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The strategic significance of succession planning


In the dynamic landscape of business, where adaptability is essential and uncertainty is the norm, one critical aspect often relegated to the backburner is succession planning.  

Highlighted by a 2022 Canadian Federation of Independent Business survey, a mere nine per cent of companies have a concrete succession plan in place, a statistic that serves as a stark wake-up call, as noted by Eleanor Culver, president of Real HR. Culver emphasizes that this figure is not just a number; it is a call to action for businesses of all sizes to prioritize the long-term sustainability of their operations. 

Richardson Wealth Limited portfolio manager/investment advisor Tricia Leadbeater agrees and says that planning is important for both large and small companies, for different reasons.

“A clear plan for succession in a larger company provides confidence to customers, staff and the board in the long-term strategy. In smaller private corporations, such as dental practices, succession planning is intricately linked with estate planning. Successors and executors require clear guidance regarding intentions, debt resolution and the allocation of tangible and intangible assets. This clarity facilitates the business owner’s understanding of both short- and long-term business objectives,” explains Leadbeater.

‘Succession planning’ is more than a buzzword; it is a strategic necessity. Assistant professor, Strategy & Global Management at the Haskayne School of Business Phillip Davidson likens it to an internal insurance policy, providing stability during unforeseen leadership transitions. But it goes beyond mere continuity; succession planning ensures the right leadership is in place to steer the company towards its future goals. “Succession planning is about finding someone not just to keep the wheels turning but to propel the organization forward.”

When it comes to succession planning, there is no ‘one-size-fits-all’ approach. Davidson says it is a meticulous process, highlighting the importance of “assembling the right team and clearly defining the attributes and skills needed in potential successors.” From family businesses to corporate giants, the selection of successors demands a delicate balance of personal dynamics and professional acumen. 


Culver identifies some key reasons why succession planning is critical to any business: 


  • Continuity: a succession plan ensures that businesses can operate smoothly during an unexpected departure or retirement, preserving their vision and preventing disruptions. 
  • Minimized disruption: without a succession plan, confusion and conflict may arise regarding who will take over the business, leading to disruptions in operations, loss of key employees and a decline in business value. 
  • Preserved value: a well-thought-out succession plan preserves the value of a business by ensuring a smooth transition of leadership, which is crucial if there are plans to sell the business or pass it on to family members. 
  • Employee morale: a succession plan boosts employee morale by providing clarity and stability regarding the future of the business, showing that leaders care about the long-term success of the company and its employees. 
  • Legal and financial considerations: a succession plan addresses legal and financial considerations such as estate planning, tax implications and ownership transition, ensuring everything is handled correctly.

When it comes to implementation and determining the involved parties, Davidson points out that,Succession planning is a process, not a person. You’re laying out how you will identify the right person, what the desired attributes of this person are when it is foreseen to occur (if known), and how much you can afford to invest in both the process, and ultimately, the selected candidate.”  

He adds, “When transitions hit unexpectedly, often the focus shifts to finding someone capable and available to step in on short notice to avoid chaos that can be triggered by the absence of leadership. This will accomplish the objective but may not be the type of person that forethought would identify as having the capabilities to advance the company rather than save it from self-destruction.” 


Davidson lays out four important steps to succession planning:

  1. Determine who is part of the team that is charged with developing this plan. 
  1. Determine the skills and characteristics of the individual you are seeking. 
  1. Determine the resources the firm has available to acquire a successor. 
  1. Identify potential targets that meet the criteria. 


“Much of the implementation depends on when the plan is generated. If the plan is being created in response to a sudden need, your timeline is rather short. If you have done this planning in advance, you open the door to a much wider range of potential candidates – recognizing the availability to perform due diligence on checking them out while grooming them for the role,” says Davidson. 


Effective succession planning is a process that requires careful consideration and time investment.  


According to Jim Rea, a partner with MNP’s Private Enterprise group in Calgary and the firm’s Regional Succession Services leader, many businesses find themselves unprepared due to inadequate planning. “By initiating planning years before exiting, you can ensure that you don’t leave valuable wealth on the table when you transition out of your business. This proactive approach ensures alignment with both the companys future objectives and the owners personal goals.”

Leadbeater concurs and says, “My recommendation would be to start early. Depending on the structure of a company and the types of assets being sold, finding the best successor takes time.”   


Yet, despite the best-laid plans, unforeseen circumstances can throw a wrench into even the most meticulously crafted succession strategies. Health setbacks or sudden demise can disrupt the transition process, leading to uncertainty and confusion. It is important to have clarity regarding roles and obligations, ensuring a seamless handover of responsibilities. 

Differentiating between business planning and succession planning is key says Leadbeater. “While business planning focuses on current operations and growth, succession planning is about ensuring the continuation of the organizations legacy beyond the current leadership. It is not just about finding a replacement; it is about safeguarding the values, vision and culture that define the business.” 

The consequences of neglecting succession planning can be dire, warns Culver. “Operational disruptions, loss of key talent, conflicts among stakeholders and diminished business value are just some of the repercussions. Additionally, legal and financial issues can compound these challenges, leading to a negative impact on the companys reputation and bottom line.” 


Another obvious complication, according to Davidson, is selecting the wrong successor. “Often, we chase a shiny new leader because they look good in their current context, without considering how they will function in our context. Consider things like corporate culture, leadership styles (directive or collaborative), ability to learn and understand the fundamentals of your business.” 


Rea highlights that business owners rarely get the opportunity to transfer or sell their business more than once. Consequently, any decision made in this regard carries a high risk of error. Given the importance of the ultimate and most valuable transaction involving the business, avoiding failure becomes imperative.

Davidson points out another common challenge: leaders often gravitate towards selecting replicas of themselves. However, this approach may not always be optimal, regardless of whether the current leader is effectively fulfilling their role. “This can be mitigated by having a waterfall succession map shared at each level,” says Davidson, “so that peers can provide insight and recommendations into the names that show up on the internal succession map and leaders can guide their subordinate leaders on how to mentor their potential successors.” 

Succession planning is an ongoing process that requires careful consideration and strategic foresight. By prioritizing succession planning, businesses can safeguard their continuity, preserve their legacy and thrive in an ever-evolving marketplace.