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February 10, 2002 at 07:00 PM
Succession Planning Fundamentals
A good succession plan is critical to every business because, as I was once told, a business without a succession plan is not a business, it is someones hobby.
In this article, I will offer some general thoughts on approaching these ideas and guiding a client through a succession plan.
Objectives. Prior to entering any succession planning discussion, the three most important points to cover with a client are: (i) objectives, (ii) objectives, (iii) objectives. Similar to how important “location” is to a piece of real estate, helping a client nail down his objectives at the start of a discussion is paramount.
If youve been through a number of succession planning discussions, you know the outcomes can be interesting, unique, customized, and very technical. However, despite how easy it is to “cut to the chase” and get right into a plan that you think may fit based upon your knowledge of the situation, you must force yourself to back up and start with their opinion of their objectives.
Many times, our initial impression and the plan we would have recommended are changed by opinions we later unearth from our client, their family, partners, employees, attorney, or investors/lenders. Similarly, we often are hired to “clean up” a succession plan that is deemed to be imperfect–usually, it is simply because the objectives arent met (or have changed).
Often a client will have only a partial handle on the end game they would like to achieve, and frequently they will have even less of a clear picture. In these cases, your role in pinning down the objectives and reviewing them periodically throughout the process is critical.
To help cement clients’ objectives:
–Offer them examples of the results of other succession plans that either you have worked on, or those of others that you can cite, so they can begin to “try on” different approaches.
–Whether or not they believe the end game is clear, it is instructive to begin the dialogue by engaging them in a fact-finding discussion, and then transcribe minutes from the meeting. Provide these minutes to your clients and suggest that they review them in detail, make any corrections that are appropriate, and supplement them with what their view of their objectives may be, after having read their own thoughts via the minutes of the meeting.
We often receive very positive feedback on this process–the reviewing of the notes, especially, helps clients to focus their thoughts. Giving them this kind of “homework” raises their level of interest and ownership in the task at hand.
–However you get to the objectives, commit them to writing, and use that piece as part of a mission statement which, although it will be revisable, will very much help to guide future discussions and stay on track.
Succession Plan versus Estate Plan. Dont try to solve them simultaneously, but keep one plan in mind while working on the other, and make a clear transition from one discussion to the next immediately after the first one is resolved.
