Business owners are regularly urged to create and update their succession plans. And rightfully so — in the event of an ownership change, a solid succession plan can help prevent conflicts and preserve the legacy you’ve spent years or decades building.

But if you want to take your succession plan to the next level, consider expanding its scope beyond ownership. Many companies have key employees, perhaps a CFO or an account executive, who play a critical role in the success of the business.

Your succession plan could include any employee who’s considered indispensable and difficult to replace because of experience, industry or technical knowledge, or other characteristics.

Look to the future

The first step is to identify those you consider essential employees. Whose departure would have the most significant consequence for your business and its strategic plan? Then, when you have a list of names, who might succeed them?

Pinpointing successors calls for more than simply reviewing or updating job descriptions. The right candidates must have the capability to carry out your company’s short- and long-term strategic plans and goals, which their job descriptions might not reflect.

Succession planning should take a forward-looking perspective. The current jobholder’s skills, experience and qualifications are only a starting point. What worked for the last 10 or 20 years might not cut it for the next 10 or 20.

Identify your HiPos

When the time comes, many businesses publicize open positions and invite external candidates to apply. However, it’s easier (and often advantageous) to groom internal candidates before the need arises. To do so, you’ll want to identify your “high potential” (HiPo) employees — those with the ambition, motivation and ability to move up substantially in your organization.

Assess your staff using performance evaluations, discussions about career plans and other tools to determine who can assume greater responsibility now, in a year or in several years. And look beyond the executive or management level; you may discover HiPos in lower-ranking positions.

Develop individual action plans

Once you’ve identified potential internal candidates, develop individual plans for each to follow. Consider your business’s needs, as well as each candidate’s personality and learning style.

An action plan should include multiple components. One example is job shadowing. It will give the candidate a good sense of what is involved in the position under consideration. Other components could include leadership roles on special projects, training, and mentoring and coaching.

Share your vision for the person’s future to ensure common goals. You can update action plans as your company’s and employees’ needs evolve.

Account for the job market

Succession planning beyond ownership is more important than ever in a tight job market. Vacancies for key employees are often difficult to fill — especially for demanding, highly skilled and top-tier positions. We’d be happy to help you review your succession plan and identify which positions may have the greatest financial impact on the continued profitability of your business.

© 2021

Polk & Associates

Large enough to serve a diverse clientele, yet small enough to maintain a hands-on approach, we are committed to maintaining the highest accounting and ethical standards with continuous education, extensive research resources, and excellent quality control.

Polk and Associates is a member of the Michigan Association of Certified Public Accountants, and the American Institute of Certified Public Accountants. The firm participates in the AICPA Peer Review Program, and has always received the highest level of award for its audit practice and quality control.