Avoid These Business Succession Planning Mistakes

It’s not uncommon for CEOs and business owners to put off succession planning for a later time. After all, they’re busy with putting out fires or crafting a strategic plan for the next five years. In such cases, thinking about succession options takes a back seat to more immediate concerns, with the notion that a decision can be made later, in a more predictable manner.

But as we’ve noted before, “alternative scenarios are equally possible, ranging from sudden death or an incapacitating illness to a business-related scandal or major changes in one’s personal life. In such cases, having an established succession plan will prove to be a great asset.”

Don’t wait until the last minute to start put a succession plan in place. Here are critical mistakes to avoid:

Hoping a family member is the right choice as a successor

In a family business, it’s natural to assume that when the owner steps aside, a member of his or her family will assume control. Or that someone in the business owner’s network can be recruited with relative ease.

But as every business leader knows, it takes considerable talent and experience to head an organization. Family members may lack those qualities or be otherwise temperamentally ill-suited for such an important role. In these circumstances, nepotism is rarely a viable option.

Overlooking promising candidates within the organization

If your company does a good job with recruitment and retention, there may already be a senior-level manager or supervisor who could be considered a potential successor. Don’t make the critical mistake of neglecting to groom the next leader from within the organization, based on his or her qualifications and years of experience.

Neglecting to consider shareholder interest

Some businesses rush into succession planning without taking diverse shareholder interests into consideration. Obviously, the choice of an individual to assume leadership affects everyone involved, from the senior management to frontline employees.

When undertaking succession planning, “executives, board members, human resources, and the potential successors themselves should be asked to weigh in,” notes LinkedIn. Neglecting to engage these key stakeholders “can lead to a succession plan that does not meet the needs of the organization or its potential successors.” 

Not factoring in cultural alignment

A company’s culture is another element to include in succession planning. Sometimes, in a rush to choose a successor, businesses disregard “cultural fit” and select an individual who simply isn’t right for the organization.

A business leader “who might be perfect for one company might be absolutely wrong for another,” notes Forbes. Ensuring cultural alignment means never appointing a successor who “is doomed to feel and appear out of place from day one.”

As part of the vetting process, make sure you include questions tailored to address the cultural alignment factor.

Planning without transparency

All too frequently, businesses feel obligated to engage in succession planning behind closed doors. Sometimes there’s concern about how an open discussion about a successor can affect current stakeholder/employee performance.

But, in fact, cloaking the process in secrecy can lead to discord and discontent.

Problems with a lack of transparency may encourage “the mistaken belief that there is no plan,” notes Consumer Legal Services. That can lead to a departure of valued employees “who were slated to be part of the next generation of leadership [and] who may leave … because they were never informed of the opportunity for advancement.”

Instead, as much as possible, strive for openness in the succession planning process. Share updates with people in the company so that everyone understands how the decision was made, and the reasons behind the ultimate choice of successor.

The best advice for effective succession planning is to be part of a network of CEOs and business owners who can share their own advice and experience in the process. A valuable and confidential business advisory group like a TAB board is ideal for business leaders who want to get succession planning right—the first time.