Contemplating the future can be confronting for people at any stage of life — and a business owner thinking about handing over the reins is no exception.
But the events of the past two years have put succession planning front and centre for businesses, regardless of their stage of operation.
Pitcher Partners’ recent Business Radar report found succession is looming as a pressing concern for a quarter of Australia’s middle market business — with the need to focus on the issue growing alongside the size of the company.
But it is also a challenge that can’t be easily resolved during lockdowns, making it harder to do everything from broaching the topic to plotting an exit plan to ensuring a smooth transition.
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When we spoke to owners and managers of middle market businesses after the first wave of the pandemic, we found many had delayed overdue transitions during a period that highlighted the need for consistent, agile and responsive leadership.
As the first wave of lockdowns eased, though, succession surged up the priority list and was high on the agenda of recovering businesses — then Delta hit.
Once again, owners and managers are focused on the existential threat of “right now”, rather than the longer-term discussion of “what then”.
But there are a few lessons that emerge from the Radar report that can help businesses navigate this issue.
The first is that there are a range of triggers for succession planning, not just the seniority of leaders.
Among Victorian middle market businesses, the life stage of the founder was the key motivator behind nearly half of succession plans — but that was not the case elsewhere. In Queensland and South Australia, succession discussions were more commonly driven by external factors like the departure of key staff or market changes.
In WA, business founders started to consider their options based on improved market success or capability.
In other words, the discussion doesn’t have to be framed in terms of a founder or leader’s need to move on and can be broader in scope.
The second lesson is that some businesses have a more urgent need for planning than others.
We found succession was higher on the agenda where businesses had suffered staff pressure, whether through being unable to recruit staff amid a skills shortage, retain team members in the face of competition or challenges upskilling existing personnel.
Here, the issue is more worrying: succession needs to consider not just the head of an organisation but the next tier of potential leaders and the skilled experts that keep a business running.
The third lesson is perhaps the hardest: the gap between those businesses that recognise succession planning is an essential part of their strategy and those unwilling to raise the topic.
One in seven businesses reported the topic has never come up for discussion. Many of these businesses feel it is too sensitive to raise, or too early to put on the table.
But what would happen to these businesses if the owner or senior leaders could not work tomorrow?
How are critical relationships being shared and transferred? What plan is in place to preserve corporate knowledge and sector experience if senior personnel leave?
Without a clear plan for transition, a business faces one of three inferior options. They either keep in place someone who wants or needs to move on, they lose a leader without someone to fill the void, or they rush to fill the leadership vacuum with an appointment who is not the right fit.
If this leads to the souring of key relationships that have been crafted over years, it can damage market share and reputation. In turn, makes it exceptionally difficult for an organisation to retain other key talent.
Start the succession planning discussion now
Given the ongoing volatility, it is wise for all businesses to put succession up on the agenda. Businesses should look both at emergency scenarios (where a business leader is suddenly unavailable), and key personnel scenarios, (where the loss or turnover of important staff damages operations).
Whether you plan to have a family member or executive take over, or are going to map out a strategy for a smooth transition to an external candidate, a succession plan reduces the danger of damaging fallout for the company and staff.
Right now, many business owners and managers are focused on the day-to-day struggle to meet orders, deliver work, and engage with customers remotely.
We would expect succession to be a secondary priority for those in the trenches.
But for a business at any stage of growth looking to life after lockdown, it’s never too early to start the discussion and plan for the leadership needed to bring the business back to strength.