Succession planning focuses on business continuity by preparing in advance for future roles. Moreover, succession planning is a great way to prepare for retirement and other unforeseen events. According to an article by Will Kenton for Investopedia, titled “ Succession Planning Basics: How It Works, Why It’s Important,” succession planning ensures your business continues to run smoothly and without interruption.

Here’s what it involves:

• Assessing current internal talent
• Providing targeted development programs
• Establishing a clear roadmap for transitions

At large corporations, usually, the Board of Directors and the CEO oversee succession management. They train mid-level personnel to take up higher and critical positions. However, if you have a family business, the next generation will likely take over. 

A succession planning model is important in ensuring the continuity as well as the stability of your business. Also, succession planning is important when you’re planning for contingencies due to an ageing population. According to Statistics Canada, in the article for “The Daily,” the number of citizens that are aged over 65 grows six times faster as compared to children (0-14) in Canada.

Hence, firms must plan for succession to battle a competitive market with an ageing population. Succession Planning develops qualified candidates, thereby safeguarding your organization’s future. IBC Financial has the best resources to help you devise a well-structured succession plan.

The benefits of succession planning include securing an organization’s future. Succession planning benefits firms by fostering innovation and contributing to economic stability.

According to an article by Asfa Rasheed in Magzinera, titled “Best succession planning in Canada,” it also helps mitigate risks through contingency planning. Here are some other advantages you can get:

• Fresh Inflow of Ideas: Bringing in new leaders to your business can rejuvenate it with fresh perspectives and ideas.
• Avoid Disputes: Dealing with family-owned businesses gets a lot easier. A detailed succession plan will help you prevent conflicts regarding leadership.

Inadequate succession planning poses risks that potentially lead to operational disruptions. Inadequate succession planning could also risk the financial stability of a firm.

As per the article by Jim Wilson in HR Reporter, “What are the top people risks for employers in Canada?” 37% of advisors believe significant dependencies on key people and an inadequate succession planning model is risky. Here are some other risks:

Talent Shortages

A lack of clear career advancement opportunities can result in decreased employee engagement. This ultimately leads to high turnover rates as the top performers may seek career paths elsewhere.

Loss of Institutional Knowledge

The unexpected and unplanned exit of veteran and experienced employees can lead to a significant knowledge transfer gap. It may adversely affect the strategic decision-making and efficiency at your firm.

Lack of Diversity in Leadership

A homogeneous leadership structure may lack varied perspectives if there’s no planning. This can, in turn, stifle innovation.

Despite these risks, only 1 in 10 (or 9%) business owners in Canada have a formal succession plan. You can avoid this by planning your succession with IBC Financial experts.

Types of succession planning include emergency, board, staff, and future leadership role planning. The various types of succession planning can be for leadership as well as non-leadership key positions. However, succession gap looms for Canadian businesses as Baby Boomers exit workforce” fewer than 8.5% of retiring business owners in Canada have a clear, actionable plan.

Here are the types of succession plans you can look into:

• Board Succession: You can plan ahead for the transition of the Board of Directors members.
• Staff Succession: You can find and prepare potential candidates to take over critical roles at a firm.
• Emergency Succession: This type of succession plan helps you stay prepared for unexpected departures.

·    Leadership Succession: You can plan to fill the executive key positions with high-potential employees.

A good succession planning strategy involves devising a tailored development plan. A good succession planning strategy also includes talent assessment and job rotations. As per Kara Dennison’s article in Forbes, titled “The Importance Of Succession Planning, Now More Than Ever” great succession planning strategies will involve identifying critical roles and creating a talent pool.

You must strive to improve your business’s bench strength. This pertains to all levels, not just the top-most or executive levels. Additionally, job rotations can help prepare key employees to flourish as future leaders. IBC Financial’s expert advisors are here to guide you in an efficient transfer of key leadership roles.

To create a succession plan, there are three crucial phases. To create a succession plan, start with identifying the main challenges to your business.

According to Anna Plut’s article titled “Creating a Succession Plan For Agencies” in Marketing News Canada, knowing that there’s someone with good business sense who can handle your business, can be very reassuring. Take a look at the three phases:

1.  Assess: You need to first identify the challenges, critical positions, and skill sets required.
2. Evaluate: The second phase involves evaluating the employees with great leadership potential.
3. Develop: In the last phase of planning, you need to capture the institutional knowledge from the departing employees. Additionally, create a pool of talent to step into their shoes.

The best practices in succession planning include active mentorship and regular reviews. The best practices in succession planning also emphasize transparency and skill mapping. 

It’s important that you not only identify but nurture potential successors. Here are some other important factors you must consider:

• Assess the leadership team properly
• Make succession planning efforts a part of business culture
• Give due priority to critical roles
• Hand-pick the next generation of leaders

The responsibility of succession planning is with senior leaders and senior management. The responsibility of succession planning also falls in the hands of HR teams at large organizations.

As per an article by Katie Terrell Hanna in TechTarget, titled “Succession Planning,” an HR team is typically a key driver in succession planning. Nevertheless, the stakeholder and top leadership support is also critical.

Succession planning costs can vary quite widely, depending on the size and complexity of your business. Succession planning costs factor in legal, financial, as well as tax advisor fees.

According to Jeff Noble’s article “5 succession planning tips for privately held business owners” in BDO Canada, a financial and tax plan will help ensure a smooth succession.

Succession planning and estate planning are not the same. Estate planning focuses on your personal assets, such as property and financial accounts. According to Julia Kagan’s article, “What is estate planning? Definition, meaning, and key components”, for Investopedia, it prepares you for managing your individual financial situation.

Whereas succession planning model deals with your business’s leadership continuity. Contact the IBC Financial team for all kinds of financial planning and tax advisory now.