There isn’t one specific priority that tops the list of startup founders. Priorities often vary depending on the maturity of their businesses, with prominent concerns usually being fundraising, market differentiation, partnerships, and customer acquisition.
Understandably, there is a strong emphasis on the growth of a startup’s business, focusing on upward trajectory and opportunity — but what about looking beyond just growth?
There is a temptation for founders to focus solely on the present, but the future is just as important.
It’s inevitable that there’ll be changes in leadership due to either planned departures or unforeseen circumstances. With that being the nature of work, startup founders wouldn’t want to simply sit back and watch their hard work crumble due to a lack foresight, which is why succession planning is crucial to ensure stability of a startup amid change.
What is succession planning and its benefits?
In essence, succession planning involves pinpointing crucial roles within a company and crafting strategies for individuals to step into those roles. By considering both present and future objectives, this approach guarantees that organisations have appropriately skilled personnel in key positions both now and for the future.
Implementing succession planning offers key benefits for startups and their long-term success. First off, it reduces risk and uncertainty. It ensures a pipeline of well-trained and experienced individuals ready to step into key roles, minimising gaps in talent and negative impacts on productivity and performance.
Succession planning also helps boost morale and employee engagement. By defining clear career paths and aligning employee goals with the business plan, succession planning can improve employee morale, engagement, and retention.
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Furthermore, it is a cost-effective solution for startups as it minimises disruptions, knowledge loss, and the need for expensive external hiring and training.
Why succession planning matters for startups
From my experience in European corporates, they have good continuity programmes that startups can learn from. CEOs and Division Heads earmark high-potential employees one to two levels down the managerial hierarchy and send them for global programmes like the International Institute for Management Development (IMD) and Company Led Training Programmes — setting the stage for future leadership with a strong foundation.
For startups like ours, we typically don’t start out with that kind of organisational hierarchy. Instead, I identify partners and senior management who are 12 years younger than myself, who in turn hire team members who are over 12 years younger than themselves. This creates 20-to-24-year age gaps — a sufficient timeline for a startup to grow, scale globally, and establish at least four to five generations of innovation or complimentary offerings.
With multiple generations within a startup, founders can mobilise regionalisation and globalisation, establish a good culture, and reduce generation gaps. If this can be carried out, the business will establish a culture of continuity whether the founder exits by IPO or buyout, as the business will continue like a well-oiled machine. This ensures that the startup is not simply a one-headed monster with only the founder at the helm. Succession planning and continuity programmes also aid in avoiding mass walkouts, hence reducing the risk of collapse and possible fraud.
Most importantly, succession planning ensures continuity and stability. Having a pool of competent individuals ready to assume critical roles ensures continuity and stability, even during times of transition or unexpected departures.
The three phases of succession planning
Typically, succession planning can be broken down into three phases:
- Assessment
- Evaluation
- Development
During the assessment phase, think of it as an overview. The current leadership team should have a look ahead to the next one to five years, identifying the significant business challenges. With that, the critical positions that will be needed to support business continuity must be identified. Competencies, skills, and corporate knowledge critical to success are then listed out, and the startup’s leadership can then create an employee shortlist for evaluation.
Understandably, a startup’s headcount might be small to begin with — making the assessment phase complicated as employees might not have the potential for such positions. To counter this, startups could have a hiring criterion prior to this assessment in mind, employing only those with potential from the get-go, eliminating the possibility of a lack of internal potential for future leadership.
Next, the evaluation phase of succession planning builds on what was assessed. There should be a selection of competencies employees will need to be successful in positions and to meet the identified business challenges. This, in turn, allows for the categorisation of skill or competency gaps — where high-potential employees will then be considered for future leadership roles.
Developing this pool of talent would be the last phase, where shortlisted employees capture knowledge from the leaders they worked with. This phase addresses any lingering knowledge or skill gaps through formal training, job shadowing, mentoring, and on-the-job experience.
Though the involvement of key stakeholders is encouraged within succession planning, multi-pronged input is not a luxury startups typically have. Instead of relying on a board of directors, external consultants, and HR departments, founders and seniors of startups need to focus on mentoring those within the layers of the hierarchy.
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This ensures that the key leaders know what is happening through their startup and understand the feelings and capabilities of employees through the layers. This fosters trust-building and provides an avenue for staff to provide input and feedback without fear of their direct superiors.
From the leadership front, the offer of ongoing support, guidance, and feedback to successors throughout the transition process ensures a better transition. Leaders should monitor their performance and progress and adjust as needed to ensure a smooth handover of responsibilities.
It is important to be cautious of any hidden biases that might arise when it comes to succession planning. Research shows that managers often prefer to hire and promote individuals who resemble themselves. In turn, it is highly advised that succession planning be a team effort within a startup, involving various leaders providing input during the identification, selection, and mentoring phases to avoid biases and ensure the best for the business moving forward.
Smooth, resilient, and successful with proper foresight
Succession planning is an integral part of ensuring the success of a startup to attract investors and customers. Serious investors always look at the people who drive the business, and a smooth flow of operations gives them an element of trust, with the same going for customers.
It not only mitigates the risks associated with unexpected leadership changes but also provides a structured approach to identify, develop, and nurture future leaders within the organisation. Startups should not just think about growth but weigh succession planning as a fundamental aspect of their strategy to safeguard their vision, culture, and operational resilience.
By implementing a well-crafted succession plan, startups can foster a talent pipeline, retain institutional knowledge, and facilitate smooth transitions. This proactive approach facilitates knowledge transfer, aligns employee goals with business objectives, and promotes a culture of continuous learning and development.
Ultimately, a robust succession plan serves as a strategic investment, enabling startups to navigate challenges, seize opportunities, and sustain their competitive edge in an ever-evolving business landscape.
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