Council Post: Creating Momentum In Your Succession Planning Process

When taking on a new succession planning assignment, I always ask clients to do some homework to prepare themselves for what lies ahead. I advise them that there are separate and parallel paths for planning business succession versus ownership succession. The latter tends to revolve around personal wants and needs and is more subjective.

The planning process is a bit like blazing a path through a dense jungle. You have a sense of where you want to go, but you can’t see very far ahead of where you are, and the footing is hazardous. So, you take a step or two, reassess your position, and think about the next few steps. There is rarely a straight path forward, and you progress in fits and starts depending on what the issues of the moment may be.

Creating A Plan: Business Issues

To acquaint them with the issues, I ask clients to write out the answers to these questions:

What is the state of the business today? How healthy is it? It is important to be realistic about what you own and control. This discussion will anchor the process going forward.

What are the industry issues I cannot control and have to accept? Do you have a firm grip on your competitive position? Your industry fundamentals likely control your growth rate and profitability.

What is the growth potential of the business? What might a new owner do with the business? When you look to exit ownership, you need to look at the business as a new owner would. What are they likely to want to do with it? Why do they want your business?

What investment may be needed to maximize the growth potential? That includes people, money, technology, real estate, partnerships, etc. What investment will the new owner need to make to achieve the potential you envision? How does that impact how you market the asset?

The business issues are more numerical and fact-based. They are discussed, every day, with the management team, customers and suppliers.

Creating A Plan: Personal Issues

Business issues are usually easier to wrestle with because they are about the everyday work that you do. But assessing your personal wants and needs can be challenging, circular and sometimes frustrating.

What are your personal goals (financial, lifestyle, family, health, philanthropy)? This question is often the hardest and needs the most consideration. There is no reason to rush it, and no reason to think there is only one right answer.

What are the issues and concerns of your family? If you have a family business, what are the family issues you need to contend with in your exit planning? Yes, this may a tough one. If you are struggling, a family business consultant may be needed to deal with family issues.

What are the business and personal risks that need to be weighed? What risks are you unwilling to accept? At some point, you know what you just can’t tolerate. So, it is better to identify the no-go situations upfront and use those constraints to find a path forward.

Setting Priorities

When you put these pieces together, do clear priorities present themselves? If the path forward is still murky, then you may need to work harder to define, clarify and understand the issues. Keep working the issues until priorities come into focus.

How do we translate these priorities into specific scenarios and action plans? What are the pros, cons and risks of each scenario? 

Once you have a set of business and personal priorities, get out your machete and start marching through the jungle. As in a movie, keep the group together, and beware of quicksand and other threats — they could be anywhere. But trust your instincts and follow the data.

Driving The Action Plan

Unlike a jungle safari, you can have reasonable visibility when planning your succession process. In the jungle, it is unsafe to stay in one place too long; it is usually better to keep moving.

The analogy in business is that not making a decision is a decision, and it usually winds up being a bad one. It is usually better to make a decision and, if it doesn’t look good, adjust course based on what you learned. This is similar to agile programming in software.

So what is the time frame for action? When do you have to, or should you, make a decision, even if you are not completely comfortable with the outcomes?

In business school, I was taught that the ultimate act of leadership was to replace oneself, making the successor successful and taking oneself out of the spotlight. That is the sum of the succession planning process: You are really doing some tough work to benefit others, not yourself. That is the sign of a leader.

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