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Goodbye baby boomer generation! What's next for medium-sized companies?

March 27, 2024

Effective succession management with EPM – A solution for successful company succession

The baby boomers are slowly retiring from the workforce, and we can see the effects of it not only in the worsening shortage of skilled workers, but also in its massive impact on company succession. 6% of the 3.81 million small and medium-sized enterprises with an annual turnover of no more than 500 million euros plan to exit by the end of 2024, and the trend is rising. Additionally, the general interest in setting up businesses is declining, which further reduces the number of interested parties. According to the current KfW study, other factors that make a takeover more difficult lie in the bureaucratic effort, administrative complexity, and financing requirements. However, these challenges can all be overcome: the prerequisite for this is long-term and comprehensive planning, as well thought-out and efficient succession planning can ensure the continued existence of the company and at the same time guarantee the smooth transition of responsibilities. This means a rethinking of corporate strategy; to move away from isolated planning and instead towards networked planning with a 360° view of financial, operational and business planning. A key solution to this is Enterprise Performance Management (EPM), a comprehensive management practice aimed at optimizing company performance. EPM encompasses various aspects such as planning, budgeting, forecasting, analysis, and reporting, thus improving planning accuracy and increasing the agility of the company.

A deep understanding of the current and future direction of the company is crucial for succession planning. EPM helps to set clear goals and analyze the impact of changes on performance. Another crucial aspect is the financial stability of the company. EPM tools support the creation of realistic budgets and make it possible to develop financial scenarios for the future. This facilitates the identification of financial risks and the development of strategies to manage them.

By integrating forecasting and risk management into succession planning, potential challenges can be better anticipated. EPM helps to simulate and compare different scenarios and to take appropriate risk mitigation measures. Successful succession management requires continuous monitoring of the company's performance, using meaningful dashboards and reports to track target achievement and make timely adjustments. EPM encourages collaboration within the company, which is particularly important when it comes to transferring responsibilities. Transparent communication about succession plans and the associated strategic decisions is also crucial for success.

An effective business handover requires comprehensive and well-thought-out planning that provides a clear picture of the company's current situation, but also considers the impact of the rapidly changing environment. A holistic view across all business units such as Finance, Human Resources, Supply Chain and Sales is required to easily provide downstream stakeholders with the necessary transparency while providing the ability to model, plan and visualize potential impacts. EPM provides the necessary tools to successfully manage the strategic, financial and operational aspects of succession, ensuring a smooth transition and the future performance of the business.

Author: Tim Janßen
Image: © g-stockstudio / istockphoto.com