Spring 2014 issue of Horizons

The first step of the process is to identify key decision-makers and succession planning goals and objectives. Gather information such as:

∙ Who are the current owners?

∙ What top management will be involved in the planning?

∙ Who are the outside advisors that should be consulted?

∙ What is the transition timeline?

A misstep in communication could cause costly disruptions such as power struggles between key employees or family members and stress for external players, including suppliers, customers, lenders and advisors. If the succession plan contemplates transfer to a third-party buyer, how do you keep key stakeholders incentivized throughout the transition? Groom A Successor Once the goals have been discussed and agreed upon, choosing and grooming a successor follows. This is an important piece of the succession plan, because it is the successor who is able to utilize the owner’s intangible assets. The owner has knowledge, skills, and relationships that other employees may not possess. The succession plan reduces the business’ reliance on the owner by transferring knowledge to potential successors. In doing so, the planning ensures that a competent and valuable leader is available at all times. When evaluating successors, it is essential to identify and quantify the right qualities for each position. Both hard and soft skills should be evaluated, as well as behavior.

∙ What do you want your legacy and the company’s legacy to be?

Different owners may have different exit goals or timelines. Common topics among these discussions usually include items such as future financial security, financial stability for dependents, maintaining family ownership and treating children equitably. Management may have expectations of future ownership or different roles within the company. Will continuity among advisors provide stability during the transition process or is it time to seek other counsel that aligns with the vision of the new ownership group? These questions are not easily answered. Nor is there a common right answer for these questions. Every organization and succession plan, just like every set of blueprints, is different and should be handled accordingly.

Communicating Objectives The next step of communicating the objectives with key members of the organization is vital.

∙ Will management be on board with the goals of the succession plan?

A successor’s behavior, such as natural leadership and ability to work with others,

∙ Are the family members on board with changes of control among generations?

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