There are several succession plans available for business. These include internal succession, external succession, liquidation, or dissolution. Whichever plan one chooses for the business, it is important that proper strategic planning is done and find out which one is best for the business. Among these, liquidation or dissolution should only be considered as the last option. The company should be prepared to continue despite any changes that might come up in the process of the company’s existence.
Under internal succession, a successor is found within the business. This plan is suitable for family owned businesses. In this plan, the successor is well known to the owner. However, there is the need to potential successors to be scrutinized carefully so that the succession plan works perfectly and does not affect the business operations in a negative way. In such a plan, the business owner has to be careful in dealing with those members, whether employees or family members who may feel disgruntled about the succession. That may adversely affect the operations of the business and even lead to the downfall of the business. Inside tussles have a way of stalling or hurting the daily operations of the business. They give out a weak point of the business, which competitors can use to gain the competitive advantage over it. Therefore, it is imperative that every person, especially those who hold key positions, are satisfied with the choice of a successor.
The external succession plan looks for a successor outside the business entity. The business owner may look for acquisition or a merger. In such a situation, third parties such as brokers or investment banks can come in handy in procuring a merger or acquisition. It is vital to check for compatibility between the two businesses so that there will be a smooth transition. The owner can decide to sell the business outright. As such, all the operations of the business go to the one who purchases the business entity. However, after the sale of the business, it may be necessary that the owner of the business stay as an employee of the business for some time.
The choice to liquidate or dissolve the business may be a better option for those who intend to retire. In this case, the business owners sell off the assets of the company, pay off any liabilities, and pocket the net proceeds from the sale of the assets. This might not be without some challenges, however. This should, however, be considered as last resort. The operations of the business should outlive the owner. This should be done given the fact that a business entity is separate from its owner. They are two different entities, and the exit of one should not necessarily mean the stalling of the other. They should exist as two different entities which they are.
Challenges in a succession plan
Any change is bound to affect a business entity one way or the other. Despite existing systems, no single person can run a business the same way as the other. Changing business environments call for a change in the way we do business. Therefore, successors have to be innovative and work towards matching business operations with the current market demands. There should also be a consideration to forecasting. The planner needs to understand that business does not operate in static environments but rather in places where changes take place every day. Innovations are being made and new competitors were emerging. The business should be able to adapt to these changing environments and be able to deal with emerging competitors.
With the opening up of the global market, many businesses are finding themselves with the challenge of a widening talent gap. Succession planning should, therefore, take into consideration processes that will work for both the individual and the company. Succession planning remains informal in many companies thus creating huge gaps in skills and performance. This calls for a need to invest in tools and technology for talent development within a company. Companies that will invest in this area will be able to survive in an expanded business field. They will view globalization as an opportunity for growth rather than a threat to their existence.
The changing market scenario also means that older business models cannot work effectively for the company. There is the need to sensitize workers and managers within the organization of the changing business trends. This will prepare them for succession and bring the company up to par with the current market needs. If the workers can work in these changing environments, they will be able to shield the company against the tremors brought about by change. The business will be able to stand the test of time and outdo others. One important aspect of business is able to maintain the competitive advantage over its rivals. If it can match up with the changing market trends and adapt to new technological innovations, it will be able to rise above the rest and create a niche for itself in the market.
Another major challenge in succession planning has to do with the fact that companies have to contend with technological innovations. These innovations are making catching up with the current market needs an uphill task. Companies need to invest in research and to adapt to current technological innovations. This should integrate into succession planning process for the company to avoid being phased out by their competitors. Planners who fail to factor in technology are setting up their business to major threats. Eventually, their competitors no matter how insignificant they may be will be able to catch up with them or even overtake them when they adopt the new technology.
A company’s inability to motivate and retain key employees can also pose a major challenge in succession planning (Muhoho, 2014). This may mean that potential successors may exit the organization even before getting an opportunity to drive the mission of the company. Motivation involves proper remuneration for the job done by another thing. Sometimes, the organization may not be in a position to give its key employees the same or better rates than their competitors leading to an exodus of key employees from the company. Conducive working environment and involvement in decision making also form part of employee motivation. Employees work well when they can identify with the organization and feel part of it. If they feel like outsiders, they will be looking for a way out, and this might not be good for the operations of the business. The organization might even lose good potential successors in the process since employees will look to work in areas where they are appreciated.
Some organization may not have all the details about their employees. This limited knowledge of the employees could pose a challenge while planning for succession. Sometimes qualified persons may be left out of the succession plan. Some of these employees may be disgruntled in case someone less qualified than them is picked. The company might then end up losing good employees or even have to work with rebellion from the disgruntled employees which might not be good for the company (Muhoho, 2014). The company should keep an up to date employees database and work towards knowing their employees well. This will make it possible to assign each employee where they are best suited and be a starting point in identifying potential successors in case one is being sought from among existing employees.
Lack of awareness especially by those in positions of leadership can be a big hindrance to succession planning. The leadership may not prepare itself adequately for succession just because it lacks the necessary information regarding succession planning. In such a case, the company may be faced with a real transition problem when the term limit of such individuals expire or in the event of their death. Some companies may have to wind up in the event of the death of their leader just because there was no succession plan in place (Muhoho, 2014).
Ineffective business practices and lack of a clear-cut vision for the business also poses a challenge to succession planning. Without a clear vision for the business, it will be difficult to put in place a succession plan, and if it is there, it may not have the survival of the business in mind (Muhoho, 2014). Best business practices are the lifeline of successful businesses. These practices include having a clear vision for the business and not only establishing a business for the sake of it. A business that follows sound business practices will be able to have proper succession planning strategies and will be able to survive long in the market.
Way forward for succession planning in Singapore
To attain successive transition for businesses, succession planners need to educate the company on the new trends in succession planning (Muhoho, 2014). Stable processes need to be built to overcome the challenges that may face the company during the transition stages. This succession education will enable the successor to steer the company forward following the current trends in the market. That will have the benefit of creating companies that will adapt effectively to the needs of the market (Cascio, 2011).
Succession planning has to integrate talent development in its strategies. The talent development processes have to include performance management, training, and development needs. Consideration has also to be placed on compensation and needs assessment for the company. This process will ensure that the company can get the best successor when that time comes. Succession will also be smooth since needs identification will already have been worked out and the best-suited person regarding performance and steering the strategies and mission of the company will have been identified (Adewale, Abolaji & Kolade, 2011).
The planning process also needs to be formalized and be made part of the company’s strategic planning. Competency management should be made part of the succession planning and should include analytic components. A strategic plan for the succession planning needs to work towards career development. Automation of the succession process will be a major boost to succession planning. Automation will improve efficiency and reduce operational risks during the transition process.
The place of technology in succession planning
Technology will be vital for succession planners to manage succession planning effectively. It will have the benefit of reducing administrative tasks as well as cut costs. Automation of processes will make companies’ work easier and will ensure that systems are up to date and that successors can learn quickly from the past. Companies are faced with a need to invest in technology to make succession planning work easier and more productive.
In planning for succession, succession planners need to know that succession planning is not just a matter of changing the company’s chief executive officer; it involves changing of systems also. The other workers should also be taken into consideration also. Therefore, automating the systems will make the work of succession planners easier.
It is also important to know technological innovations are changing the way we do business. Those companies that ignore technology do so at their peril. Technology reduces the time taken for transactions to be handled as well as improves the marketing ability of the company. It is also necessary for integration processes and keeping of databases. The competitive advantage of companies is nowadays determined more by how well a company adapts to technology. Many companies have found themselves at the receiving end due to their reluctance to adapt to modern technology.