Entrepreneurship - Succession Planning - Literature review Example

Running Header: Succession Planning. Student’s Name: Instructor’s Name: Course Code & Name: Date of Submission: Introduction Succession planning is important activity for an entrepreneur as it ensures timely transfer of knowledge involving the management of the business venture. Moreover, it provides an opportunity for the development of a pool of candidates who would fill future key positions in the business. Therefore, through succession planning the entrepreneur is ensured of future business stability in relation to leadership as well as other key areas. This paper will review the literature behind entrepreneur succession planning. Succession Planning According to Christee (2007, 1) succession planning involves finding the appropriate people and developing them so that they can fill vacant opportunities when they arise in the business. . It involves the procedure of identifying future leaders in a business and developing them through training so that they will be ready to fill future leadership positions as they arise. The process involves reviewing the business strategic plan, analyzing the existing employees, forecasting the future needs and developing the employees in a planned way so that they can replace the existing leaders when they leave the business or retire. Succession planning is the process through which businesses make an arrangement for the future in relation to the transfer of management or ownership of the business (Clutter 2005, 11). Succession planning does not only consider the top management replacement but also the procedures and processes required for effective transfer, leadership development, exit strategies, and the legal considerations. Clutterbuck (2005, 11) states that succession planning involves planning for the workforce. It involves focusing on the important roles in an organization and identifying as well as developing employees to fill those roles as vacancies arise due to retirements, promotions or leaders exiting the organization. Succession planning ensures that the business is not left with loop holes in the key positions as a result of retirements and resignations. A succession plan covers leadership levels as well as other significant positions in the business. The process ensures that valuable information and knowledge about the business is shared in order to necessitate long term survival and success of the business. It enables the business to experience minimal disruptions during transitions. The idea behind succession planning is to ensure that there are suitable and enough employees in a business who can fill any key role as it is created or becomes vacant (Gabour 2007, 87). It involves indentifying, motivating and developing suitable employees to familiarize themselves with their new roles in the business. Moreover, it ensures that the employees acquire skills and knowledge about their expected new roles as well as the capability to handle different roles in the business. Hills (2009, 3) suggests that succession planning entails to the process of determining the future team that will provide leadership to the organization. It helps the managers to pass their skills to suitably talented employees with an aim of creating a pool of experienced future leaders of the business. A business must come up with techniques that will ensure that it possesses the right employees with the necessary skill at the required time. Succession planning can involve both building and buying the suitable employees who possess the required talents. Buying will involve bringing in new ideas while building involves developing the current employees in the organization. To ensure successful succession planning, the managers must identify the employees with the ability to lead as well as to develop other employee’s competencies, and train them in order to acquire the knowledge relating to the organizational culture. Succession planning refers to an attempt to plan for the correct number and quality of managers as well as critical employees to provide cover in case of serious illnesses, death, promotion and new vacancies that may be created as a result of the expansion of the business in future (Sambrook 2012, 580). Succession planning is a component of human resource planning and it is aimed at contributing to the overall business plan. Through succession planning employees career paths are moulded to ensure long term progress and success of the business. To enhance succession planning the business must recognize the roles of human resources development and this includes career development, organizational development, learning and the development of the potential leaders. Entrepreneurship and Succession Planning According to Charantimath (2006, 580) an entrepreneur must recognize and accommodate the goals, needs and objectives of the business in order to ensure successful succession planning. The goals and the objectives will then be used to develop the succession plan. An entrepreneur must ensure that the succession planning process is incorporated in the business as early as possible. Furthermore, the entrepreneur should include the succession goals, transition schedule as well as the contingency plan in the succession plan. Succession planning requires an entrepreneur to lay down the right structure regarding the process of evaluating the suitable candidate’s educational background and their business experiences (Emerald Group, 8). The entrepreneurs must maintain transparency in the process of evaluating, selecting and apprising the candidates. Moreover, the entrepreneur must set the rules, procedures and goals to provide guidance in the process. To enhance the process an entrepreneur must recognize and appreciate the individuals in the organization who demonstrate the spirit of entrepreneurship. The entrepreneurs must be methodical in the way they execute and interpret the process. Competition between employees in the business provides the entrepreneurs with the best opportunity to identify the suitable candidates who posses and demonstrate the necessary skills, proficiency and motivation in the critical areas of the business. In addition, opening training programs can assist the entrepreneur to identify and develop hidden talents. Sambrook (2012, 581) claimed that entrepreneurs have a tendency of utilizing the informal transfer of knowledge and work skills between the individual employees and this is an approach towards effective succession planning. Entrepreneurs opt to utilize the on the job training method due to its low cost as well as due the fact that entrepreneurs may lack the human resource development department. Furthermore, the entrepreneur may lack the necessary training and development skills and this motivates them to use the on the job training method. A large number of entrepreneurs feel that transfer of a business is neither a contemporary nor a problematic issue (Malien 2012, 136). The entrepreneurs may fail to adequately plan for the future because they view themselves as immortal and that they are the only ones who can capably manage their businesses. Moreover, the fact that succession planning is a difficult and long process makes the entrepreneurs to give it a low consideration and focus. However, when the entrepreneurs start getting old they are triggered to start planning for the future. This forces them to call for external help to assist in succession planning. The external advice offers them with an easy way to identify the methods to utilize in order to make the process successful. As discussed by Ip and Jacobs (2012, 331) to ensure long-term success of a business entrepreneurs prefer nurturing and mentoring their family members. This is with an aim of instilling their values to their heirs which are critical to the success of the business. The successful family members must have good educational background as well as posses the necessary skill to carry on with the business. However, selecting an individual family member to fill the vacancy can lead to conflicts, rivalry and hostility in the family. Furthermore, identification of female successors in the family is low among many entrepreneurs Sambrook (2012, 580) suggests the effectiveness of successful planning by entrepreneurs depends on the prosperity of the venture, the successor’s enthusiasm to take over the business and the role of the entrepreneur’s family in the process. The entrepreneurs’ willingness to exit the business is determined by the availability of a good succession plan. Furthermore, the entrepreneurs are motivated to step away from the business depending on their successor’s willingness to take over the management of the business. Hess (2011, 220) proposes that an effective succession plan for an entrepreneur should cover a period of five years. The predecessor should build and earn the trust of the entrepreneur family members. On the other hand, the entrepreneur must create a plan on what to do next after leaving the venture. This ensures that the entrepreneur will find it easier to exit the management of the business. The entrepreneur must ensure that proper procedures are set regarding the succession planning in order to protect the family wealth and legacy. Including the entrepreneur’s children in the management of the venture can motivate and develop their interest in the business. The entrepreneur should further maintain open dialogue among the family members to avoid future conflicts in relation to the succession plans. Failure to plan for the future can lead to liquidation of the business, lack of competent leaders to manage the business and disorientation of the family in case the entrepreneur dies. Conclusion To conclude, succession planning involves laying down a framework that will enable a business to identify and develop suitable employees in order to fill future vacant positions as they may arise. An entrepreneur must set the put down the right procedures in order to ensure successful succession planning. However, many entrepreneurs fail to plan for the future because they see themselves as paramount to towards the success of the business. Therefore, an entrepreneur is a person who is able to plan for the succession of the business by identifying and training future leaders and at the same time setting down policies that will avoid future conflicts in the family in relation to the venture. References Charantimath, P.2006. Entrepreneurship Development. New Delhi: Dorling Kindersley. Clutterbuck, D.2005. Succession Planning: A developmental Approach. Developing and Learning in Organizations 19 (5): 11-13. Emerald Group.2011. Keeping it in the Family: How to improve succession Planning. Strategic Direction 27(8): 8-10. Gabour, Christee.2007. Succession Planning Basics, Danvers: ASTD Press. Hess, E.2011. Growing an Entrepreneurial Business. California: Stanford University Press. Hills, Angela. 2009. Succession Planning or Smart Talent Management? Industrial and Commercial Training 41, (1): 3-8. Ip, Barry.. &Jacobs, Gabriel. 2012. Business Succession Planning: A review of the Evidence. Journal of Small Business and Enterprise Development 13, (3): 326-350. Malinen, Pasi.2012.Problems of Transfer of Business Experienced by Finnish Entrepreneurs’, Journal of Small Business and Enterprise Development 11, (1):8-10. Sambrook, sally. 2012. Exploring Succession Planning in Small, Growing Firms. Journal of Small Business and Enterprise Development 12, (4):579-594. Appendix 1. Do you have succession plans for your business? 2. Who would prefer between your employees and your family to lead the business in future? 3. What factors do you or will consider in selecting your predecessors? 4. Which training methods do you or will use to train those who you consider to be suitable to lead the business? 5. After succession planning, what would motivate you to step out of the business? Read More