a guide for family business succession planning
TRANSCRIPT
SUCCESSION PLANNING
Presented by: Wm. (Chip) Valu9s, PhD
www.pcg-services.com
“The final test of greatness in a CEO is how well he chooses a successor and whether he can step aside and let his
successor run the company” Peter Drucker
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SUCCESSION
The phrase implies:
• An Event — occurs the day the boss quits • An End — seen as a des9na9on or date in 9me • Nega:vity — being pushed out the door or placed on a shelf; influence stops
• A Barrier — something that must be overcome or removed
Succession is…
A new beginning A process A racetrack (con:nuous)
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A journey
Most of all, succession is…
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ADEQUATE PREPARATION IS THE KEY
This includes: • An agreement or willingness to go on the trip
• A common des9na9on and/or general direc9on
• Milestones for monitoring progress • Fuel to sustain your journey • Fundamental skills for dealing with trouble
CRITICAL MILESTONES
1. Entry of the next genera9on
2. Agreement to perpetuate the business
3. Comple9on of strategic plans
4. Comple9on of estate and financial plans
5. Iden9fica9on of a successor
6. Transi9on of power and control
7. Competence and sa9sfac9on in new roles
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Guide to Obstacles: A Checklist for Failure
• Secre9ve environment; liRle communica9on or candor
• Triangula9on: Communica9ng concerns to anybody but the source
• Conflict which has remained ac9ve and unresolved for years
• Mystery guests: impact of spouses and others not directly involved in the business
• Families who “stuff” their feelings un9l periodic explosions occur
• Family dynamics and issues
TIPS FOR SUCCESS
The Business • Clear responsibili9es and appropriate authority
• Accountability and consequences for performance
• Construc9ve conten9on • Sound decision making and problem solving
• Clear boundaries
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TIPS FOR SUCCESS
The Family
• Support and encouragement
• Non-‐family mentoring
• Appropriate educa9on and outside experience
• Freedom to risk
• Conflict management and communica9on skills
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TIPS FOR SUCCESS
The Advisors • Clarify roles and boundaries
with the owner/family/business
• Challenge clients/deliver bad news
• Facilitate understanding instead of agreements
• Encourage mul9-‐discipline interac9on
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TOOLS TO PREVENT PROBLEMS
• Guidelines for entry into the business
• Formal developmental plans
• Family councils, mee9ngs and/or retreats
• Codes of Conduct
• Mission Statements or Family Creeds
• Advisory Boards or outside mentors
QUESTIONS PARENTS MUST ASK THEMSELVES
• Do I listen openly to my son/daughter about his/her plans for the business? Do I encourage such dialogue?
• Am I able to encourage autonomy and hand over areas of responsibility to my successor?
• Do I feel confident about his/her leadership abili9es? • Am I able to take 9me away from the office without worrying
and constantly checking in?
QUESTIONS _____ MUST ASK THEMSELVES
• Have I aRempted to impart all I know about running the business to my successor? • Do I trust my successor’s judgment when it comes to handling, spending and alloca9ng company money? • Have I openly championed the talents of my successor to our clients? Allowed him/her room to deal with them without interference?
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QUESTIONS SUCCESSORS MUST ASK THEMSELVES
• Do I feel capable of managing this business? • Do I have enough experience to run this business? • Do I have a clear plan for how I would run the business? • Am I willing to take on as much responsibility for the business as my parents do? • Do I understand and respect my parents’ way of managing the business?
QUESTIONS SUCCESSORS MUST ASK THEMSELVES
• Whatever my role, do I willingly offer to take on more of the business and try to master it? • Do I seek out and ini9ate projects of my own and follow through on them? • Am I able to seek out and listen to my parents’ advice and comments on my performance? • If cri9cized, can I accept and objec9vely evaluate the feedback? • Do my siblings/family and I share a common vision for the business?
Ques:ons Advisors Can Ask
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• Are you fully commiRed to family succession? Is it a dream you deeply feel?
• Will your spouse and you be financially secure a]er re9rement?
• Will you choose a successor and set a firm date to pass the baton?
• Do you truly believe there is life a]er re9rement? • Does an absorbing new challenge or interest await you a]er
you leave? • Are you able to delegate decisions and authority? • Are you willing to let others take new business risks? • Do you trust key people with financial informa9on?
While the journey can be difficult, those that succeed enjoy many benefits. Be deliberate; be courageous.
Work the issue with sincerity and expect the best
from each other. The rewards are many.
Good luck!!