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Succession Planning and 4 Reasons Why it Helps You · Enhance.training

• 0:00
  SPEAKER_00: Undertaking succession planning is in the interests of individuals who are seeking promotion or are involved in running a team or a business.
• 0:08
  SPEAKER_00: The business you work in, no matter what it does, is the sum of its employees.
• 0:13
  SPEAKER_00: The employees make the decisions from the day-to-day to the strategic and they deliver the work or the product to the customers.
• 0:21
  SPEAKER_00: In this podcast, we explore why succession planning should be on your to-do list and explore the following four reasons in more detail.
• 0:30
  SPEAKER_00: Firstly, for any employee, why winning your next promotion is so much easier with succession planning in place, and for managers and business owners, why succession planning improves business resilience and performance.
• 0:45
  SPEAKER_00: Thirdly, why it creates a more valuable business, and lastly, why succession planning allows you to retire and keep earning from your business.
• 0:56
  SPEAKER_00: My name is Jess Coles, and I've had a 25-year career in business management across household names like Innocent Drinks and Fosters to many less well-known businesses.
• 1:06
  SPEAKER_00: If you are new to this podcast, enhanced.training provides online business courses to help professionals, managers, and business owners improve their performance.
• 1:17
  SPEAKER_00: If you like this podcast, please share it with friends and visit us at enhance.training to find more articles, podcasts and videos and take a look at our courses that we offer.
• 1:32
  SPEAKER_00: So let's cover what succession planning actually is.
• 1:36
  SPEAKER_00: Just in case you aren't sure, succession planning is a planning activity to identify and develop leaders, managers, and key employees with a purpose of firstly supporting career progression within a business, secondly, allowing the business to quickly fill gaps left by employees departing the business, and thirdly to develop the next set of managers and leaders within the business.
• 2:02
  SPEAKER_00: If the management team or the business allows big skill gaps to develop between the employees in key positions and their next best person for that position, then the business could find themselves with significant problems on their hands when that key person leaves.
• 2:18
  SPEAKER_00: Allowing a key role to be vacant for a period of time can be quite costly to a business.
• 2:24
  SPEAKER_00: Growth can slow, customers can leave, other team members might become overstretched and they might leave, or there might be increased levels of mistakes, etc.
• 2:34
  SPEAKER_00: Recruiting and training external individuals takes time and is a distraction for the current staff members.
• 2:41
  SPEAKER_00: Both of these impact business performance.
• 2:44
  SPEAKER_00: Succession planning overcomes these challenges and creates some great benefits to the business.
• 2:51
  SPEAKER_00: Here are four great reasons to put succession planning in place.
• 2:56
  SPEAKER_00: Firstly, succession planning helps win your promotion.
• 3:00
  SPEAKER_00: Anyone who has been looking to get a promotion will no doubt have come across the challenge of who's going to do your work if I promote you?
• 3:08
  SPEAKER_00: Or words to that effect from their manager.
• 3:11
  SPEAKER_00: If you don't have a good solution in place, your promotion can stay off the table.
• 3:16
  SPEAKER_00: If you want promotion, then provide credible solutions to your manager for who is going to do your role when you are promoted.
• 3:25
  SPEAKER_00: I mean hiring externally is an option, though if it's your only option, don't count on that promotion just yet.
• 3:32
  SPEAKER_00: By developing a credible succession plan and putting in the investment to make that plan happen, you're demonstrating, firstly, your commitment to putting the business and the team's interests before or at least alongside your own.
• 3:46
  SPEAKER_00: Secondly, you won't create a problem for your manager when you move to your new role.
• 3:51
  SPEAKER_00: Thirdly, you're showing you're a good team player who thinks of others around them.
• 3:55
  SPEAKER_00: And fourth, it's just good management practice full stop.
• 3:59
  SPEAKER_00: It does take confidence in the value that you create within the business to invest in succession planning.
• 4:05
  SPEAKER_00: Many employees fear that putting good succession planning solutions in place means their job is less secure as the employer has a ready replacement for them in effect.
• 4:16
  SPEAKER_00: This will be a risk.
• 4:18
  SPEAKER_00: I would argue that this risk is easily outweighed by the opportunity of getting promoted.
• 4:24
  SPEAKER_00: And in my experience, businesses never want to lose good and skilled members of staff that look out for the interests of the business.
• 4:32
  SPEAKER_00: And my final thought to you is if you're worth promoting, you are definitely worth keeping in the business.
• 4:39
  SPEAKER_00: So don't fear making it easy to promote you.
• 4:43
  SPEAKER_00: The second reason succession planning improves business resilience and performance.
• 4:49
  SPEAKER_00: A business and the managers within the business should not expect an employee to stay in the same role for years and years.
• 4:55
  SPEAKER_00: Therefore, employees will either move to another role within the business or move to another business.
• 5:02
  SPEAKER_00: When this happens, the disruption can be pretty minor through to major, depending on how dependent the business is on that role in question and what the business has done to plan for this eventuality.
• 5:15
  SPEAKER_00: Good practice would be to get in place a plan of what would happen if a person in the team were to leave.
• 5:22
  SPEAKER_00: A useful starting place to build your succession plan is to answer these five questions.
• 5:28
  SPEAKER_00: Firstly, which individuals can move into this critical position now in a year and in two years?
• 5:36
  SPEAKER_00: Second, what training and experience do I need to provide to those individuals who are not ready now but have the potential to be ready for the next year or so?
• 5:45
  SPEAKER_00: Third, how can I build this training into the individual's day job and make it happen?
• 5:52
  SPEAKER_00: Fourth, for those that are ready now, what can I do to keep them engaged and staying with the team?
• 5:59
  SPEAKER_00: And fifth, if I do have to recruit externally, which is my plan B, then how would I go about doing this and what time frames would be realistic?
• 6:09
  SPEAKER_00: Once you've got that in place for the role in question, then you now need to repeat these steps for the vacant position that the first move would create, and so on going down through your team so you've got all the key positions covered.
• 6:23
  SPEAKER_00: The benefits of having good succession planning in place throughout the business are firstly, businesses with active succession planning are usually more attractive to potential employees.
• 6:34
  SPEAKER_00: It is easier to recruit and you get better employees.
• 6:38
  SPEAKER_00: Second, less disruption is experienced with a plan as you don't have to create a solution before putting it in place, you can just get on with it straight away.
• 6:47
  SPEAKER_00: And third, a quicker solution as you have one or more people within the organisation that can move into the role rather than having to have delays with recruiting externally and then training new joiners.
• 7:00
  SPEAKER_00: And fourth, better employee retention as development of individuals is a key focus for the business.
• 7:07
  SPEAKER_00: These four reasons alone usually offer a huge return on any investment you might make as a business to set up a succession planning program.
• 7:18
  SPEAKER_00: The third key reason is that a business is which is less dependent on the owner or the key managers within the management team is more valuable.
• 7:28
  SPEAKER_00: So let's explore why.
• 7:30
  SPEAKER_00: Business continuity and repeatability and strength make a business more valuable.
• 7:35
  SPEAKER_00: This is common sense and it's also borne out in business valuations achieved.
• 7:40
  SPEAKER_00: Just ask any M ⁇ A broker or specialist on this point.
• 7:44
  SPEAKER_00: The ability of the management team is a critical part of the valuation of a business.
• 7:50
  SPEAKER_00: This team makes the key decisions and is tasked with running and growing the business.
• 7:55
  SPEAKER_00: If you are not in this team day to day, would the business performance change at all?
• 8:01
  SPEAKER_00: It's a useful question to ask yourself.
• 8:04
  SPEAKER_00: If you are a business owner looking to sell your business, then your succession planning will impact the sales price that you can achieve for your business.
• 8:14
  SPEAKER_00: Imagine these two scenarios.
• 8:17
  SPEAKER_00: The first scenario is the business owner works daily in the business and remains the key client contact for the top accounts.
• 8:25
  SPEAKER_00: This owner makes all the key decisions in the business on a day-to-day basis, tactically and strategically.
• 8:32
  SPEAKER_00: And the business has a turnover of say 20 million and profit of 1.2 million for each year.
• 8:40
  SPEAKER_00: In scenario two, the business owner is an involved investor, leaving the day-to-day running of the business to his management team.
• 8:48
  SPEAKER_00: The business owner holds the position of chairman and is only really involved in the key strategic decisions of the business.
• 8:55
  SPEAKER_00: And the business has a turnover of 20 million and a profit of one million each year.
• 9:00
  SPEAKER_00: The slightly lower profit is because of the extra costs of the management team.
• 9:05
  SPEAKER_00: Which business is more valuable to the purchaser?
• 9:10
  SPEAKER_00: Scenario 1 or scenario two.
• 9:12
  SPEAKER_00: In nearly every case, the business in scenario two will be more valuable, and probably by quite some margin.
• 9:20
  SPEAKER_00: Plus, I would argue that the owner of scenario two has the potential for more time to do other things, and probably a lot less stress in the day-to-day life, if you like.
• 9:31
  SPEAKER_00: And another key point is that if you are not involved in the day-to-day running of the business, then when it comes to selling the business, you're much more likely to be able to get more of your sales price paid earlier and have a much shorter earnout period than if you're involved in the business day-to-day.
• 9:52
  SPEAKER_00: The fourth key point is that succession planning allows you to retire and keep earning from your business.
• 9:58
  SPEAKER_00: Investing in developing good managers and leaders within your business to take over from you when you retire can leave you with a lot more options.
• 10:07
  SPEAKER_00: You can sell your business for a higher price as we discussed previously, or you can keep your business and earn dividends from it.
• 10:14
  SPEAKER_00: For example, you can move into the chairman role, this allows you to participate in board meetings and the key decisions of the business but avoid the day-to-day running of the business.
• 10:23
  SPEAKER_00: Or you can step entirely away from the day-to-day business and become an interested investor, tracking the financial performance and holding the management team to account.
• 10:34
  SPEAKER_00: Both of these options, and there are other options as well, are possible when you have a team in place that can continue running and growing the business.
• 10:44
  SPEAKER_00: It goes without saying that you will need to feel confident in their ability to run the business and make good decisions, and of course you must entrust their integrity.
• 10:54
  SPEAKER_00: If you're not happy to let go and step away from the business, you may not have done enough work to develop your team or get the right people into the right positions.
• 11:07
  SPEAKER_00: So, in summary, planning and developing one or more options for replacing you in your current role is absolutely in your interests if you want to firstly get promoted or move to a different role.
• 11:20
  SPEAKER_00: Secondly, you want to sell your business or make your business more valuable to a potential buyer.
• 11:25
  SPEAKER_00: And third, if you want to develop your options as a business owner.
• 11:30
  SPEAKER_00: I would argue that succession planning and investing in making that plan a reality is one of the best investments that you can make, whether you're a business owner, a manager, or an employee that's looking to get promoted.
• 11:44
  SPEAKER_00: If you like this podcast, please share it with friends and visit us at enhance.training to find more articles, podcasts, and videos, and of course, take a look at our courses that we offer.
• 11:55
  SPEAKER_00: Thanks very much for listening, and I look forward to speaking to you again soon.