There is a difference between succession planning and replacement planning. Succession planning involves many decisions regarding the future of your business, who will take it over when you are gone, and how to set up ownership transfers from an estate, tax, and financial perspective. Replacement planning focuses more on skills and talent, and involves growing employees so they are ready to take on more business responsibility when the time comes.
Replacement and succession planning are linked. Both are necessary steps to take to ensure your business continues according to your wishes when the time arrives that you are no longer in control.
What steps can I take to ensure a replacement is ready when a key employee is gone?
- Structure your business operations to provide opportunities for personnel to increase their level of responsibility and skill.
- Make ongoing training, education, and professional development part of your business philosophy.
- Cultivate a talent pool, a group of key employees who are getting ready to take on increased responsibility. Talent pools can bring in employees from many departments, operational areas, and levels. Your business should be committed to helping these workers advance and grow into more senior positions.
- Think long-term. It's important to have the right employees ready to step in when a key person is out due to illness or injury, to keep the business functioning until he or she returns. However, it's even more critical to have the right people in place to take over in case a single key decision maker, or even a large group of key employees, are rendered unavailable by some unforeseen event.
- Purchase "key person" insurance to protect the business in the event a critical leader, founder, or decision-maker dies or becomes unable to work.
First Commonwealth Bank and its affiliates do not provide tax, legal or accounting advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for tax, legal or accounting advice. You should consult your own tax, legal and accounting advisors before engaging in any transaction.