Succession Planning (part 2)

Today we look at the second part of our discussion centered around succession planning.

Given the sensitive and critical nature of the task, the process of succession planning is plagued with certain challenges. they include: 

  • Transition of power between owners and management
  • Dealing with divergent family interests,
  • Maintaining objectivity in face of family feelings
  • Dealing with family friction, nepotism
  • Informal policy structures
  • Perception of Fairnessreturns from ownership vs. reward for management

Once the organization has clearly demarcated the need for succession planning, the process has to start with an objective and unbiased analysis of the organization structure. This will begin with a clear understanding of the current and optimal level of roles and responsibilities, followed by the creation of a structure based on the company’s current and future business operations’ needs. Because it is difficult to demarcate between family and business relationships, clarity of role acquires even a more significant focus in family firms.

The next step is to evaluate the skills and qualifications, based on the new organizational structure. This will call for some uncomfortable steps including replacing or bringing in new talent.

Once the right talent has been brought in, the next challenge is retention and empowerment. Establishing a fair and transparent process of capability evaluation and subsequent empowerment might entail further decentralization of the decision-making process.

Also adequate training and development programs will have to be introduced to enable skilled employees to be prepared for taking on senior management assignments in the future.

In family owned businesses, additional attention will have to be paid to defining roles and functions of family governance and company’s own governance bodies.

Finally, a fair and inclusive remuneration system with right incentives will be necessary to retain and encourage good talent, one that is defined by performance and not by family ties.

In effect, succession planning requires a powerful and consistent level of commitment, strong internal control processes and high corporate governance practices.

 

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