Succession planning: Key questions to ask
Every business owner needs to consider how he or she can gracefully, efficiently and amicably exit his or her company. Here are some key questions to ask when determining just where you stand on creating and implementing your succession plan.
When’s your target date?
There’s no such thing as too soon. By designating your retirement date far enough in advance, you’re more likely to not only pick the right successor, but also facilitate a smoother transfer of power.
In some industries, it can take years to appoint and train a qualified successor and effectively work through the many management, ownership and organizational issues. But don’t choose a date too far away, because your successor-to-be may get tired of waiting.
Are your managers informed?
A successful succession hinges on staff buy-in — or at least, acceptance. So getting managers and key employees involved in the planning will greatly help you ready your company for the transition.
Remember, misinformation, rumors, threats about quitting or refusals to support the new boss are often inevitable in a succession. To help keep potential sources of conflict in check, identify stakeholders who may have strong concerns about your next company leader or the process. Then work out problems with them early on.
Who’s helping you?
No business owner succeeds — or should try to create a succession plan — alone. One idea to consider: Form a board of directors consisting of people you trust who are familiar with your industry. It can serve as a voice of reason among the often cacophonous tumult of a business transition. Moreover, such a board can help you assess the strengths and weaknesses of potential successors unrelated to your personal concerns or biases.
A board of directors is also helpful in assimilating a new boss into the business. Board members’ varied perspectives usually provide a more objective and collaborative approach to analyzing succession problems and developing fresh solutions. They can further assist by mediating organizational disputes, giving feedback on your heir apparent’s progress and reassuring business stakeholders.
What’s your successor doing?
If you’ve chosen a successor, put him or her to work. Co-owners, board members and employees are more apt to follow a replacement’s lead if they feel confident in his or her knowledge and skills.
For instance, let your successor gain experience examining financial information for tax and financial reporting compliance and profitability analysis. In addition, allow him or her to spend time among your HR staff to learn about your hiring methods and benefits issues.
Don’t hesitate to let your heir apparent get his or her hands dirty, either. Put your prospective replacement on the front lines with your sales staff or, if you’re a manufacturer, down on the plant floor to see how your business really operates.
While your successor gets acclimated, you may want to hire an interim manager. His or her objective industry and supervisory experience can be invaluable in training your next-in-line. But you must give the interim manager executive powers, including the ability to guide careers and make employment decisions.
How will you break the news?
Maybe it’s many years away, maybe it’s sooner than that. But don’t wait too long to reveal when you’re leaving the company and whom you’ve selected as a replacement. Giving everyone ample notice (as long as one to two years) will allow plenty of time for employees to voice their concerns about your successor and the transition as a whole.
Break the news gently to gain their support for the new boss while giving them good reasons to stay with your company. If disagreements arise, discuss the issues openly. Seek compromise by enabling your successor to exercise his or her newfound decision-making authority but stay involved as a consultant to ensure he or she doesn’t alienate staff.
Refining the finer points
These are, of course, some of the “big picture” questions to ponder. Your financial advisor can help you answer them as well as refine the finer points of your succession plan.
No article, email, web site content, or other communication from Fox, Byrd & Company, P.C. (the Firm) may be considered advice or a recommendation to any person, business or other entity. The Firm renders advice and recommendations only to its clients. The reader may not rely on any article, email, web site content or other communication from the Firm to create a client relationship with the Firm. Advice and recommendations are rendered by the Firm only when the Firm has been specifically engaged to provide advice and/or recommendations.©Copyright, Fox, Byrd & Company, P.C., Dallas, Texas.