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Management Succession
Planning:
In
organizational development, succession planning is the
process of identifying and preparing suitable employees through
mentoring,
training and
job rotation, to replace key players — such as the
chief executive officer (CEO) — within an
organization as their terms expire. LDV Capital Management
thrives on the challenges to assist companies with this tedious
planning and preparation.
From the
risk management aspect, provisions are made in case no suitable
internal candidates are available to replace the loss of any key
person. It is usual for an organization to insure the key person so
that funds are available if she or he dies and these funds can be
used by the business to cope with the problems before a suitable
replacement is found or developed.
Succession Planning involves having senior executives periodically
review their top executives and those in the next lower level to
determine several backups for each senior position. This is
important because it often takes years of grooming to develop
effective senior managers. There is a critical shortage in companies
of middle and top leaders for the next five years. Organizations
will need to create pools of candidates with high leadership
potential.
A careful and considered plan of action ensures the least possible
disruption to the person’s responsibilities and therefore the
organization’s effectiveness. Examples include such a person who is:
suddenly and unexpectedly unable or unwilling to continue their role
within the organization;
accepting an approach from another organization or external
opportunity which will terminate or lessen their value to the
current organization;
indicating the conclusion of a contract or time-limited project; or
moving to another position and different set of responsibilities
within the organization. A succession plan clearly sets out the
factors to be taken into account and the process to be followed in
relation to retaining or replacing the person.
Business Succession
Planning:
Business succession planning involves planning for the smooth
continuation and success of a business which depends greatly on the
availability of competent people. Be it profit or non-profit
organization, one of the concerns is there may be no successor to
drive it once the leader or key person leaves – either by choice or
by circumstances. This concern has been repeatedly expressed in the
papers by leaders from the private and government sector. It is
people, or more aptly, the right people, that make things happen.
But the music will stop one day! If the leader or key person does
not retire (whether by old age, disability or choice) he will end
his time of service when he dies. And when they do, problems often
set in. The day after is often filled with chaos and uncertainty.
What is likely to happen to the organization when a key leader is
eliminated without succession planning in place? Here are some
things to expect. First, there would be either no able successor or
where there is, the successor is often either unprepared to handle
the heavy responsibilities placed upon them or he/she simply does
not have the ability to manage the organization in the way it used
to be. Whatever the case may turn out to be, the situation can be
dire for the organization. Profit may be lost. Business can become
untenable to continue. In the case of the unplanned death of an
owner, the remaining co-owners and the heirs may be embroiled in a
relationship crisis that threatens to wreck the business.
In an unplanned situation, ineffective quick-fixed solutions are the
only answers left. If no able successor can be found, a temporary
replacement is often the only choice left, and the ultimate result
may still be the downfall of the organization. It is difficult
enough to run an organization with experience and ability. Without
the requisite qualities in the new leader, the rot of the
organization is almost likely to set in immediately; unless it is
lucky to have a replacement who happens to be suitable and
motivated. If not, an unmotivated successor is equally bad news for
the set-up. Without the drive, the organization will stay stagnant
and more than likely, to slide.
Without succession planning, a business that has become successful
can just as easily fall. The business grows because there is a
leader (probably the owner) with experience, drive and ability.
Without proper succession planning, the future success of the
business is left to chance once that leader is gone. Under such a
circumstance, if it succeeds at all, it is by default rather than
planned. That is not all. The passing of the baton from one
generation to the next is often clouded by the stakeholders’
differing views and agendas. Without proper planning, the clashes of
views and agendas can pull the business in several directions and
this may wreck an otherwise viable business.
With so much at stake, business succession planning has to be a
priority and should be part of every business planning. There are
two main options available to business succession planning, which
are:
1.Retention Planning: Retention of the business within the family
circle; and
2.Buy-sell Planning: Selling of the establishment to other business
owners or key employees or interested outsiders.
It is a norm in many parts of Asia that succession planning is a
sensitive issue to discuss amongst partners or shareholders. This is
despite the fact that a successful transition minimizes disruption,
ensures continuous profitability and guarantee satisfactory returns
to the partners and shareholders.
TODAY..... Good joint management and effort among business
shareholders have built a successful and profitable business. The
business shareholder and his family enjoy a comfortable livelihood
and good lifestyle.
TOMORROW..... Suddenly, unexpectedly, a key shareholder dies and the
business is disrupted instantly. What will be the outcome of the
shareholders' business interest and his family's livelihood and
lifestyle?
FUTURE..... The surviving shareholder and the deceased shareholder’s
family face a critical decision. What are the options available to
the surviving shareholders and the deceased shareholder’s family?
What are the options available AFTER the event has happened?
•The heirs become active in the business - Do they have the
experience, skills and expertise to manage the business and be an
asset to the company?
•The deceased’s share is sold to an outsThe heirs keep their share
as inactive shareholders - Can the surviving shareholders accept
this arrangement with the extra input of effort and yet share
equally in the profits?
•The deceased shareholder’s share is sold to surviving shareholders
- Will the surviving shareholders be able to raise the necessary
cash for this transaction?
An IDEAL SOLUTION for all concerned could be...(action plan)
Proper business continuation and succession planning can help
prevent a business from being frozen and discontinued. It also helps
avoid conflict among family member and between heirs and surviving
owners.
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