Succession planning, the task of deciding who will replace a key executive who retires, moves on or passes away, is a critical step in the continuing development of a company. Has your board taken up this important matter yet?

Here are five reasons to begin formulating your succession plan.

1. Identifying qualified candidates

Identify potential leaders who have the skills needed for the position that may open. The leader you choose should not only have an excellent record of past performance, but she or he should also exhibit a solid commitment to company values.

2. Maintaining brand identity

Bringing in a new leader from outside may inadvertently compromise your brand image because this person will not yet have developed a loyalty to your values. Consider promoting from within.

3. Avoiding salary issues

Another issue with hiring an outsider involves pay. An executive you bring in from another company will expect the offer of a high salary, plus a large benefits package to leave his or her current employment. A leader you hire from within will already know the business and support its values and goals. A raise in salary may be in order, but you will likely save the company money over the hiring of a candidate from the outside.

4. Soothing investor concerns

Whenever a top executive leaves the company, your investors are bound to suffer a bout of nervousness. You can calm their fears by putting a succession plan in place. This shows you are looking ahead and are committed to the long-range success of your company.

5. Creating a roadmap  

Creating a sensible and effective succession plan will help the management team develop a strategy and plan for future growth. With the addition of a new leader, fresh ideas will surface, and the team will become stronger.

Seeking guidance

When you are ready to begin succession planning operations, legal guidance ensures no missteps occur in selecting the ideal candidate to replace a departing leader.