SMEs are the often unrecognised force of the British economy. There are almost five million of them employing millions of people throughout the country, they provide over 67 per cent of the UK’s private sector jobs and contribute over 50 per cent of UK GDP.
Smaller businesses – just like their larger counterparts – experience numerous challenges, especially in the current market, however, many are unique to the sector. One of the most common and potentially damaging issues, which is often overlooked, is that of succession planning. Every day I see our clients and contacts putting it to the back of their minds as they see it as a long term consideration which can be sorted ‘tomorrow’. The problem is that ‘tomorrow’ often turns into ‘next week’ and then into ‘next year’.
More often than not, a business leader – whether they be an Owner/Founder, MD or Chief Executive – will not have an exit strategy in place for themselves, let alone a comprehensive succession plan for other senior management and Board members. They are also unlikely to have identified a suitable replacement within the business.
There are many reasons for this; such as not wanting to relinquish ownership or control and a lack of confidence in the capabilities of existing employees. When it comes to family businesses, it tends to be around the lack of a suitable candidate within the family unit and emotions often run high when family members are chosen above others.
In business, it’s ideal if emotion can be parked because it’s not about one person’s exit it’s about the creation of a robust and repeatable succession planning process that will eradicate a reactive approach to any sudden vacancy. In short, it’s business critical.
Many interpretations of ‘succession planning’ exist and very few business leaders understand the requirements and the preparation involved. Yes, it’s complicated but a few key points need to be considered: Should this be driven by the business leader alone or by the whole senior management team? Where do they start? How does the business attract external talent and develop existing employees?
Laying the foundations across every operational and strategic part of the business over a period of years will ensure that any senior manager or director’s day-to-day involvement will reduce over an agreed period of time. It means responsibilities can be ‘passed’ to an existing employee on their promotion, or pass to an externally sourced candidate. This ensures that on exit the business will not suffer any loss of knowledge or strategic leadership.
Although unforeseen circumstances may require a senior management team to improvise, each step of the succession planning process should be defined and articulated in sufficient detail and should take other organisational concerns into account, for example employee training and development, cultural consistency and strategic compatibility.
A business’ succession planning strategy can only achieve results if the Board is equipped with well informed advice and information regarding internal and external talent. As professional advisors to the SME community, Odgers Interim is equipped to inform on that and to raise the awareness of the value of succession planning. Our support details how to engage, train and develop your existing employees and how to promote your business and attract external talent.
In short plan early and ensure your legacy continues.