3 Key Succession Planning Steps for Affordable Housing Developers
June 16, 2022
At a glance
- Fill the gap: Many affordable housing developers don’t have succession plans that can ensure the continuity of the business after the owner has left.
- Appeal to investors: Affordable housing investors often pass on deals for companies that don’t have succession plans in place. Since succession plans often unfold over several years, development companies should start laying the groundwork today.
- Take action: It’s critical to enlist the help of a qualified, third-party team with industry-specific experience to guide the succession planning process.
The full story:
Leaders in affordable housing development companies are constantly inundated with competing priorities. Unfortunately, succession planning is often the one strategic task that falls into the “We’ll take care of this next year” column.
Succession planning can look different for every development company; for instance, an owner may be exiting the business through a sale or perhaps the owner is retiring and a “changing of the guard” takes place, as the next generation steps up to the helm.
Regardless of what succession may look like for your development company, one thing is certain: you need a plan in place. Not only does having a solid succession plan improve the chances of a smooth transition, but it is also appealing in the eyes of future investors. In fact, some investors may be wary about making deals with development companies that don’t have succession plans and could pass on offers in favor of firms that do.
Though succession planning is a complex activity, one that requires the guidance of an experienced professional team, it’s helpful to develop a baseline understanding of the process so you’re prepared to engage in it at the right time.
Step 1: Get a big-picture assessment of your business
In order to develop a long-term succession plan, you have to fully understand your business’s future, including where you want to go and who will play pivotal roles in achieving those goals once the owner has transitioned out of the organization. Pinpoint the most important challenges your business will face over the next five to 10 years. These challenges could be obstacles you’re already aware of, or challenges that are likely to affect the industry, and thus your business, going forward.
From there, you can identify the key roles, positions and job titles you’ll need to create to help your business overcome those challenges and ensure its continuity. You may already have specific internal employees and stakeholders in mind, or you may need to hire individuals to fill those roles (we’ll cover this later). Regardless, it’s important to start laying the groundwork now as part of your succession plan.
Along with filling roles for key employees, it’s also essential to think about the skills, qualities and proficiencies, as well as industry and organizational knowledge, needed to achieve success in your business. This exercise will likely illuminate gaps or needs you may have in terms of training, learning and development. All of the tasks and tactical steps needed to accomplish these goals will have to be outlined and accounted for in your succession plan.
Step 2: Evaluate your internal people, processes and procedures
Like I mentioned above, you may already have high-performing employees who are on the leadership track. As you start the succession planning process, evaluate those employees thoroughly and discuss what roles they may play in the owner’s ultimate succession. You will also need to specifically identify the key competencies and responsibilities these individuals will need to adopt to address the business challenges you identified in the first step of the planning process. This will help lay the foundation for the next phase of the process, which includes training.
Step 3: Create and implement key tactics and programs to prepare for succession
Develop targeted career paths, training exercises, and learning and development programs for the individuals you have identified as successors and future firm leaders. This process could take anywhere from five to 10 years to complete, depending on how far in advance you’re aware of the owner’s exit.
Aside from training business successors, it is also critical to capture departing owners’ and leaders’ knowledge regarding their strategic growth plans for the organization. You may arrange internal all-hands meetings or opportunities for one-on-one meetings that encourage knowledge-sharing and help formalize plans before owners leave the organization.
The bottom line
There are nuanced and tactical steps within each of these planning phases, which is why it’s important to enlist the help of a qualified, professional team that has experience in succession planning, particularly within affordable housing.
Aprio’s Affordable Housing team can provide the valuable, industry-specific expertise you need to create and deploy an effective succession plan. Our team can help ensure your employees and stakeholders are working toward a common goal to enhance operations and organizational goals as you prepare for what’s next, in addition to arranging staff and board retreats that allow you to immerse yourself in the succession planning process together.
About the Author
Alison specializes in the audit requirements of the construction and real estate industries, with deep experience in commercial real estate, multifamily housing and affordable housing. She works extensively with corporations, S-corporations and partnerships in the real estate space.