How Do You Plan for a Sudden Loss of Leadership?

Jun 24, 2011

You usually don’t like to think about your final breaths here in this world, but with a family-owned business, along with grief, the subject arises sudden and unexpectedly – what do we do about vacant leadership in the business?  At some point following a tragedy, thoughts must focus back on the business.  What needs to be done?  Who will do it?  How and when will it get done?


We don’t want to think about the possibility of a sudden death, but unexpected things happen.  Like when my father suffered a debilitating stroke.  As surviving siblings those decisions needed to be made.  Our employees, customers and our father’s legacy depended on maintaining the operations of his manufacturing business.  Even before his death, bills needed to be paid, work needed to be completed, payroll had to be met and plans had to be made regarding where the business was going in the future.  Through careful planning, however, you can help your associates and family members cope with an unforeseen event of this nature.  You can protect and strengthen your business in the process. 


Annual strategic planning sessions which cover future business planning is an excellent opportunity to address leadership succession. Let’s look at three areas of leadership to consider in succession planning – leadership roles, successor selection and what it will take to survive.


Leadership Roles – What business functions does leadership perform?  If you or one of your key employees died, would anyone know where to pick up where they left off?  Are there written job descriptions for others to follow?  As an owner, consider your specific roles and responsibilities as the business manager.  Those might include – banking, budgeting, risk management, hiring, training, product development, as well as setting the direction and goals for the business.


Leadership Succession – Who will perform these duties?  After determining what the leaders do in your business, decide who will assume those duties if it becomes necessary.  Tasks and key responsibilities should be assigned to specific positions rather than to individuals.  Transition planning rarely goes smoothly when a company tries to replace leaders with individuals.  There is usually no such person who can fill their shoes.  My father was a master of invention.  Given a task to complete and some time to think about how it needed to work – he could do about anything mechanical with steel.  None of his successors had those skills. Skills such as planning, finance, banking relations, employee management, customer relations and operations could be managed by family members and the remaining employees. 


If you are the one in charge, chances are no one could replace you, either.  Family members might inherit ownership, but may not want to or be capable of handling the day-to-day operations of the business.  These tasks should be delegated to those who have the skills and abilities to perform them.  Others may take leadership in setting the overall direction for the company’s future. 


What Leadership Needs for Success – What is needed for the business to succeed?  Identify what each leader might need to perform the tasks ahead of them.  Heirs could potentially assume responsibility and control of the business without knowing everything you do, but consider training them now.  Survivors will certainly have financial concerns as well, so do some financial planning for the future.  Teach future owners how to make better financial decisions, resolve their differences and how to collaborate.  Head off issues with trusts, wills, shareholder agreements or buy-sell agreements.


Balance what the business needs with what the owners want from the business.  Balance the interests of both the owners and managers to head off potential problems and power struggles.  With regard to management, now is the time to identify and train individuals to take responsibility in short notice.  How would their roles change?  What skills would they need that the business could help them develop now, that would help it succeed?


Planning for leadership succession will be time-consuming and won’t be completed overnight, but it will be time well spent.


This blog post was written by Leonard Holler, Wyoming Entrepreneur Regional Director, CPA, CVA

Category: Business Planning

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