Don’t Neglect the People Side of Succession Planning

The legal and financial aspects of succession planning for a company oftentimes get priority, but remember that people are at the heart of a business operation transition. Here’s some info to keep in mind.

Don’t Neglect the People Side of Succession Planning

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As a company leader, you may be thinking about transitioning out of day-to-day operations or turning things over completely.

In most succession plans, the legal and financial sides are usually considered carefully. However, the “people” side is often not planned and executed as effectively. A comprehensive succession plan must be executed in a practical way with your people in mind.

At a recent CONEXPO-CON/AGG Show education session, Tery and Linda Tennant, of leadership development firm Attainment Inc., shared tools to help contractors develop leaders and organizations to their full potential and help successful people move to the next level during a business transition.

Succession Plan Elements

Without people, a plan is just a plan. The following elements must be included to ensure a smooth transition, with an emphasis on steps five through seven:

  1. Comprehensive written plan
  2. Legal business structure
  3. Financial and tax considerations
  4. Roles and structure
  5. People development and motivation
  6. Agreed upon values, vision and goals
  7. Proper execution

Despite your efforts, even the best-laid succession plans have the potential to fail under the following circumstances:

  • Lack of a clear, comprehensive picture of the desired goals
  • Possible obstacles and solutions not identified upfront
  • Not devoting proper time to plan or implement
  • Lack of proper execution measurements
  • Not identifying and correcting ineffective systems and processes
  • Lack of process documentation and transfer of information

And the top reasons succession plans fail are:

  • Not planning for the people side: communication, coordination, gaining commitment and buy-in
  • Not developing leaders and other people effectively
  • All the pieces not integrated or well-coordinated

Identify and Develop Roles and People

Once you have the basic elements of your plan in place, it is time to start identifying the people who will lead the change. If you are planning to transition your business in the next five years, what will the new structure look like? Who will fill what roles and who will report to whom?

First, develop an organizational chart defining employee roles now, during and after a transition. Don’t forget to identify your own goals and how your time will be spent. Second, define the high payoff activities (HPAs) for each role. High payoff activities are the six most important prioritized activities where you or the employee should spend at least 80% of the time. Identify your leadership HPAs first, then help each employee identify his or her HPAs. Lastly, identify the employee’s ability to perform each HPA and identify any gaps in skills that need development.

Oftentimes in this industry, there is a strong emphasis on technical skills and a lack of focus on leadership, time management and communication skills. Proactive training is key to getting the new business structure off on the right foot. When sending employees to development classes, make sure to set specific training outcome goals, implement the training over a period of time, provide written reference materials and resources after training, and determine if the training was effective based on the goals.

Develop and Execute the Plan

The final step of the process is developing and implementing a practical plan that will be easily understood by management on down. Bring as many members of your team together as possible to get them on board and engaged with the transition. 

Consider involving the following:

  • Family
  • Company leaders and employees
  • CPA or tax planner
  • Valuation consultant
  • Corporate or legal structure attorney
  • Facilitator

Use this big change as an opportunity for feedback about the past, present and future of the business. By getting everyone engaged, the burden of the transition will not lie only on the founder or current leader.  

Brainstorm with your team about the following:

  • Accomplishments: How did you get where you are now?
  • Company Values: How do you define your values, vision and mission?
  • Key Performance Indicators: Where do you stand now?
  • Market Outlook: What are your business’s strengths, weaknesses, threats, opportunities and possible goals?

It is important for the founder or current leader to have honest discussions with the next owner or manager. Understand that some of the values of the next generation of leaders may not be the same as the existing one. Let the incoming group of leaders decide if they need a new set of values to drive the business forward over the next 10 to 20 years.

After you have these discussions, make sure all of the stakeholders agree upon the priority of goals. Establish action steps, identify who is responsible, set target dates for completion, define how you will track progress and measure the results. Have regular meetings to hold everyone accountable and keep moving the plan forward.

Most importantly, understand that developing and executing your transition plan isn’t going to happen overnight. Don’t rush the process and make time for team building along the way.

About the Author

AEM is the North American-based international trade group representing off-road equipment manufacturers and suppliers, with more than 950 companies and more than 200 product lines in the agriculture and construction-related sectors worldwide. AEM has an ownership stake in and manages several world-class exhibitions, including CONEXPO-CON/AGG.



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