The value of succession planning and the steps that should be taken to ensure successful transitions are topics that have been often written about by leadership experts (including me). What is less talked about is the cost of a poor succession plan, or not even having one; the best case scenario will be chaos and uncertainty, and the worst case: the business fails.
Successful business owners will go to great lengths to put policies and procedures in place to ensure day-to-day operations run smoothly and they may even have developed 5- or 10-year plans to support future growth. But, many put off devising an exit strategy or legacy planning, preferring not to think about their eventual departure from the business, via retirement, disability, death or some other reason.
It takes great courage to think about what’s next, and failing to do so is actually a selfish act that stands to negativity affect clients, employees, and owners’ families. I believe an exit strategy should be in place the day a business is started to ensure continuity of care for those three groups of people.
An initial succession plan doesn’t have to be carved in stone—frequent reviews and updates as necessary are invaluable—but it provides a form of insurance against the unknown. The future is not totally ours to plan; when owners without succession plans are disabled or die unexpectedly, their businesses definitely suffer and may not survive.
Here are few consequences of failing to have a strong succession plan that go beyond personal frustration:
- The value of the business may be lessened when survivors choose to sell it.
- The entire business will be adversely affected by power struggles and chaos, and the culture will reel from negative emotional impact.
- Clients will lose faith in the ability of the business to continue to serve them at the level expected.
- Employees will seek other opportunities in lieu of perhaps clinging to a sinking ship.
- Ultimately, the business can fail, especially if the owner kept much of his knowledge to himself.
Not having a succession plan in place is even more devastating for family businesses, since emotional arguments and hurt feelings are likely to ensue. What do you think would happen if an owner expectantly died and his adult siblings were left without guidance as to future leadership and business trajectory? That situation would probably result in a bloodbath and bruised egos that might never recover—damaging both the business (if it survived at all) and the family.
It should go without saying that effective leadership transition or legacy planning is necessary for businesses to maintain their sustainability. Given the fact that the cost of failing to plan can negatively affect the emotional and financial well-being of a business, it’s vitally important that owners create a comprehensive succession plan to guide operations after they are no longer there. They owe it to themselves, their clients, their employees and their families.