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Sunday, 24 March 2013 12:37

Succession Planning and Its Impact on the Performance of Small Micro Medium Enterprises within the Manufacturing Sector in Johannesburg

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The study found that there was a gap between perceived and actual status of succession planning in the SMMEs studied. It further revealed that there was no preference to recruiting from outside versus developing inside talent in preparation for succession planning. This finding can provide guidance to other SMME owners while making their succession planning, while it provides opportunities for managers. Most of the top managers surveyed indicated that they will be retiring in next 5 years and indicated that company had no succession plan or exist strategy. This finding has serious implications for the SMMEs studied and must take succession planning very seriously, otherwise they will come to a halt suddenly when the leadership leaves the enterprise for whatever reason, either due to natural death or otherwise. SMMES studied did not put plans in place to groom, train and develop top managers. As a way forward some strategies that can be followed to address the key variables are:

Business Strategy: An organisational structure should be implemented so that employees know who is next in line and what is expected of them, so that if anything is to happen to top management that company can still carry on. Exiting top management and shareholders should have contingency plans in place to ensure that the business can outlive them and that they have a proper exit strategy in place to carry over shares to the new management or new shareholders. The business strategy can add great value to a company if it needs to be sold.

Skills development: Identified top managers should be groomed and developed to ensure that they know what is expected to fill the vacant positions. It is of paramount important to ensure that these potential managers are fitted with all the necessary knowledge and skills to manage the top management of their companies.

Succession Planning: Implementing a formal succession plan is very important to ensure that all aspects have been looked at if something is to happen. The succession plan should also be reviewed annually to ensure managers’ suitability for positions and to ensure that all aspects have been accounted for. In conjunction to a good succession plan it is also necessary to have a good performance management system to ensure that potential top managers are identified from within or to see were individuals can be improved or where skills should be recruited from outside. Duties should be delegated in such a way that the business can operate if one or more key persons are absent thus employees should be multifunctional and flexible.

It is evident from this study that the manufacturing sector has not changed from those recorded in earlier studies. The conclusion from this study served as a wakeup call to the SMMEs which took part.

The gaps that can be observed in the two preceding graphs show the perceived importance of the variables by the companies and what is actually implemented. The significance gap level of 0.5 was used and the following findings were made in respect of each variable:

Business Strategy: There was a gap of 0.73 in respect to what the companies perceived to what is to their advantage and what they are implementing. This variable represented the statements in regard to the company’s utilization of an exit strategy for their shareholders and top management, and whether their succession planning is aligned with the business strategy that they follow. It can be inferred that the respondents perceives highly of what needs to be done but the implementation is not up to the level expected.

Governance: There was no significant gap between responses in regards to the companies’ governance. The GAP is very small so the assumption can be made that respondents implemented governance measures according to what they perceive as good practice. Governance is used to see in what way the business is controlled by shareholders, procedures and managers.

Skills development: The study established that there was a gap of 0.53 in regard to the implementation and perceived advantage of skills development. Skills development is of paramount importance to succession planning as the new up and coming generation needs the proper training and development to function as the new leaders and to ensure the sustainability of the company.

Succession Planning: Succession planning had a significant gap level of 0.63 which illustrate that companies perceive succession planning as a measure to ensure sustainability in their companies, and that they recognize succession planning as a value adding component of their business. Although they do acknowledge that succession planning is value adding but they do not follow the necessarily follow steps to move from their current state to the preferred state.

Common issues found in case studies
Common issues that were identified within the case study, was that there is a lack of succession planning in most SMMEs. As most of these companies are still owned and managed by their founding members it creates a problem of sustainability. These shareholders will also be reaching pensionable age within the following few years and it is important to ensure that all plans are drown up before hand, to ensure that these companies remain operational and functional even when the owner isn’t personally able to manage.



Ajay K Garg & Erich Van Weele (May 2012), Succession Planning and Its Impact on the Performance of Small Micro Medium Enterprises within the Manufacturing Sector in Johannesburg, International Journal of Business and Management: Canadian Center of Science and Education (Vol. 7, No. 9).

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