Somebody broke into my son’s luggage when he flew home for the recent holidays, so I went to our local luggage shop to replace it. The perfect shell suitcase was there, branded with characters from the Star Wars franchise.
Pleased with the new suitcase, I went home and showed my son, who is a Star Wars fan. Greeted with silence, I thought he must be thrilled. Then the following conversation ensued:
Son: Mum, this suitcase is wrong!
Me: How can it be wrong? It has Star Wars characters and is a shell suitcase. It’s perfect!
Son: It’s too small compared to my other suitcase, and it has zips.
Who knew large luggage came in different sizes and that zips are apparently easier to break into compared to clasps? The above got me thinking about items being the correct fit for the owner. This led to thoughts about Financial Services Providers’ (FSPs) succession plans.
Succession failures can have dire consequences for an FSP and succession plans are becoming increasingly important when applying for a new licence. The new FSCA licence application form (FSP 7 in particular) requires one of the supporting documents to be a business continuity policy:
[The plan, inter alia, must demonstrate processes that are devised to cater for exceptional risks that, though unlikely, would have catastrophic consequences for the business of the applicant. It can cover a range of situations including, succession planning, the death of a key person, crisis events that threaten to shut down business operations or any other financial situation or unexpected event that threatens to destroy the business of the applicant.]
Many business owners only think about succession planning when they want to realise value and exit their businesses. Often, they leave it too late and it becomes a fire sale.
Good succession planning can enhance organisational efficiency and create workplace harmony by ensuring that staff and clients know their needs are being addressed. It can also dictate the direction the company will take, which is important to maintain a competitive edge.
Giving effect to succession plans are complex undertakings and they can be exceedingly uncomfortable. But nobody can run their business forever, and one needs to plan for that inevitability.
What can go wrong with succession?
Common mistakes include appointing the wrong person or not having successors in place. By not having a proper succession plan you are doing a disservice to yourself, your clients and employees.
A failed succession process can affect the financial wellbeing of a business, damage client confidence or create a power struggle that can impact on the business culture.
Successful succession planning
Successful succession planning should start early and you should approach it with an open mind. It also requires an effective way for information to be passed to the identified successor. In addition, a good succession plan will identify the critical roles within the FSP, whether the potential successor is ready to take over and, if not, what training or experience they need.
Don’t make the mistake of waiting until it is too late, or assume the loose or verbal arrangement you have made will come to fruition. Take a cold, hard look, and assess your plan honestly.
As for my ‘succession plan’ with my son’s luggage, the successor was my brother’s spare luggage set. My son is now back in Cape Town with an 84cm shell, boring black luggage.