear career paths and development opportunities, boosting employee retention and motivation. She says: “This approach also helps in nurturing the next generation of leaders from within.”
Identifying the right talent can be challenging, and continually prioritising the identification of potential leaders who will be able to drive the business forward is key to success.
Make sure your process ducks are in a row
Developing a succession plan requires time and resources to evaluate talent, design training programmes, and provide ongoing mentoring to prepare future leaders. Rasheva recommends establishing a clear timeline for planned transitions, while also preparing for unexpected departures.
Paul Beare, Founder and MD of Paul Beare Limited, says it’s about mapping the duties of key people and determining how others will cover the work short term. Managers must be aware of the gaps that may emerge as people leave and identify potential successors from within the workforce to prepare them for new responsibilities.
Paul Beare, Founder and MD, Paul Beare Limited
Flexibility is another crucial aspect, says Rasheva, and succession plans need to be adaptable to changes within the company or the external environment. She says: “A rigid plan may fail to meet evolving business needs and market conditions, so being prepared to adjust the plan as necessary is essential.”
Make use of technologies such as AI
AI can aid in succession planning by simulating succession scenarios, helping businesses anticipate risks and plan effectively. Beare adds that AI performance tracking tools can help uncover hidden talent by revealing “quiet superstars”, recognising valuable employees for future leadership roles.
There is also the matter of identifying future skills needs. Analysing management data allows organisations to pinpoint skill gaps, so that they can develop or acquire the necessary skills for future demands.
Rasheva says that organisations leveraging AI will gain a competitive edge in navigating digital transformation and staying relevant. However, accountants should be advising business leaders on ensuring their use of AI tools is unbiased, to promote fairness and transparency in the succession planning process.
Succession planning goes much further than just being ready for when the leader leaves. When done well, it can also protect valuable in-house knowledge. It facilitates the transfer of this knowledge through the next generation of leaders, contributing to a business’s sustainability.
Continually flexing the succession plan to adapt to changes, investing in the right talent, and integrating AI, can allow businesses to position themselves for continued success, even after the founder has gone.
