In small-medium businesses when the time comes for succession it’s important to make sure that the transition is as smooth as possible. It’s the job of the leaving CEO to ensure that they’re leaving the company in good and well-prepared hands. This can sometimes be more difficult than it sounds though, with so many different aspects to consider it can be easy for either party to become overwhelmed. This handy guide will help you make succession a slick process.
How to pick a successor
There are a few different options when it comes to picking a successor and it’s good to be aware that things might not always go to plan.
Types of Successors:
- Co-Owner: This involves selling your shares or ownership interests to your co-owner(s). This type of succession can relieve a lot of stress as a co-owner already knows the ins and outs of the company, they can take over in an unexpected event and they share the same interest in the company that you have. However, it does require the co-owner to be prepared, and have the funds, to be able to buy out your shares in the company.
- Company: When a business has multiple owners, you may sell ownership back to the owning company, it would then be distributed out between the remaining owners. Like a co-owner it does require the company to have the funds on hand to be able to buy out your shares and ownership interests. This can be the best option when there are multiple co-owners for the one company, it saves the time and effort that would be required to write up agreements with each co-owner individually.
- Prodigy: It may be that your company has someone already within it that is perfect to take over your role. This is usually someone who you have moulded and taught throughout the business’s history. This is highly beneficial as the person you have chosen should already know what’s involved, have relationships with other employees and understand their responsibilities. Someone who already knows the company and is known by the company helps to ease the transition as it reduces the amount of change needed. Unfortunately, it can be difficult to sell the keys to the company as many employees won’t be able to afford to buy the business from you. This is something you would need to discuss with your chosen employee to make sure that they were prepared.
- Third Party Business: If you are lucky enough to have built a competitive and successful business, you may well receive interest from competitors or an entrepreneur who would be interested in buying your company. Obviously, this works better for some businesses than others depending on what you specialise in and the terms of the agreement. This process can be quite disruptive to existing employees, especially if the new company wants to make a lot of changes in structure, staff or morals. It can boost relations with clients or it could crush them. You will need to very carefully consider what you and your business stand for and the changes which will occur if you hand over the keys to an outside party.
- Heir: Lastly, your successor could be a family member. This is a particularly popular option for family run businesses. An heir can also come under the co-owner or prodigy categories but with a much deeper tie. Although being family can offer an easier strategy because of how well you know them, it can also cause a lot of stress for the same reason. The process needs to be just a clear and concise for an heir as it needs to be for any other successor, this will help to reduce the pressure during the hand over.
While you may not be thinking of succession yet, it is good to have an idea about it to save you worrying when the time comes. It’s never too early to start planning.
- Have a plan: Having a plan is vital for both the leaving CEO and the new one. It doesn’t matter what the reason for the succession is or who the new successor is, whether they’re family, a new company or an outside party who is going to be stepping into your shoes. Having a plan to share with them will ensure that you are both on the same page and will make the transition period as calm as possible.
- Make sure everyone knows their part: Even if you aren’t planning succession yet, having a plan in place can save you and your employees a lot of time and stress in case something unexpected happens to you. The plan should outline who will take over the business, any changes to the org structure and what responsibilities the new CEO and their employees have. If they know the team it will make things much less awkward than if they think their COO is there to make coffee!
- Handover your ideals & policies: Your key policies should also be conveyed in the plan. You probably know the company like the back of your hand, but a successor will need to learn it either from scratch or in more depth than they’ve needed before. Your company mission statement should also be explained, there could well be turmoil if the new CEO comes in with very new ideals to your own. Changes are bound to happen in the future but during the transition period everything should be kept as normal as possible to avoid disruptions to your business.
- Stay open with your staff: You should also have a simple version of the succession plan to share with your employees, they need to be kept informed of what’s going on, so they don’t worry. If they know that there’s going to be someone new taking over and what that entails, it will help to keep the company running as it should be during the transition.
The whole process of succession from picking a successor to the actual changeover can be stressful. It’s important to remember the reasons why succession is necessary. Stick to the plan as much as you can, be open with your staff and make the process a smooth, gradual one which causes the least disruption. This will help you to keep your, your successor and your employees stress to a minimum.