11 things to consider during succession planning

By Michael Lamm May 17, 2019

As a Mergers and Acquisitions Specialist, I have the opportunity to consult with many business owners who are considering an exit strategy. While some of these business owners will have already decided to sell their businesses prior to our meeting, others are undecided.

When consulting with owners who are undecided, I recommend a wellness check-up for their succession-planning process. Following is a succession-planning checklist that could help lead to a clean bill of health for your company:

Determine upfront what is important to your company. Your succession plan should reflect your company’s mission statement. For example, one company may be dedicated to disruption, while another may seek continuity of time-honored processes and practices. These two mission statements may require the disparate skills of different leadership teams.

Be transparent. Transparency in all things is a good practice. This holds true for succession planning. Insufficient candor and transparency will produce court intrigue and unhappiness. Whichever method you choose to pull back the veil, make clear to your management team members where they stand regarding future leadership roles.

Be fair. Weigh your succession plans against key employees’ expectations. Be honest if they are not in harmony. If possible, work with the employee to find other paths leading to job satisfaction. For example, task forces, committee membership and charitable initiatives. Be mindful of what is important to this employee. If this is not possible, be candid regarding any disconnects.

Be proactive. Until tomorrow is guaranteed, succession planning should begin in earnest at the earliest possible date. Investors and lending institutions will insist upon it.

Look into the future. While none of us has a crystal ball, we are able to make certain predictions. One safe prediction is technology will become increasingly important for companies wishing to succeed in the marketplace. The ability to react to fast-moving events has also increased in importance. Climate change looms larger over potential supply chain disruptions. Your succession plan should anticipate shifting requirements for executive skills.

Factor in culture. Each company is characterized by its own internal culture. Succession planning should factor in your company’s unique culture. A top-down leader would prove to be ineffective in a bottom-up organization. A risk-adverse executive may stifle the creative energy of a risk-tolerant culture.

Don’t leave a mess behind you. You owe it to loyal staff to get succession planning right. Wrong choices, poor decisions and insufficient planning will only serve to destroy your legacy. Your succession plan may be the last important thing you do as your company’s leader. Commit to getting it right before turning off the lights on your way out.

Have a contingency plan. When Bill Parcells retired as head coach of the New York Jets football team, there was a clause in his contract naming Bill Belichick as his successor. Belichick resigned the day he was scheduled to assume team leadership. Nineteen years later, the Jets have cycled through five head coaches. Since even good plans can come undone, it is an excellent idea to have a contingency plan in place.

Be mindful of your own limitations. Like your chosen successors, you are not perfect. John D. Rockefeller, who continues to hold the record as the richest American, had this to say about his relationship with his wife Laura, “Her judgment was always better than mine. Without her keen advice, I would be a poor man.” Like Rockefeller before you, accept your fallibility.

Enlist the assistance of a rabbi. This person, or persons, can help to fill in your own shortcomings. Test your hypotheses. Consider alternate scenarios. Build a case for your succession plan, and then deconstruct it. Detail your thesis and ask your trusted advisors to punch holes through it.

Be creative. Succession planning is no time to be boring. Consider not-so-obvious choices. George Young, who was general manager of the NFL's New York Giants, said Belichick would never be head coach of his team when Belichick worked in that organization. He was too sloppy. While Belichick may have been sloppy, I also think it is safe to say the Giants’ buttoned-down general manager wasn’t very creative.

There is something about succession planning causing it to be intrinsically unappealing. It speaks to our impermanence. Which one of us doesn’t wish to be forever young, vital and healthy? The company we leave behind, though, can become our living legacy.

Properly planning for your own succession can, over time, count as your greatest success.

As a managing partner at Corporate Advisory Solutions (CAS), with offices in Philadelphia and Washington, D.C., Michael Lamm oversees and executes on M&A engagements, investment opportunities, compliance/regulatory assessments, strategic consulting, valuation and expert witness litigation matters for constituents of the Outsourced Business Services (OBS) sector. Michael can be reached at mlamm@corpadvisorysolutions.com or 202-904-7192

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