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Concepts of succession planning
Concepts of succession planning
Concepts of succession planning
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Entrepreneurs need plenty of self-belief in order to make it in their chosen industry. Unfortunately, entrepreneurs are often guilty of focusing on building their business around themselves and forgetting to consider what happens to the business after they are gone?
If you spent a lot of time creating a successful business, you should definitely spent enough time on planning for its future after you no longer work, whether due to retirement or something more unthinkable. Succession planning as vital for entrepreneurs as it is for big businesses.
This guide will help you understand what succession planning is all about, why it is important and what options are available for entrepreneurs. It’ll also help you focus on the key aspects of
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It makes sure the business operations can continue as normally as possible, while the ownership of the business changes hand.
Most often succession plans deal either with leaving the business to family members or selling the company to someone else.
Why should entrepreneurs have a succession plan?
When entrepreneurs start planning for their business, the questions of what happens to your business after you stop working are naturally not the first thing on one’s mind. But succession planning is as essential for ensuring business success as having a proper plan for running the business. Life can be unpredictable and planning for different outcomes is essential for business success.
The numbers of businesses that don’t have a succession plan in place is quite high. A recent US Trust Insights on Wealth and Worth Survey found that nearly66% of business owners don’t have a succession plan. Most often, businesses think a written plan is not needed and the consequences of having a succession plan in place are not properly understood.
But the benefits of having a proper succession plan are enormous. A proper succession plan
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It is important to assess all the available options and consider which are the best routes for your business.
Below is assessments of the most common options business owners take: handing over the business, selling the business, or liquidating the business voluntarily.
Handing over the business to a successor
When it comes to handing over the business to a successor, you have two main options: either keeping the business in the family or finding a non-family successor either within the company or outside of it.
Keeping it in the family
Family businesses used to pass on from one generation to another, but succession to the next generations is now much less common. In the US, for instance, the Family Business Institute reported in 2013 that only 30% of family-run businesses succeed into the next generation, and less than 13% are handed over to the third generation. Part of this is down to lack of proper succession planning.
If you are running a business, you need to carefully think whether you’d like a family member to continue your work, as well as whether they are even willing to do so. You don’t want to force anyone to run the business, but you should also not assume your family members wouldn’t be
Simpson Seeds Inc. would not be what it is today without family. Although there may be family members that choose to not be an active member within the family business, it is still important to see them as what they are: very important allies. No matter the circumstance, each family member has some sort of responsibility to the company in order to keep both the business and the family strong (Aronoff, 2017). Although the Simpson’s lawyer advised them not to mix non-active and active members, I believe they have to in order to uphold their number one value of family. When a family business chooses to exclude family from the family business, it introduces contemptuous attitudes that are toxic to a family dynamic. A family business is combined with the family’s identity, and even though non-active members of the family do not participate in the business, they still share that family identity (Aronoff, 2017). To exclude them from their family identity would send a very awful message, and it is not something that the Simpson’s want to do to their family – as Greg has expressed validly about his sister Sandra. It helps to provide non-active family members with information about the business and the proceedings, because whether the active members realize it or not, non-active family members have made subconscious contributions to the business as well have provided support to those who are active within the business. By continuing to hold
In the case of Pocasangre Olivia the business was started with everything the owner could provide to start a dental practice, from the building, equipment and supplies everything except the staff. That is where the problem started. At the start of the business Dr. Pogasangre enlisted the help of a colleague from her previous employer. That employee was given the position of Office Manager, however over the course of the years; the position was only a title. The Office Manager was never allowed the take the realm of leader, because of Dr. Pogasangre inability to relinquish control. As a result of her not finding the balance between her and the Office
business also affects the amount of profit gain, owners liability and kind of tax we have to pay.
You have asked me to analyze your plans for future growth and recommend the best form of business organization to accommodate that growth. I have also taken into consideration you’re your two main concerns of increased liability and ability to add investment in capital assets.
Unfortunately, businesses allow barriers to be their excuse in not formalizing a succession planning. As a result, firms will produce an informal process for short-term purposes and forgot to come up with solutions for long-term problems. Overall, succession planning must involve the very top, the board of directors, and have human resources (HR) aid in advancing tomorrow’s leaders for today’s roles.
Harvard Business School “Working Knowledge” Newsletter - April 17, 2006:! “Can you manage different generations?
In 2014, JB Hi-Fi announced the retirement of their CEO Terry Smart. He had been with the company for more than 14 years. In an interview with Smart Company, Smart explained the process for hiring his successor. Smart (2014) stated that succession planning is not something that can be done overnight, it’s a long-term process and it’s part of the board’s role. When JB Hi-Fi promoted Richard Murray to CEO it was because of his extensive experience, knowledge, skills and contribution to the organisation over 11 years (Keating 2014). This example of JB Hi-Fi’s succession planning not only demonstrates their diligence in following their charter but also the emphasis placed on laying the right
Businesses do not plan to fail, they fail to plan. In my opinion, the planning process is a vital component towards successful operation of any business, thus i believe the above statement to be correct. According to Stephen Chapman, planning is defined as ‘the process of setting targets and deciding how to achieve them. It acts as a link between the business owner’s ideas and the actual operation of the business’. (2011 pg. 396) It is a managerial and leadership task and is such an integral part of managing a business, especially in today’s rapidly changing environment.
The business plan will also be useful in facilitating the adoption of a strategy that will help the business prosper in the modern market. The plan will be a critical tool that will help in the production of a reliable strategy for attaining the goals and objectives. The proposed business plan will be implemented in three years time. Within the first three years, the business i...
Business involved by two or more members of the family and is owned within the family is the simplest way to define family business. In this type of business the positions in the company is filled according the family blood. The founder of the business is usually the skull of the company, the rest of the positions are taken place by the family member which are usually higher positions where else other positions are filled by non family members.
A transition plan is essential for the employees being terminated. As a manager, there are multiple methods to help make a positive transition for laid off employees. A severance package, letters of recommendation and career information can help a great deal at this stage of the process. Encouraging an employee to focus on the future is helpful.
Strategic renewal is another desired outcome of corporate entrepreneurship. The new economic order and business environment has created a pace of change which requires businesses to adapt more frequently and rapidly than ever before. The changes could involve corporate structure, mergers and acquisitions, addressing new market opportunities, changing product portfolios, repositioning, adapting infrastructure, or adopting new technology. Managers in an organization must be able to take stock of its situation under changing market conditions and agree on a coherent new strategy that will meet the challenges of the present as well as of the future.
Nonetheless, those who are not direct members of the family can also handle a family business. Family members are frequently taking active involvement in the business operations, and members of the family tend to take up top positions within the organization, but this is dependent on the succession strategy within the business. Some family businesses turn into public companies in order t...
Businesses trying to survive the current economic crisis need to pursue competitive advantages and empower them. Competitive advantage results from matching core competencies to the opportunities. The entrepreneur that I interviewed uses her experience, quality, consistency and overall learned what the customers really need and demand. Jane’s skills and experience enable her to respond faster to market changes. Jane has remarkable negotiation and sales skills that make her a most competitive in the market. There are also questions that you need to ask yourself to determine if you are ready to take the next step. Are you able to think of new ideas? Can you imagine new ways of solving problems? Entrepreneurs should think creatively. If you have ideas learn how take advantage of new opportunities. Be your own boss also means that you are responsible for making difficult decisions. The business world involves uncertainty. Do you avoid the uncertainty in life at all costs? If so, owning your own business is not the best option. Do you enjoy the thrill of taking risks? Then you are ready to enter the world of
Business plans are documents used for planning out specific details about your business.Business plans have importance and purpose for the success of the business however.Here are a few of the importance and main purpose of why we need a business plan in order to start a business. Business plan will guide us as an entrepreneur in how to handle and manage our business and company. It very useful in clarify direction , future vision , attract financing , attract team members and last but not least is to manage company.Moreover , the information gathered regarding the project is used in the Business Plan to predict viability , forecast success and propose strategies for the project .