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Firm foundations

Your career Succession planning

Most of us like to assume that we are irreplaceable, but the fact is that everyone moves on at some point in their career. Making plans to ensure a suitable succession is part of good management, Ewan Grant believes.

Fact: there aren't enough quality leaders in the civil engineering industry. Why? Many internal promotions are based on longevity, a highly subjective pick 'n' mix or the lack of credible competition, rather than a strategic selection process. And when a managing director or chief executive in the civil engineering sector retires or moves on to another role, it can precipitate an industry-wide shift that resembles musical chairs rather than corporate reality.

Entrepreneurs in civil engineering are passionate about their businesses and the emotional bond becomes stronger as time goes by. A company launched to fill a gap in the market or obtained through a fateful inheritance frequently turns out to be their raison d'Ûtre and as a result many business owners are reluctant to lose control.

Hard-working entrepreneurs enjoy doing things for themselves and get a tremendous buzz out of individual achievement. The thought of handing over a business which they have zealously built to a colleague, child or management team has zero appeal, particularly if there isn't an heir apparent.

Family Perspective Succession planning is relatively easy in some organisations - particularly family-owned businesses. If a business owner's goal is to pass his or her business on to the next generation, then succession planning should be an integral part of how one's business and personal lives are managed, particularly if the child or children in question are capable and committed.

If you own this type of business, it's important to rise above operational issues and take a long-term strategic view of your situation. Shared objectives, open communication and decision-making, wealth management, naming and training successors and retirement planning all help to transfer a business from one generation to the next. If this process is difficult - or if independent input is required - a professional adviser can help to structure corporate and personal affairs. Larger familyowned businesses benefit from having an autonomous adviser or director whose main interest is wealth accumulation and management, not joining in the power struggle.

Family-owned businesses also face a unique set of tax matters relating to succession planning. If you own a family business, your professional adviser can help you to keep your family's financial interests in a business and create taxefficient methods which can greatly reduce estate taxes that need to be paid in future Corporate Affairs Unfortunately, most businesses either ignore succession planning or leave it until it is too late.

In the past, succession planning was largely restricted to managing director and chief executive roles. However, it is now recognised that one or two people in isolation cannot lead an organisation and the emphasis is on building successful management teams across all facets of an organisation.

At its most basic, succession planning focuses on developing future leaders with the correct skills and experiences.

If properly done, it also highlights the way in which a business should be run after its current owner retires, sells up or moves into a non-executive role. Fundamentals include the systematic identification, assessment and development of personnel to guarantee the stability of key positions.

Leadership Recruiting, managing, motivating and retaining high achievers is an incredibly difficult task, but it is essential for growth.

Analysing tomorrow's leadership requirements for your business hinges on a few key issues. A thorough understanding of your market is essential, allied with a viable business strategy. Your corporate culture and values should be reviewed and a change management process initiated if required.

Candidate Pool In smaller businesses, the candidate pool for one or two key roles might be limited to a few people. In medium-sized and larger companies, where it is important to have great leadership across a variety of functions, the candidate pool will be much larger. Your business' projected growth rate needs to be factored in. If you expect to double or treble turnover in the next five years, the senior management team will need to be enhanced accordingly. It is important to keep managers at a number of levels aware of the succession planning process.

Transparency promotes great internal communication and encourages potential candidates to take responsibility for their futures by stepping forward.

The selection criteria are fairly straightforward:

lRelevant educational background, including professional qualifications.

lSkill set / job performance.

lLongevity / propensity to stay with the business.

lManagement experience.

lDesire and capabilities to be successful in a senior role.

Once the candidates have been identified each candidate should be provided with a development plan that includes mentoring, coaching, job rotation assignments and regular 360infinity feedback from objective multi-raters, to avoid charges of favouritism or of the process being perceived internally as a sham. Candidates should be regularly reviewed against the desired competencies, with issues discussed and overcome in a supportive forum.

The best succession plans are driven by top management and accurately reinforce the organisation's future strategy and culture.

Ewan Grant is head of the corporate finance group at leading accountancy firm Baker Tilly. E-mail:

ewan. grant@bakertilly.co.uk.

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