The old saying, often attributed to Benjamin Franklin, is that “nothing is certain except death and taxes.” Established companies suffer similar certainties, and succession planning is one way to identify and develop company leaders who can avoid company struggles in advance of adverse events.
There are many reasons to consider succession planning; foremost being the identification and development of replacement leaders. Preparing and transitioning replacement leaders may entail internal or external grooming, and effective succession planning involves thoughtful, formal planning.
Effective succession planning begins with goal analysis. What is the long-term goal for the company? Does the company have the right people to achieve that long-term goal? If so, what is the grooming plan for, and plan to keep them? If not, how does the company get, groom, and keep the right people?
On the other side of successful succession is exit transition. Who is going to transition? What are the transition and exit incentives for them? When should their transition begin and the exit become effective? Will there be continuing roles for transitioning people, and what if any parts of the transition will become public knowledge, and when?
Company structure can affect many of these issues. Is the company a stock company? If so, what kind of stock company? Is the company a limited liability company? If so, how is membership and management structured? What are the specific requirements for amending bylaws or operating agreements? What are the limitations on transferring stock or membership interest?
Once the succession plan is formalized, documents should be put in place to coordinate them with the succession plan; including such things as creating or modifying buy-sell agreements, employment agreements, shareholder or member agreements, etc. As with most things in business, prior planning is critical; and, using another saying often attributed to Benjamin Franklin, his sage advice in the 1700s “if you fail to plan, you are planning to fail” remains true today.
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