Benefits of succession planning: Formalized corporate governance
The benefits of succession planning are most commonly associated with a transfer of leadership or ownership – i.e. finding and grooming a successor to ensure a smooth, future transition of leadership with minimal impact on the business.
The benefits of succession planning can also be immediate in nature. An effective succession plan can improve the overall functionality and efficiency of your business now, while guiding your company towards long-term growth and success.
Succession Planning Refines the Leadership Process
The process of succession planning includes the creation of a formalized hierarchy of business leadership and clear, fully-defined leadership roles.
Some businesses, particularly family-owned businesses, adopt a vague internal hierarchy with no clearly-defined roles or responsibilities. While this may allow for greater agility and flexibility, it very often ends in disaster as there is no clear chain of oversight to identify who is responsible for decisions and their implementation. When preparing a succession plan, these roles and responsibilities must be formally outlined, along with proper ownership and accountability for each functional area of your business. This can help a business run more smoothly both now, and following the owner’s departure.
The succession planning process also compels the owners of a business to take a hard look at the overall governance of the company. Is there a need to create a formal board to include independent, external directors? While preparing a comprehensive succession plan, it may become evident that new board members who could bring fresh ideas and perspectives to the table.
Additional Succession Planning Benefits
The formalization of corporate governance has a number of other benefits. In addition to formalizing executive roles, a succession plan can identify potential insufficiencies in the company’s talent level, and outlines a course of action for ramping up, if the level of talent is lacking. By committing a plan to paper, it forces owners and the board to give serious consideration to setting concrete, long-term goals and defining the overall corporate vision.
Have you prepared a thorough succession plan for your business?
Failing to prepare an effective succession plan can have a major impact on your business, both now and into the future. To learn more about how we can assist with the succession planning process, contact one of our business advisory partners, today.