MaRS Library Succession planning for startups
Succession planning is part of preparing your business for the future. Often assumed to be only important for larger companies, succession planning is, in fact, critical for startups and smaller companies.
Entrepreneurs will recognize that in a startup, the departure of a top employee can have a huge impact. Often companies only plan for the succession path of their key executives, but it is wise to consider a succession plan for virtually every key position and employee.
Succession planning: What to consider
When considering who to include in your succession planning program, consider the following:
- What is the long-term direction of your startup? Do you have an effective strategic plan guiding your course?
- How does the concept of succession planning fit into your business strategy? Do you concentrate your efforts in the areas where the returns will be highest?
- What are the key areas that require continuity and development of your employees?
- Who are the key people you want to develop for the future?
- Have you established career paths for your top talent? Have you customized each path to fit the abilities and talents of each person?
Your succession plan should be proactive, with employees moving into different areas for experience and training before they are needed in critical positions.
Key steps in succession planning at your startup
Step 1: Identify critical positions within your startup
Identify the critical positions at your startup and make those the focus of your succession planning efforts. To pinpoint which roles are critical, perform a risk or impact assessment. (It helps to remember that without these roles, your startup would be unable to effectively meet its business objectives.)
Step 2: Profile key competencies
By profiling key competencies for positions within your startup, your employees better understand the key responsibilities of the position. The competencies should highlight the qualifications and behavioural and technical competencies required to perform the role successfully.
Step 3: Choose your talent management strategies
Step 4: Implement these strategies for succession planning
Document your chosen strategies in an action plan and start to implement them. Make sure your action plan clearly defines timelines, roles and responsibilities.
Step 5: Monitor, evaluate and adjust your plan
To ensure that your succession planning efforts succeed, regularly monitor the effectiveness of the plan. Evaluate its related activities and adjust as need be.
Succession planning benefits your startup
Having a succession plan in place benefits your startup. It builds a framework for:
- An ongoing supply of well trained, broadly experienced, motivated people who are ready and able to step into key positions as needed
- Integrated goals for key personnel, which align with your startup’s business plan
- Defined career paths, which will help you recruit and retain good talent
- The continuous input of ideas to improve your startup’s internal processes and procedures
- Opportunities to improve your value proposition in the marketplace
Succession planning pitfalls: What to avoid
Not having a succession plan can lead to difficulties for your startup. The pitfalls may include:
- Not having a formal customized plan for each key person or position, which can result in the right successor being overlooked
- Not identifying the criteria for admitting employees into succession pools and the evaluation method to objectively determine readiness and development needs, which can make the process of choosing a successor ambiguous when determining the best candidates
- Being too slow to advance or promote, which can result in the best talent leaving the company
- Not defining roles and responsibilities for all stakeholders, including managers, mentors, the succession planning committee and the employees in the program, which can lead to overlap, conflict between stakeholders and ambiguity over who the best successors are
Plan years in advance for your future leadership
Ideally, a succession plan should be planned years in advance of expected needs. To properly train a successor, a company needs sufficient time to expose their top talent to the full spectrum of opportunities within the company, as well as any external education and experience required.
If designed and implemented well, succession planning can bring peace of mind to a senior management team and its plan for future leadership.
- Profit-sharing plans for startups: Bonus or deferred plans.
- Offer of employment and employment contracts: What startups need to know.
- Recruitment strategies: Using networks to find talent and job candidates.
- A review of John Hamm’s HBR article, “Why entrepreneurs don’t scale”.
- Interview assessment: Sample template.