It has been impossible to escape the announcement that Harry and Meghan have elected to step down as senior royals. However, the move, dubbed ‘Megxit’, has proved more difficult to implement in practice than it sounds on paper. This has been, at least in part, because the royal family have had to do something that it never anticipated or planned for; negotiate an exit package for two of its senior members. The difficulties faced by the royals in dealing with this should act as a timely reminder to all businesses that succession planning is critical.

Succession planning

Many businesses neglect succession planning for any number of reasons, ranging from a lack of resources to dedicate to it, to a reluctance to have awkward conversations about who within the business may or may not have the skills to replace key employees.

However, regardless of size or industry, all businesses should have some form of succession plan in place as departures can be catastrophic. Growing businesses in particular should remember that succession planning is as much about preparing to create new roles in line with the business’ strategic plan as it is about preparing to fill the gaps left by departing employees.

Risks faced with unexpected exits

When any employee leaves a business, there is a risk that the business will be compromised. This issue is particularly prominent when the employee is senior, or worse, a founder.

Employees departing with specialist knowledge, skills and talent will leave a business short of these assets. This may be felt particularly hard if the leaving employee joins a competitor, taking intellectual property or other confidential information with them.

Where the employee is critical to the business, another factor may be the loss of client and/or investor confidence. Additionally, the departure of one employee may trigger a knock-on effect with others potentially following suit. This can cause a loss of structure in the organisation, and consequently a drop in productivity.

A hurried replacement process, resulting in hiring an unfit individual and overlooking an internal candidate, leading to disgruntled employees, or worse employment claims, may follow.

Top tips

An effective succession plan can help avoid most, if not all, of the above risks and help stabilise a business in the event of a shock employee departure. In order to create such a plan, businesses shouldn’t just focus on senior roles but also consider employees at all levels; departures at any level can create a gap that needs filling. Creating a multi-layered plan, including multiple potential successors for each role, also helps prepare for the potential loss of talent and allows the business to be agile and change direction.

By aligning the succession plan to the business plan, senior leaders can help clarify what the business needs by way of skills and experience, which helps to defend from any unhappy candidates. This plan should then be kept under regular review, ensuring it reflects the latest business developments. Finally, the most effective plans nurture junior talent already identified within the business, by creating career steps and offering leadership training.

Well-kept secrets

Meghan and Harry have branded themselves as “Sussex Royal”, applying for this to be trademarked. They also have significant knowledge about life inside the royal family, which could be of value to others, while also be damaging to the royal family, should it be leaked. It is likely that senior royals have considered these issues in dealing with Megxit.

Similarly, in order to protect against unfair competition, a business needs to think about the threat posed by departing employees and ensure that departing employees cannot take any of the business’ intellectual property or confidential information with them when they leave. They should provide for these risks in the employment contract by ensuring that ownership of intellectual property created by an employee rests with the company, and that employees must return all company property and must maintain confidentiality going forward.

In addition, businesses should consider including provisions in the employment contract that seek to curtail an employee’s ability to compete once they leave (so called “restrictive covenants”). These restrictive covenants might seek to prevent a departing employee joining or setting up a competitor, dealing with the organisation’s clients, or poaching the remaining workforce for a specified time after their departure. Whilst such restrictions can be a powerful weapon in a company’s armoury, courts will not always uphold them. Careful drafting is therefore needed to maximise the prospects of them doing so.

Minimise risk

Losing key personnel always has the potential to cause significant disruption to a business and, if handled incorrectly, it can have a damaging impact on the success of the business. Succession planning may seem like an administrative burden, but even a modest amount of time can pay dividends in protecting the business in the event of a shock departure.

As far as the royals are concerned, only time will tell whether the deal reached adequately covers all the issues arising from Megxit. One thing is for sure – it will make an interesting episode of The Crown.