As a business owner, the day will come when you’ll choose to either leave or retire from your company. Whether you decide to turn the company over to a current employee or to someone new you recruit, it’s important to have a plan in place to ensure that your successor is properly prepared to run the business.
You’ll also need to consider how different employees will be affected by your departure — especially if you have multiple generations of workers on your team. For the purposes of this article, we’ll focus on six steps for how to develop future leaders from within your company.
1. Start Early
A succession plan takes months to create and years to execute. It also requires significant communication and mentorship. Putting a plan in place now will ensure you’re able to transition the day-to-day responsibilities and onboard the new leader gradually and thoroughly. The earlier you start, the more prepared for change your company will be.
2. Evaluate Your Internal Talent Pool
It’s crucial to evaluate the size and skills of your current team. Are there enough mid-level team members who would be prepared to replace your older employees as they follow you into retirement? If not, you may want to adjust your recruitment strategy to ensure that you bring in more mid-level team members. If you do have a large enough team, consider what skills each employee needs to be prepared to take on more responsibility.
When choosing your direct successor, it’s important to think about not only their current skills but also their skills or potential as a future business leader. Ask yourself the following questions:
- Are they knowledgeable and passionate about the business?
- Are they entrepreneurial?
- Do they know how to lead a team?
- Do the rest of your current employees respect them?
- Are they a good communicator?
- Can they provide good service to your current and future customers?
If you answer “no” to any of these questions, that doesn’t necessarily mean the person you have in mind won’t make a good successor. You will just need to have a plan to develop the qualities they are missing—and that’s why it is important to make your succession plan early.
3. Invest in Each Employee’s Success
Consider what skills each employee needs in order to move up and assume greater responsibility. If you have a multigenerational team, you’ll also want to take into account how each generation prefers to develop their skills.
Employees from Generation X, who are in their 40s and 50s, often value relationships and look for a feeling of community. Take the time to get to know these employees and make sure they feel engaged in the development of their careers and the success of the company. Millennials (those in their late 20s and 30s) want to know that their work has meaning. When training those employees, explain the reason behind your actions and how it contributes to the overall success of the company.
Generation Z workers are in their early 20s. They typically value honesty and open communication, so be transparent about the state of the business and provide opportunities for them to both provide and receive feedback.
Even if your successor isn’t from the millennial or Gen Z generations, working to develop younger employees will strengthen your team as a whole and make the transition to leader a smoother process for your replacement.
4. Establish Goals
Part of successfully turning your business over to someone else is ensuring that your successor understands the business’s philosophy and goals. Share your vision and objectives for your business and ensure that your successor believes in your company’s core values. Identify the goals of your successor and discuss how reasonable they are. If you’re leaving a family business—especially if the person taking it over isn’t a family member—also discuss the importance of continued family involvement in leadership and ownership.
By starting your succession planning early, you’ll also have time to consider any personal business goals you have before you retire or leave the company. Perhaps you’re hoping to hit a certain profit goal or complete a specific number of jobs before your time at the business comes to an end. Outline these goals and consider how realistic they are.
5. Map Out Your Plan
Important decisions shouldn’t be made on the fly. Your succession plan needs to be documented clearly so that everyone involved understands their role. Write down each step that needs to be taken and add notes along the way to keep track of the details.
Writing your plan out will also help ensure that you’re covering every necessary detail and not forgetting anything. Refer to the plan as necessary to make your transition as smooth as possible. If you’re unsure of how to lay out your plan, many free and paid resources exist online to get you started.
6. Accept the Change
As your plan turns to action, there will be a lot of shifting of roles and different people taking on new tasks. Change requires patience. Mistakes will happen as people learn the ropes of their new positions and your successor may perform certain tasks differently than you do. As your employees gain more responsibilities, yours will lessen, until it’s finally time to give up all your tasks. Accept the new reality of the company as you and your employees move toward the future.
Don’t wait until you decide to move on to start setting up your company for success. Having a solid succession plan in place will ensure that your employees will always be in good hands—even when those hands are not your own.
