What is the connection to the company’s management team’s “reserves” with the value of the company?
Change of the management – it is a question much avoided in the Latvian business environment. The attention to the question is limited, considering problems encountered on daily basis as more crucial. Bearing in mind the unforeseeable impact of the pandemic phases, it is completely understandable.
Daily operational functions prevent a focus to a long-term strategy and a company succession for that matter. At the same time, sooner or later the company is required to solve this problem, as the multiple businesses started in the nineties have to find a leader and a successor, who would ensure a quality continuation for the company. Some of the current managers do consider that their offspring would provide a succession, but it is very rare that the next generation is talented, capable, or interested enough to succeed.
The main reasons for failures of ensuring a prospering succession preservation are the following – not paying much attention to this matter, a weak internal leadership development, deficiency of management development principles and inadequate recruitment experience.
Regardless of this, there are business who realize the change of management effectively – such examples are Phillip Morris and Circle K, who have prepared the development in a way, that a mere service station employee can become a manager of the whole entity. These are not just few success stories, but a line of principles that give the employees a chance for growth and a challenge. A good succession planning happens if internally there is a reserve for each following position.
It is instrumental to consider a “reserve player” from an external point of view. We are providing a chance for companies to benchmark and monitor the market to identify industry professionals who would be a great addition to the team in a moment of change. Usually, market mapping is needed for certain positions in the company. For example, perhaps a company is required to have a manager who would help it to enter the stock exchange or maintain a more aggressive approach to the growth in export markets.
The question remains – what is better – to consider a manager from an internal point of view or someone fresh from the outside? Particularly, if the owners are looking for a greater change in the development of the company, it is more important to choose an external player. It is crucial to remember that the strategies used in the past might not work as formidably in the present, that is why during the process of planning development, some of the priority development spheres should be taken into account.
Eventually, a large part of company owners do want to sell businesses they have successfully developed. There is a problem – mostly these owners have carried out multiple functions at once with a distinctively authoritative management view, that is why the development of talent has taken a secondary part. Their team have taken a role of functionaries rather than a role of potential future leaders. Furthermore, in a scenario where the sale of the company would be implemented, potential buyers would not pay the required price for an inexperienced succession team.