By JIM HAMILTON
In virtually any sport, a successful game plan involves preparation, assessment of options, and team development. The same process holds true for successful succession planning. If you're a business owner, preparation for the succession game should begin at your first thoughts of "letting go."
There are many options in transition planning, such as how you should transition the company, to whom, and when. Each of these options has a distinct path, yet there are commonalities no matter which form your succession process is going to take. These commonalities are critical to achieving success. They are designed to support the underlying objective of succession planning, which is ensuring the long-term viability of the organization.
Here are 10 steps that are crucial to any succession planning process:
1. Get a professional valuation of the business.
True market value (the price which an interested buyer will pay) can only be realistically determined by an unbiased, independent appraiser. Value assessments are arrived at using a formula of income-based multiples. An alternate formula is asset-based; arriving at a fair market value based on an on-site visit to appraise tangibles as well as intangibles such as personnel, intellectual property, goodwill, and competitive advantages.
In addition to determining market value, the assessment can help the owner determine the best time to sell, based on company performance and future growth potential.
2. Clarify and communicate your personal, financial ownership, and business goals.
To move forward in your planning, and for potential successors to understand the opportunity to take over, you need to communicate your intent to your company's leadership.
3. Avoid the common mistakes.
Some of the most common mistakes made in transitioning a business are:
• Not understanding the terms of the deal
• Being fixated on price
• Overvaluing stock
• Not having an exit strategy
• Jumping too early or waiting too late
• Not being aware of market conditions
• Not planning ahead.
4. Identify, develop, and deploy a leadership team that can take your place.
Whether your succession involves family, key employees, or outsiders, you should ensure that the team that will replace you is a good cultural fit for your company.
The incoming team should have common goals and abilities needed for specific leadership roles. Measure the new team's accomplishments by goals, not approach. Others may use a different approach than you, one which may be uncomfortable for you. However, as long as everyone arrives at the common goal, the approach is insignificant.
Employee communication is important throughout the process. It's particularly critical to convey the transfer of authority. The communication of authority must be understood by all individuals both inside and outside the company.
5. Openly align your goals and expectations with those of your key employees/successors.
Meet with key employees and successors to hold candid conversations on expectations. Present your thoughts and get their input. Then, together, establish a plan and agree upon the "look of success." This plan should include the roles and responsibilities of each team member, as well as any role you will retain during or after the transition.
6. Assemble a team of experts.
You will need a team of transition experts who are experienced in business succession. The specialists you need include an investment banker/ broker, certified valuation analyst, legal counsel, and financial counsel (for taxes).
7. Drive the process based on the future needs of the business.
The business needs of the future are the foundation on which all decisions should be made. This includes the selection of the person who will champion the company going forward. Owners should involve successors in the planning to help them in the "letting go" process.
8. Ensure that your successors — and you — are ready.
Align the incoming team's performance, potential, and ability with the future needs of the business. This will provide the basis for the final development plan for the successor(s). Topic areas should include managing the work, the people and the money; learning to be an owner; and written transference of any information previously known only to the owner.
9. Document the plan.
The many options and elements of the succession process, along with potential changes that may occur throughout it, make it critical that everything be set in writing. This should include the vision, mission, and strategic plan; shared personal goals and expectations; and timelines, key dates, and transition points of both the development plan and the financial agreement.
10. Remember, it's a people business.
Business succession may be comparable to a game, but always remember that this game affects the lives and livelihood of all employees and families as well. Don't let succession impede your focus of caring about your people. Keep people at the forefront of your planning to help you achieve a successful succession.
|CREATING a LEADERSHIP TEAM That Can Take your Place |
Here are 10 tips to help you identify, develop, and deploy new leadership in your company:
1. Define the skills and abilities you need for specific leadership roles.
2. Assess the skills and capabilities of existing and potential/future leaders against those skills and capabilities you have defined.
3. Determine the specific leadership roles and areas of accountability that you would like to transfer to others.
4. Meet with the individual(s) to whom you would like to transfer the specific accountability to review your thinking on the matter and get their input.
5. Together, establish specific areas of responsibilities, goals, and the approach to measuring and monitoring the areas for which you would like them to provide leadership. Mutually agree on what success looks like.
6. Differentiate between goals and approach, recognizing that others might go about the process in a manner different than your own, perhaps in a way with which you might not feel comfortable.
7. Determine the resources and support the individual will require to be successful.
8. Define your ongoing role in terms of coaching (under what circumstances you will intervene in problematic situations). This must not be arbitrary or attempt to take back the authority you have given them.
9. Communicate to your company the transfer of authority that has taken place. Be ready to redirect individuals coming to you about matters that now reside within the leadership realm of the individual.
10. Define the leadership approach you will use to provide support remembering to tailor your methods to the style and preferences of the individual. In addition, when checking in on the accomplishments and status of the goals you have set for this individual, let the system be "the heavy." Never let your personal preferences or arbitrary perspectives drive your assessment or feedback to the individual. Let the performance plan speak for itself. It's important not to be punitive or reactionary in your approach. Use less-thanideal performance as an opportunity for coaching, and ask the individual how he or she might consider approaching a specific area in the future. Developing leadership in others is about letting individuals learn from their mistakes and letting them find their own way while being there to support them if necessary.
— Jim Hamilton
Plan Early, and Get Help When you need It
For Kathy Love, the realization that it was time for her to "let go" came when her company hosted a Nexstar Senior Peer Group meeting. Nexstar is a business development organization for independent contractors. The peer group helped Love realize that she was indeed ready to make her exit, and helped with the succession plan.
"Even if you don't know who the person will be that succeeds you, start thinking about a date and timing," Cagle says. "Start planning as early as possible. Talk to a planner, or peers who have done this before. The earlier you start planning, the better off you'll be."
Jim Hamilton is a business coach for Nexstar, White Bear Lake, MN, a business development organization for independent plumbing, HVAC, and electrical service providers. Nexstar offers experienced members and professional advisors to help coach parties through the sales or acquisition process. For more information, contact Bob Mallory at Nexstar, 888/6095490, e-mail email@example.com.