Here today. Gone tomorrow. This is obviously something most businesses do not want to think about, but should for the benefit of a business carrying on after the loss of key employees or owners.
Succession planning refers to the development of a comprehensive and coordinated plan designed to insure an orderly replacement of key members of an organization when they are lost to the organization for any reason. It reminds many of the idea of royal succession. Who is next in line for the throne? However, this is not exactly right. History showed that too often the Prince was not properly prepared to assume the responsibilities of King with very serious results. The business succession plan not only names the replacements but provides for their training and mentoring.
Within a Corporation, a good succession plan is not only wise from a good business point of view, but is also part of the obligation of the Corporation to protect the best interests of its stockholders. The history of business is full of examples of organizations that did not survive the loss of a key person. The succession plan must identify all key personnel and begin to groom their replacements so that an orderly transfer of responsibility takes place.
Key personnel can be lost for a number of reasons. The easy one is retirement. This is usually anticipated and there is plenty of time to groom the replacement. However, retirement is not the only concern. Key personnel can be lost to death. They can be lured away by another Company. They might become ill and unable to perform their duties. They might even need to be replaced because of failure to perform to an acceptable standard. All of these cases can create chaos within an organization unless a succession plan has been in operation.
Many organizations have Succession Insurance policies that are designed to provide the necessary funds for the recruitment and training of new personnel in the event of a sudden loss of a key member of the organization. This is one indication of how serious this issue can be to a large business. It is a part of the risk management element of the overall business financial plan.
It is not just large Corporations that need succession planning. In fact, smaller business concerns can be even more adversely impacted by the loss of a key member of the organization. It is a general rule that the smaller the business, the more important each individual member is to its success. While a larger organization might more easily adsorb the loss of a key member, the smaller organization may be totally devastated. Succession Planning is the means to reduce this risk and is considered as important as any other form of insurance in the overall risk management picture.
