Succession Planning Best Practices

Multi-generational family-owned businesses have long been part of the American dream. However, handing the business down from one generation to the next is no simple family matter. According to the Small Business Administration, 90 percent of U.S. businesses are family owned, but only 30 percent of such companies succeed in the second generation. Just 15 percent make it to the third.

Today’s workforce includes four generations in spanning  more than 60 years.  Each generation brings its own set of values, attitudes and communication style that impact the succession planning process. The following best practices apply whether your business legacy goal is “keeping it in the family” or “finding the best management team possible.”

Leadership Training

Developing leadership talent is a long-term investment in your company. In addition, according to The American Society for Training and Development ongoing professional development is one of the top five factors employees want from their workplace and is a successful retention strategy for preferred employees.

The American Society for Training and Development reports that ongoing professional development is one of the top five factors employees want from their workplace.

When businesses provide training programs for employees who show leadership potential, the employees recognize that time, attention and skill development is being invested in them for the purpose of career development. When you continue to challenge and reward talented employees, you eliminate their need to seek opportunities elsewhere.

Knowledge Management

In the past, companies began succession planning only to replace senior leadership due to retirement or career change. Times have changed.

As businesses experience the impact of a slow global economy, companies have implemented workforce reduction measures such as buyouts and/or layoffs. When longtime employees retire and walk out the door with decades of corporate knowledge, companies wrangle with lost intellectual property that cannot easily be re-captured. To add to the downsizing trend, more than 40 percent of the aging US workforce is set to retire within 8 years (by 2020). These two trends make it imperative that businesses, small and large, develop and implement a knowledge management program.

The financial impact of not having a plan that includes knowledge transfer among workers and the organization can be catastrophic.  The U.S. Government Accountability Office has reported “the loss of experienced workers has adverse effects on productivity and economic growth.”

A knowledge management program should include documentation of institutional knowledge and history as well as capturing the skills, information and on-going research and development necessary to maintain a competitive edge within the marketplace.

Multigenerational Communication

Studies of family-owned businesses found that nearly 50 percent of family businesses avoid discussing succession planing because of unresolved issues such as personal disappointments or strained inter-generational conflict. The same is true within many business organizations where communication dynamics rely upon unspoken understandings and expectations.

While effective communication remains one of the most difficult challenges in business, a clear understanding of each generation’s communication style is critical to business success. Generational differences include:

  • Work styles
  • Team orientation
  • Preferred technologies
  • How and how often to communicate

These differences in values and belief complicate communication and interactions. Age Generations, a multigenerational consulting firm recommends exploring the following six dimensions in reaching across the generational divide for effective communication.

  1. Acceptance of authority
  2. Cultural touchpoints
  3. Technology preferences
  4. Interactive style
  5. Values and attitudes and
  6. Work ethic

We want to hear your thoughts. What do you think are the most important best practices in succession planning?

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