Posted at 4:50 AM
1. Education vs Experience
In this case, experience trumps education. When choosing your successor, look for candidates who have real world experience. The appropriate experience allows for impromptu mitigation for any crises, budget cuts, and managing overall workplace culture. These individuals are solution-oriented and will be able to resolve issues without extensive oversight.
2. Look from Within
Studies reveal that internal staff are more likely to be successful than external candidates. It is important to weigh the pros and cons before bringing in an external hire; 61% of external hires are more likely to be laid off or fired, and are 21% more likely to leave the job. Not to mention, external hires are often paid more and are shown to receive lower performance reviews during their first two years on the job.
3. Act on Your Behalf
What benefit is gained, if you, the business owner, must continuously get involved with mid-level management decisions? Consider candidates who are willing to make sound decisions on your behalf.
4. Let the Bottom Line Lead to Your Decision
Sentiment often comes into play when trying to craft the perfect team. Don’t let your personal bias influence your selection. If your “favorite” candidate doesn’t possess the qualities and skills needed, they should not be considered for that position.
5. Individual Value
It is important to embrace skills that differ from your own – but still complement your strategic vision. For example, if increasing your company’s brand awareness is a goal – and you don’t know the difference between marketing and public relations; consider someone who specializes in communications and outreach.
An Ongoing Process
There is no doubt that successful succession planning is an ongoing process. The evaluation of a succession plan’s effectiveness can help minority business enterprises (MBEs) determine if appropriate assessment and development activities have been implemented; if retention strategies have worked; and whether newly appointed leaders are thriving. The findings of this evaluation can be applied to improve planning for the upcoming year.
Succession planning changes, adapts, and grows with the needs and challenges of the business. Impactful succession planning helps highly qualified employees build their leadership and managerial skills, and is also a useful way to retain valuable talent. Even though HR leaders may create quality professional development plans, it is imperative that business owners are invested, and align talent management efforts with strategic planning. This typically occurs every 3 years, to fit their overall business strategy.
MBEs should continuously ask themselves a series of questions to determine how to customize and prioritize their succession plan components. For example, Do you want to sell the company? Would you still want to play a role in the company? Do you want to start another company? Should family be included in your plan? Depending on the answers, your succession plan and milestones may greatly vary.
Succession Planning: Sole-Proprietorships vs. Partnerships
Succession planning may seem to be a daunting task, but it is actually an opportunity to take control and create the framework for your carefully selected successors. Take the time to understand the priorities and implications that pertain to your business.
As an MBE operating a sole-proprietorship, think about all the long hours, budgetary sacrifices, and corporate taxes that you poured into your company to reach this level of sustainability. Now think about all your sacrifices falling by the wayside. This can be a reality for MBEs, especially those with fewer employees. Too often, these companies will dissolve unless there is a documented plan for succession. Identifying critical functions within the company and developing opportunities for your potential successor to grasp both executive responsibilities and in-depth operational understanding is a best practice for sole-proprietorships.
Alternatively, MBEs that have established a partnership framework presumably have someone who can provide leadership—assuming they’re not a silent partner. However, those who share ownership should include detailed expectations for succession planning in their partnership agreement. Additionally, buy-sell agreements (the transfer of assets and business interests), transfer agreements (details the circumstances for transferring interests to another party) and funding agreements (describes the source of funds used to acquire transferred assets or business interests) are must haves for MBEs with partnership agreements.
To learn more about succession planning, visit a local MBDA Business Center, today.