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

Abstract

Succession planning is a major problem within Small, Micro and Medium Enterprises (SMMEs). The literatureshows that although most of these entities are run by their founders or by a small management team and very fewsuch operators have in place proper succession planning. The lack of proper succession planning can have thedirect effect of causing the collapse of these businesses especially when key players leave the business uponretirement or in pursuit of other options. The exit or exodus of key stakeholders can make a business vulnerableand diminish its worth as investors will not invest in a business that is not sustainable. Succession planning wasidentified as one of the most pressing issue for SMME’s within the corporate governance sphere. This wastherefore investigated by means of survey that was done in order to take up this study. The intent was to ascertainwhat the current status is within the manufacturing sector in the Johannesburg region. A combination of qualitativeand quantitative methodology was applied to get responses from 15 companies out of a total of 30.The study foundthat there was a gap between perceived and actual status of succession planning in the SMMEs studied and there ismajor room for improvement in this area. Further these SMMEs did not put plans in place to groom, train anddevelop top managers. The study found that there was no preference to recruiting from outside versus developinginside talent in preparation for succession planning. The findings also suggest that most stakeholders agreed thatgood succession planning can add value to SMME’s and they become more sustainable. It is evident from thisstudy that the manufacturing sector has not changed from those recorded in earlier studies. The conclusion fromthis study served as a wakeup call to the SMMEs which took part.