What is Succession Planning and What Entrepreneur Needs to Know About Succession Planning?

admin

By: Site Engineer, Staff

full bio

There is time for everything in life under the sun, time to be born, time to die and so on. The entrepreneur should be conscious of this when establishing his company. From the very beginning, he started the business will equally be the time he should start thinking of his succession, knowing fully well that one day he may not be around, and for the business to survive, it must continue under a capable and qualify hand.

Succession is therefore defined as the process of planning the shift of ownership and/or control from one person to another in a firm. It may be further defined as the right of succeeding the founder or the entrepreneur so as to ensure continuity and suitability of the enterprise after the entrepreneur’s active participation.

The only way the business can continue continuously is to have capable successors. The process of succession may pass through from the founder to the offspring or from the director or manager to the next person. This is to say that offspring or from the director or manager to the next person. This is to say that succession can be from one person to the other irrespective of the relationship.

There are some unforeseen events such as being incapacitated, sickness, old age, death, etc, may put off the business owner or director; hence demanding mandatory succession. In view of these aforementioned reasons, succession is imperative and the planning should start in earnest.

Methods of Choosing a Successor

The entrepreneur should start from day one to start preparing for succession. He has to groom people that would succeed him. Therefore, grooming has to be done to ensure that a smooth transition is guaranteed.

Below are the necessary methods for smooth succession:

  • Start from the very beginning of the operation of your business to plan for succession.
  • In preparing successors, look for those who sincerely and have the ability to learn and to go the extra mile.
  • Equally, look for those who are basically competent and focus on whatever they are doing now. Being good in what one is doing and being able to learn other things and add to what one is doing makes one a good candidate for succession.
  • The would-be successor must be competent, have the ability to learn, manage people and communicate so as to take the company to the outside world. He should also command respect with full integrity and can be believed when he speaks.
  • Create a stepping position to the topmost job, where the successor(s) will be tested, by giving them the opportunity to interact with the entrepreneur or the directors (in the case of big companies). This position will be like a deputy to the topmost job. The managing director and other directors will have the opportunity to interact with him, listen to him on how he thinks, how he reacts to things, how he looks at problems and what initiatives he displays and so on. Those are all the things that constitute the test for seeing whether the person is going up or not.
  • The would-be successor should be allowed to know that he is being prepared for succession to enable him to reinforce his efforts. Let him know his strengths and weaknesses and where to make amendments. He should be someone that takes correction.
  • Succession planning must not be on top alone. You must look further down the line to prepare up to a set of people who will start performing getting prepared for the future succession job.

The job of succession is not an easy one and this has to be handled carefully and seriously by the party concerned. The new successor may be placed on the acting capacity to prepare him for a peaceful transition.

Types of Succession Plans

Let us narrow our discussion to small enterprises in terms of succession plans. The problem of succession in small enterprises equally affects the business itself.

Below are the types of succession plans:

(a)        Engaging in Partnership

The entrepreneur should involve some like-minded individual to form a business partnership. So that if one person dies it will not affect the proper continuity of the business.

(b)       Going Public

This is one of the best ways of ensuring the continuity of the business. Going public means being quoted at the stock exchange and the ownership and management of the company can be conveniently separated. When a company goes public, it means that shares are thrown to the public to buy thereby making the company a Public Limited Company (PLC).

A company that wants to be quoted as a public limited company can either be listed on the second-tier securities market (SSM) or the first-tier market in Nigeria. As a response to the need to encourage small and medium scale firms as well as private companies to go public, the Second-tier Securities Market (SSM) was floated to fill the gap. The listing requirements are always less cumbersome to that of first-tier. The stocks of the securities listed on the SSM can be bought or sold at the floor of the stock exchange.

However, the inventors of the companies listed on the SSM enjoy the same benefits and protection as those of the first-tier market.

 

Don’t forget to share this post!

share:
Whatsapp Share Icon