Succession Planning

Presented by:Wm. (Chip) Valutis, PhD

Surrogate Court Committee of the Bar Association of Erie County

“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

SuccessionThe phrase implies:

• An Event — occurs the day the boss quits

• An End — seen as a destination or date in time

• Negativity — 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 (continuous)

! ! ! An ever-evolving phenomenon

Most of all, succession is…

! ! ! ! ! ! A journey

Adequate Preparation is the Key

This includes:

• An agreement or willingness to go onthe trip

• A common destination and/or general direction

• Milestones for monitoring progress

• Fuel to sustain your journey

• Fundamental skills for dealing with trouble

Critical Milestones1. Entry of the next

generation

2. Agreement to perpetuate the business

3. Completion of strategic plans

4. Completion of estate and financial plans

5. Identification of a successor

6. Transition of power and control

7. Competence and satisfaction in new roles

Guide to Obstacles:A Checklist for Failure

• Secretive environment; little communication or candor

• Triangulation: Communicating concerns to anybody but the source

• Conflict which has remained active and unresolved for years

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Continued:

Guide to Obstacles:A Checklist for Failure

• Mystery guests: impact of spouses and others not directly involved in the business

• Families who “stuff” their feelings until periodic explosions occur

• Family dynamics and issues

Tips for SuccessThe Business

• Clear responsibilities and appropriate authority

• Accountability and consequences for performance

• Constructive contention

• Sound decision making and problem

Tips for SuccessThe Family

• Support and encouragement

• Non-family mentoring

• Appropriate education and outside experience

• Freedom to risk

• Conflict management and communication skills

Tips for SuccessThe Advisors

• Clarify roles and boundaries with the owner/family/business

• Challenge clients/deliver bad news

• Facilitate understanding instead of agreements

• Encourage multi-discipline interaction

Tools to Prevent Problems

• Guidelines for entry into the business

• Formal developmental plans

• Family councils, meetings and/or retreats

• Codes of Conduct

• Mission Statements or Family Creeds

• Advisory Boards or outside mentors

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Questions Parents MustAsk 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 abilities?

• Am I able to take time away from the office without worrying and constantly checking in?

Continued:

Questions Parents Must Ask Themselves

• Have I attempted to impart all I know about running the business to my successor?

• Do I trust my successor’s judgement when it comes to handling, spending and allocating company money?

• Have I openly championed the talents of my successor to our clients? Allowed him/her room to deal with them without interference?

Questions Successors MustAsk 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?

Continued:

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 initiate 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 criticized, can I accept and objectively evaluate the feedback?

• Do my siblings/family and I share a common vision for the business?

Questions Advisors Can Ask• Are you committed to family succession? Is it a

dream you deeply feel?

• Will your spouse and you be financially secure after retirement?

• Will you choose a successor and set a firm date to pass the baton?

• Does an absorbing new challenge or interest await you after you leave?

Continued:

Questions Advisors Can Ask

• 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 information?

• Do you truly believe there is life after retirement?

Valutis Consulting is a full service management consultant firm. Our approach is to investigate and understand organizational issues, customize realistic solutions and design practical strategies to move clients toward their specific business and personal goals. Our mission is to help our clients unlock the potential of their organization and its people.

Please feel free to contact us with any questions or to schedule an appointment to discuss your organization’s needs and how we can help.

(716)634-2553

chip@valutisconsulting.com

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