With over half of business owners planning to exit over the next decade, HR professionals must develop effective leadership pipelines, says Flora Hamilton
Running a business comes with many challenges – from managing cash flow to juggling day-to-day operations. However, one of the issues that is often overlooked is preparing for the departure of a business founder or senior leader.
Around 86 per cent of UK private sector businesses are family-owned. With the baby boomer generation reaching retirement age, the think tank Ownership at Work estimates that more than half of business owners are planning to sell part or all of their shareholdings over the next 10 years.
Despite the predicted mass transfer of business ownership, almost a third (32%) of entrepreneurs find succession planning challenging, research from the Federation of Small Businesses shows.
While proactive succession planning improves business stability, resilience and growth, many businesses are not taking the necessary steps to prepare.
Why succession planning is a non-negotiable
Despite understanding the importance of succession planning, more than a quarter of business owners are yet to put a plan in place, according to research by the Society of Trust and Estate Practitioners (STEP).
By avoiding the subject, business leaders who want their family or senior managers to take over are unintentionally putting their company’s future at risk. This jeopardises not just stability and growth, but in many cases, the business’s long-term survival.
Proactive succession planning isn’t just another tick box for HR, it’s a critical pillar of strategic people management and growth. When founders, managing directors or CEOs struggle to plan for their departure, HR professionals should step in to develop robust processes and advocate for a clear succession roadmap.
Businesses that have a strategic plan and develop successors early, secure a smoother handover and position their organisation for sustained momentum. According to STEP, 74 per cent of family businesses with a succession plan say it has made their business stronger and helped them to grow.
Make succession a strategic priority
Succession planning should begin years ahead of any anticipated departure. This allows businesses to explore different leadership options and gives them ample runway for professional development.
Involving stakeholders early in the leadership pipeline builds trust and confidence in the chosen successor when they officially step into the role.
Abdul Waheed, founder of logistics firm Best Trading, recognised this imperative early on. While attending the government-funded Help to Grow: Management Course, he implemented a structured plan, deliberately transferring significant day-to-day operational and decision-making responsibilities – specifically the expansion of supplier network and materials procurement – to his son, Faisal.
The result was a clear leadership pathway that has supported Faisal in taking on the leadership role in a phased manner, positioning him for a smoother transition to full control.
Future-proof leadership
Succession planning is a great opportunity to set out a clear vision for the future direction of the business.
A future-focused approach to succession planning can act as an essential and timely tool for helping organisations to adapt to market shifts, strategic priorities and cultural evolution.
Build a support ecosystem
Developing a support network can help newly appointed leaders to adjust to their position. This can often be found through networking with peers and mentorship.
Ideally outgoing leaders should visibly champion their successor and remain available as advisers, providing context and feedback without overstepping. This advisory role is a delicate balance – offering wisdom without undermining authority.
Succession should be viewed as a growth strategy rather than simply an exit strategy. HR professionals can play a crucial role in helping improve the talent pipeline long in advance of a formal handover and helping new leaders adjust to the new position.
This can help maintain the stability and continuity that provides reassurance for employees and customers alike.
Flora Hamilton is executive director of the Small Business Charter, which delivers the Government-funded Help to Grow: Management Course