In a December 2008 survey of approximately 600 business leaders and owners, 67% indicated they did not have a written succession plan in place. Of those who had a written plan in place, 55% of them said the plan was either out of date or needed significant revision. There are many reasons for this, some of which you may identify within your own organization. This article will explore some of those reasons, which I will refer to as myths, and provide some realities for business owners and leaders to consider. In another similar article, I write on Succession Planning for the Small Business.
Myth # 1 — My Company is too small for succession planning.
Reality — If you have 5 or more employees, even if they are all family members, the prudent decision is to have a plan. You probably have life insurance, disability insurance, and even a will. Having these tools in place means that you care about the ones you love and want to provide for them if something happens to you. Succession planning is all about planning what happens to your business and employees if something unexpected happens to you that will either temporarily or permanently incapacitate you from performing your ownership or leadership functions.
Not having a plan provides undue risk to the livelihood of your employees and their families. You may have addressed the financial aspects by having a large life insurance policy that will cover the bills and maybe provide some operating cash for a while. What about the leadership needed to continue to run the company? You place an undue burden on your spouse if they’re disinterested or incapable of assuming this responsibility.
I know of a situation where the owner of a 15 person software development company had a stroke. Thankfully, the stroke did not result in his death; however, it has significantly impacted his ability to think about complex situations, such as running, sustaining, or even growing his business. Unfortunately, this responsibility has fallen to his wife, who is just not skilled in these matters while having some interest in the business. As a result, she has had to turn to a long-time family friend and business executive to counsel her on actions. Had there been a succession plan in place, perhaps this heartache on the wife would not have had to happen.
Myth # 2 — I don’t have time to write out a succession plan.
Reality — If this is your logic, you probably place little value in budgets, marketing or sales plans, business plans or goals. The old saying, “if you fail to plan then you plan to fail” seems appropriate here. Succession planning is not just about the top job either. A worthwhile succession plan considers all key positions within the organization, not just the CEO position.
Most leaders don’t plan for their key staff to leave, become disabled or completely incapacitated. Unfortunately, life happens and when we are not prepared to handle what life throws our way, we tend to be in the reactionary mode, not the proactive mode. Our options tend to be quite limited when we are in the reactive mode.
It is not that you don’t have the time; it is really that you don’t want to make some key, potentially hard and uncomfortable decisions. See Myth # 3 next.
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Myth # 3 — I don’t know how to create a succession plan.
Reality — What is really being said here is that you don’t like the obvious choices that are apparent. You may know well in your heart of hearts that your younger brother, child, or another second in command is not really ready to assume your role. Or maybe you know that you and your brother disagree on the talent of your nephew. You don’t have a viable alternative, or you don’t want to have a “family conflict” so you do nothing hoping that you will continue to plod along, grow the business and this succession thing will work itself out in a few years. These situations are not just limited to family companies either.
Partnerships and “closely held” organizations can face this situation as well. The ownership of a company generally gets together because each person has some unique talent they bring to the entity. As the entity grows, the realization sometimes sets in that greater talent or leadership is needed to sustain this organization. Failure to come to grips with this reality is like putting your head in the sand. Succession planning can be an objective process that can guide the owners and the key leaders of the organization to make the best long term decisions to protect the viability of the company.
Myth # 4 — I don’t think succession planning is important.
Reality– If a company has more than 5 employees, unfortunately, this is just an excuse for not making the serious decisions one has to make to give the future viability of the company a fighting chance. If you really don’t think it is important, chances are you are focused on short term results only. You may have a survivalist mentality that does not think too far into the future and plan for the inevitable obstacles and roadblocks that businesses encounter. In a word, you may be focused on you and not the other employees or customers that rely on your leadership. That is a hard statement to make; it may, nevertheless be true.
Myth # 5 — The issues raised in a succession planning process are complex and sometimes too difficult to discuss.
Reality — this is true, yet it is not a good reason to avoid tackling these problems. Financial considerations are significant, tax consequences are significant also. Who would you rather decide the fate of these financial aspects — you or the government? The issue of coming to grips that Junior is just not cut out to run the business, or that you will risk offending some family members by selecting a particular person, are difficult issues to address and resolve. They are uncomfortable at the least and loaded with potentially unhealthy conflict that can last for years at the most. Consider that this company of yours impacts families other than your own. Not effectively addressing these issues is not the solution at all.
What can you do? — If you can identify with one of these myths and realize that you or your organization are underprepared and at risk, seek some help. Succession planning by itself is not a difficult process — the decisions you may have to make can be extremely difficult. There are many qualified advisors who can help you develop a plan and walk you through the decision-making process, ensuring that you remain objective all the way. The author of this article has worked with dozens of organizations, public and private, for-profit and not-for-profit, large and small numbers of employees, to design and implement a succession planning process and subsequent plan that has been highly effective in protecting and growing the businesses.
Be one of the companies that plans to be around in the future by being prepared to face the future on your terms. Decide that you will influence how that happens and not be forced to react to a limited number of less than desirable options. Decide that you will not leave this responsibility to others in your family or business.
About the Author — Bill Bliss has worked in Organization Effectiveness, Executive and Leadership Development throughout his 25-year career. His firm provides trusted advice for improved personal and organizational performance. He has coached a wide variety of executives, including Chief Executive Officers, Presidents, Vice Presidents, and Directors across many disciplines. He has facilitated succession planning, strategic planning, team building, and leadership development sessions for various clients in manufacturing, engineering, retail, real estate services and construction, publishing, transportation services, financial services, and other industries. His firm is based in South Carolina and can be seen at www.blissassociates.com.