As the old saying goes, "Knowledge is power." This certainly rings true in business, as those who best understand their industries and markets tend to have a knack for staying on top. If that person is the owner, however, knowledge can quickly turn into a vulnerability when it's time to retire.
As you develop your succession plan, consider how to mitigate the loss of pure know-how that will occur when you step down. One way to tackle this risk is to implement a knowledge management strategy.
Two types of knowledge
Knowledge management is a formal process of recognizing and treating knowlede as an asset that your company can identify, maintain, and share. Generally, a business can subdivide knowledge into two types:
- Explicit knowledge. This exists in the tangible world and typically includes company reports, financial statements, and databases. These items are usually easy to access, extrapolate from, and append. For your succession plan, however, you may need to dig deeper into your own confidential files, memos, or emails.
- Tacit knowledge. This is information that resides solely between the ears of business's leadership, team, and trusted advisors. As you can guess, this variety of knowledge is not easily retrievable. In terms of succession planning, this is probably the stuff you haven't written down or even explicitly expressed.
Typical knowledge management categories include:
- Taxes and accounting
- Financial management
- Strategic planning
- HR, payroll, and employment practices
- Sales and marketing
- Customer relationships
In addition, knowledge management should account for your company's intellectual property (like trade secrets). While it may be tempting to keep such details close to your vest (not even cluing in your management team), this attitude does not create a self-sustaining, thriving business and could put your company at risk upon your departure.
A comprehensive knowledge management effort related to your succession plan will call on you to undertake a full inventory of every category listed above, and perhaps others. Gathering your explicit knowledge may entail compiling years', even decades', worth of documents, files, and writings. This may not be an easy task, but it's still a matter of straight research.
You'll likely find capturing your tacit knowledge somewhat more challenging. One idea is to ask a suitable employee or engage an outside consultant to interview you regarding all the pertinent categories. Many business owners find these conversations arduous at first but eventually come to appreciate the enlightenment.
A legacy preserved
A solid succession plan is imperative to maintaining the future stability and success of your company. Knowledge management can strengthen that plan and help preserve the legacy you've worked so hard to build.