A succession plan doesn’t only focus on finding the right people to take over from you when you retire, sell your company, or move out of day-to-day operations. It also helps protect your employees.
Your employees are one of your most valuable assets. They know your customers, how to run your business and have built relationships and skills that would be hard to replace. If you lose key members of staff during a transition, this can cause disruptions, affect your relationships with customers, and could reduce the value of your business.
This is why you should consider employee retention as part of your business succession plan.
When transitioning to a new leader, you want to ensure that you create a culture that feels secure for your employees, that they feel informed, and that they are committed to the future of your business.
Below are 7 ways to retain key staff and keep your business stable during your succession plan.
1. Communicate Early and Honestly About the Transition
Uncertainty is one of the biggest challenges employees face during a business transition. When people don’t know what’s happening, they often assume the worst.
Will I lose my job? Will the new owner change our culture? Will my role or pay change?
If there isn’t clear communication, you will find that speculation can rise very quickly, causing a lot of anxiety. This can cause employees to become distracted, and some may start to look for new opportunities.
You don’t need to share every detail of your succession plan immediately, especially when confidential negotiations are involved. But share what you know with people when you know it and be honest about what’s still being decided.
We recommend communicating the following around your succession plan:
- Explain why the transition is occurring and what it means for the future
- Give an overview of the timescales involved and any key dates
- Explain how any changes in leadership could impact them.
- Keep them up-to-date as you make decisions.
- Give them an opportunity to ask questions and raise concerns.
Keeping communication consistent will help to give employees a feeling that they are part of the process and help to build confidence in the company leadership.
2. Foster a Culture of Psychological Safety
Psychological safety can help you keep staff during times of change.
Psychological safety means feeling confident to ask questions, share ideas, voice concerns, and make mistakes without feeling embarrassed or punished.
At times of business succession, your staff may be reluctant to share their thoughts out of fear of how the new leadership will respond. They may feel that if they voice any concerns they will lose their job or affect their future opportunities.
If your staff don’t feel comfortable being open and honest, then you could be losing out on valuable information. Your staff will not raise concerns, share amazing ideas, or engage.
Owners and new leadership can create a culture of psychological safety by:
- Listening to your staff’s concerns.
- Creating an environment where they can give genuine feedback.
- Treating your staff with respect.
- Keeping your promises and resolving concerns quickly.
- Recognizing the contribution your staff has made.
This is especially important for remote/hybrid workers.
Creating a culture of psychological safety and making sure your staff feel listened to and valued will create a sense of trust. This is key when asking your staff to back new leadership and accept changes.
3. Identify and Retain Key Employees
There will be certain people within your business with special skills and key relationships or processes.
If these people leave in a transition period, it can cause significant issues.
For example, a small business may have one employee who has been with the business for a while and has several key customer relationships. If they were to leave during the change of ownership, you would lose key knowledge and some customer relationships.
During the succession planning process, consider who will be a significant loss if they were to leave.
- Who has specialist skills?
- Are there people who have key customer/vendor relationships?
- Which people are involved in key processes?
- People with leadership potential?
- What roles would be difficult to replace?
Once you’ve identified your key people, you will need to think about what you can do to encourage them to stay with the business.
This might include offering retention bonuses, progression opportunities, increased duties, or long-term incentive schemes.
However, it isn’t always possible to offer cash incentives. They will want to feel they play an important part in the future of the company.
You want to encourage them to stay until the transition has completed but also give them reasons to stay with the business long-term.
4. Support Your Staff Through Change
Even if there is a well-planned change in leadership, it can be quite a daunting process for staff.
They will have been used to working in a certain way with their management style and will now have new processes, technology, or structure with new ownership or leadership.
While these changes may be good for the business overall, your staff will need support and time to adjust.
The key to managing change effectively is to help your staff understand why things will be changing.
Small business owners can make the transition easier by:
- Explain why the organization is making these changes and what benefits you expect.
- Provide training to help with new roles.
- Provide mentoring and development.
- Try to implement changes slowly where possible.
- Have regular check-ins to ensure you identify any issues.
Staff will respond to changes in different ways. Some will see the change as an opportunity, whereas others may worry about losing relationships and roles.
Leaders who recognize these dynamics and provide the right support will be more likely to keep staff engaged and productive.
5. Preserve Knowledge Before It Walks Out the Door
One of the major risks associated with a business succession is losing the knowledge held by experienced staff.
Small businesses normally won’t document important information, as the staff will know how to do things based on years of experience.
They’ll know what customers like, how vendors work, how processes work, and the little nuances.
However, when the staff leaves, so does the knowledge.
By having a succession plan in place, you can ensure that you identify and document the knowledge you need to run the business successfully.
Things to consider:
- Document key processes and procedures.
- Ensure all key information is in one place.
- Train staff to undertake each other’s roles.
- Set up mentoring between experienced staff and future leaders.
- Have contingency plans for key roles.
Knowledge sharing should occur well before any change in ownership or leadership occurs.
Not only does it reduce the risk of any disruption but also makes your business more robust and may make it more appealing to potential buyers.
6. Give Employees Opportunities for Development
Change can cause uncertainty but can bring new opportunities.
When the business is changing, it creates opportunities for employees. These opportunities could include taking on extra responsibilities, learning new skills, or taking a leadership role.
Think about internal development opportunities instead of relying on external hires to fill key roles.
By developing your employees, you will benefit from having people who know the business inside out, know your customers, and understand your culture. They may also be more inclined to stay with the company if they can see an opportunity for growth.
To help your employees grow:
- Identify staff with leadership potential
- Talk about what they want to achieve professionally and what interests them.
- Offer training to help them take on more responsibilities.
- Give high potential employees opportunities to contribute to strategic decisions.
- Encourage mentoring relationships with current leaders.
Having internal talent will help your succession plan by ensuring you have employees ready to take on more responsibility.
Employees will be more committed to the company if they can see a future for themselves.
7. Maintain Company Culture
Company culture can be a big factor in whether employees stay with an organization.
In small businesses, the company culture is often shaped by the owner’s personality, values, and management style. Employees can build a close relationship with the owner.
Staff may fear the loss of the culture they enjoy when ownership changes.
This is especially important if you sell the business or a larger organization acquires it.
Take the time to figure out what elements of your company culture make staff feel valued and make your business successful.
Maybe it is flexible working, good communication, good teamwork, great customer service, or development opportunities.
Give new managers the insights into your company culture, and they can make sure they keep what makes your culture great but also make the necessary improvements.
Staff will be more likely to accept new leadership if they can see that the values and culture they like are valued.
Keeping company culture means you can still make changes. It means knowing what makes your business successful and capitalizing on that!
The Importance of Retaining Employees
Employee retention can have a direct impact on how successful and profitable your business will be.
Whether you are passing on to a family member, promoting from within or getting your business ready to sell, having a stable workforce with experienced staff can help make the process more appealing.
Buyers will often consider whether a business can run successfully without the owner.
If a business is heavily reliant on your skills or a few individuals, it may be viewed as a higher risk than if they have good management, clear processes in place, and committed staff.
Having a high level of employee retention can help do the following:
- Ensure continuity of the business. Having experienced staff means you can move the leadership in your business while ensuring that daily operations continue.
- Better customer relationships. Customers will continue to work with those they know.
- Lower costs. You won’t incur the cost of hiring new staff.
- Retention of knowledge. Ensuring that key knowledge remains within the company.
- Better valuation. If there is stability within your workforce and good management in place, it will reduce the risk associated with buying your business.
Investing in retaining employees can be part of an overall strategy to ensure the value of your business is protected and increased by business owners who are looking to exit their business eventually.
Make Employee Retention Part of Your Succession Plan
Business succession planning ensures your business is set up for success after the current business owner or owners are no longer involved.
Having the correct successor is important, but with the right approach, it will increase the chances of a smooth transition.
By having good communication, psychological safety, leadership development, and maintaining knowledge, you can ensure there will be less disruption to your employees.
Most importantly, retaining your top performers should be considered within your succession planning.
At Mosaic Business Advisors, we work with small business owners to ensure they have a plan in place for growing their business, transitioning their leadership, and eventually succeeding in their business. It is key to have the right people in place so you can ensure your business is set up for success.
A successful succession plan will protect not only the business itself but also the people, relationships, and knowledge that make it valuable.
Debra Murphy is a marketing coach and consultant helping small businesses navigate the complex maze of online marketing. Experienced across all traditional marketing channels, Debra specializes in organic search and content marketing to help small businesses gain visibility and generate inbound leads. She is also a certified coach in the 90 Day Year® Peak Performance System. Debra regularly writes about small business marketing on her Masterful Marketing blog.
