If you own a sole proprietorship, then you are probably not putting a lot of thought into what will happen with your business when you decide to retire. More than likely, you will sell your business and use the proceeds to retire. But if you own a business with employees or any business that you want to see continue after you are done, then you need to get involved in succession planning.
What Is Succession Planning?
Succession planning is the process of making sure that there is management and executive talent in place to keep a company going after the personnel in place has moved on. In most cases, succession planning is based on current personnel retiring. But if it is done properly, then there can be trained new leaders in place even if a key member of the company unexpectedly leaves the organization.
How Is Succession Planning Done?
Succession planning gets more complicated as the company gets bigger. A sole proprietor could decide that their child will take over the business when it is time to move on and bring their child into the business to train them right before retirement. But larger businesses that have executives and managers need to have a full succession training plan in place to make sure new talent is always ready.
For larger companies, there is a succession program put in place where employees with executive or management potential are put on the fast path towards moving into those positions some day. In some cases, new talent is brought in from outside the company to start succession training to help increase the company’s talent pool.
How Does A Risk Manager Get Involved In Succession Training?
In a perfect world, employees being trained to move into management and executive positions are fully trained and qualified when their time comes. But in the real world, there are complications that can arise and change succession planning. For example, if the owner of the company suddenly dies and no one in the succession program is really ready, then the company can be thrown into chaos.
Most companies have people who can step into a management or executive level position in a emergency situation, but that is often not enough to keep clients happy. In an emergency situation, clients jump ship and revenue is lost. Risk managers will often put life insurance on every executive and company owner, and put business protection insurance in place to make sure that the company can stay in business when a succession emergency occurs.
Business comes with many risks, which means that it is important to plan for the future of the company as soon as possible. A succession planning program will help prepare employees to take over important positions within the company when the time comes. Risk managers are there to help in case a key employee passes away or suddenly leaves the company putting the entire future of the company at risk.