Succession planning: Seeing the big picture
The following is the second in a series of articles about the importance and benefits of succession planning within a business or organization. In this series, we explore the various steps of this critical planning process that will help protect the longevity of your business and provide professional growth for your future leaders.
In the previous article, “Succession planning offers smooth transition and continued success” (Oct. 20 CBT), we discussed the overall approach to succession planning and the importance of having a succession plan in place. In this article we begin exploring the planning process by assessing your business’s past and current performance, examining the industry and markets in which you exist, and finally using this information to project a vision for the future.
During this initial assessment phase, it is critical that you take a step back from the day-to-day and look at your entire operation from a fresh and critical perspective. All too often, owners, executives and managers fall into the “immediacy trap.” That is, they get too wrapped up in today’s activities (and the crisis du jour) to actively monitor the business in a bigger context, including current and past performance, all while keeping a watchful eye out for the future.
Begin the assessment by dusting off all your old profit and loss reports (P&Ls) and analyzing your past performance. If you do not regularly prepare, review and compare your P&Ls, then this may take you quite a bit of time, but—trust me—it will be time well spent. Go back four, five or even 10 years and begin to really study and compare your current performance to past performance. Make it easy on yourself by starting with the highest levels of income and expenses to develop initial historical and trend analyses. Once this is complete, then you can work your way through the more detailed levels as needed. Also, review your past balance sheets and calculate the common performance and financial ratios. The point of this assessment is to know how well your business has performed in the past and look for key trends that might show you where you are going in the future.
Next, spend some time researching and thinking about your industry. How is your industry faring in the local, national and global markets? How has your business’s performance fared in comparison to your competition and the markets in general? Is your business prepared for new regulation or new competition poised to enter the market? What growth opportunities exist, and could possibly allow for expansion? When searching for industry comparables, you will undoubtedly find reliable information sources online, but your banker, accountant, management consultant or state and national associations may also be able to help you gain access to comparable industry data and trends.
Finally, when conducting analysis—whether historic, trend or comparable analysis—numbers alone may not be enough. You may want to make a graph to help you visualize the timing and magnitude of changes that you see in the numbers. Being able to see the numbers represented in the graphical presentation may help confirm your suspicions about key trends or issues affecting your operation. For example, health insurance costs may be rising more rapidly than you suspected. Or hiring the new sales manager in 2005 yielded much higher sales than you expected. After all, we are in the “Show-Me State,” and a picture is worth a thousand words.
In the previous article I challenged you with a homework assignment. Specifically I asked you to consider your long-term goals and your vision for the future of the business. Now, with your homework assignment and initial assessments complete, you are undoubtedly well on your way to developing a clear vision for where you want your business to go and how you think you will get there. Ensuring that you have this vision solidified is very important before moving on to future steps in the succession planning process. In the next article, we begin the assessment of your business’s human capital by looking at the people around you and determining who will be most likely—and willing—to share your vision for the future.
Carl L. Medley II, partner in CCG, is a management consultant, leadership trainer and inspirational speaker. He may be reached at [email protected]