Succession Planning: A Critical Part Of Management & A Business’s Ongoing Success
January 21, 2015 | By Vela Wood
“How much do you weigh?”
There are some questions so personal and invasive social mores dictate that they should never be asked. Well, almost never asked. A colleague remarking about any extra poundage I was carrying as a result of the holidays is always off limits. A doctor remarking about a rapid 50 lbs weight gain on the other hand, is probably a conversation that needs to be had.
Just as doctors get to broach otherwise off-limit topics in order to treat their patients, our job as lawyers at VW requires us to diagnose the health and well-being of our clients’ businesses – a task often accomplished by asking those tough, awkward questions. One of the touchiest topics for business partners to discuss is ownership allocation, which is why some clients avoid the topic all together at the beginning of a business only to deal with a headache further down the road. Recently I’ve been struck with clients’ avoidance and oversight of another, and what I might argue, equally important aspect of any sound business: the succession plan.
A succession plan is like a will for your company. And like death, succession in some form or another is inevitable. Succession generally takes one of two forms. The first type of succession occurs naturally over time, such as when a CEO plans to retire and is grooming his or her successor. The more ominous type of succession happens when an unplanned event such as an illness or an accident triggers an immediate change in leadership or other key personnel.
You may recall this exact situation from the mid-90s classic comedy “Tommy Boy.” The death of big Tom Callahan puts the viability of the entire Callahan Auto Parts organization at risk. The banks panic, lines of credit get called, and handshake agreements become tenuous. A sound succession plan could have prevented all of these, but it also would have deprived us of the hilarity which ensued.
Let me be clear, a succession plan cannot guarantee that a transition will go seamlessly. However, having a roadmap calms internal and external stakeholders and helps a company’s continuity should disaster strike.
Whether you’re a startup or the third-generation to run a family business, it’s never too early (or too late) to think about succession planning. Let us know how we can help.