Family Business Succession Planning Advisors – The Rawls Group,” video features Loyd H. Rawls, The Rawls Group’s founder and CEO, and focuses on the specific factors that impact a business’ success as well as Rawls’ personal experiences, approach and philosophies about the business succession planning process.

For more information visit www.seekingsuccession.com

Duration : 0:2:52

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For more information visit www.seekingsuccession.com

Duration : 0:4:6

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Technorati Tags: business succession planning, exit planning, exit strategy, family business issues, family business problems, the rawls group

Business Continuity Planning

The Disaster Recovery Journal (DRJ) defines Business Continuity Management (BCM) as “A holistic management process that identifies potential impacts that threaten an organization and provides a framework for building resilience with the capability for an effective response that safeguards the interests of its key stakeholders, reputation, brand and value creating activities. The management of recovery or continuity in the event of a disaster. Also the management of the overall program through training, rehearsals, and reviews, to ensure the plan stays current and up to date.” (n.d.)

Within the scope of BCM comes succession planning, defined by DRJ as “A predetermined plan for ensuring the continuity of authority, decision-making, and communication in the event that key members of executive management unexpectedly become incapacitated.” (n.d.)

The Importance of Planning

Why are these planning aspects critical to businesses and governments? Planning to do business during a crisis is critical to being able to perform essential functions during and after the crisis. The prognosis for those without a plan is certain business death:

Of businesses without a disaster recovery plan:

While this article is not about farm succession, it is about business succession meaning that it is very likely to be relevant to any sort of organizational succession planning you are interested in.

> 80% will fail in just over a year,

> 43% will not even reopen,

> 93 percent that experience a significant data loss are out of business within five years according to the U.S. Bureau of Labor. (Hatter, 2004)

Clearly, the evidence supports the need for a business to be prepared for disasters. The question then becomes, “What is a disaster?” DRI International offers the following as the definition of a disaster: “A disaster is a sudden, unplanned calamitous event that creates an inability on an organizations part to provide the critical business functions for some predetermined period of time and which results in great damage or loss.” (2006)

Implied in the DRI definition is the loss being to an “unacceptable” level. If a sudden, unplanned event occurred that prevented the business from performing critical business functions and was going to result in a loss of fifty million dollars due to law suits, but the company carries insurance for one hundred million dollars, the loss may not be “unacceptable”.

The loss has been mitigated with the insurance; however, the company may now be battling a public relations issue related to the law suit. As pointed out in a Harvard Business Review, “Companies sometimes misclassify a problem, focusing on the technical aspects and ignoring the issues of perception.” (Augustine, 2000)

Utilizing this definition of disaster opens the planning paradigm to many different scenarios outside the traditionally defined natural, manmade, technological, and terrorism events.

Suddenly the definition of disaster allows for more varies considerations, including product recall; class action and individual law suits; and executive defection, resignation, termination, arrest, contract expiration, or death. All of these items can create “an inability on an organizations part to provide critical business functions…which results in great damage or loss.”

Denial

The definition of disaster also helps mitigate another phenomenon in crisis response: denial. As Augustine points out, “This stage of crisis management is often the most challenging: recognizing that, in fact, there is a crisis.” (Augustine, 2000) Setting a quantifiable threshold for “unacceptable” loss allows executives to discern that there is a crisis situation that requires a response. It is only when the crisis is acknowledged that the inevitable effects can be mitigated.

Succession Planning

Wikipedia defines succession planning “as the process of identifying and preparing suitable employees through mentoring, training and job rotation, to replace key players such as the chief executive officer (CEO) within an organization as their terms expire.”

As explained in this statement by Brent Filson, “It’s a common occurrence, a CEO leads a company to record earnings, retires and in just a couple of years, those once high-flying earnings are dropping like shot ducks. ”

“Observers blame the new leadership team. But most likely the observers are wrong. It’s not just the new leaders who are screwing up. Instead, it was most likely the former CEO… So when a decline follows the departure of great leaders, the safe bet is that those “great” leaders haven’t hired and developed leaders – and so really weren’t great at all, no matter what results they got.” (Filson, n.d.)

A trait of excellent military leadership requires the leader to develop the personnel below him to ascend in to the position the leader occupies so the leader is free to move up the ranks, or so the subordinates are capable of handling battlefield situations if the leader is incapacitated.

A military unit should not have the survivability of a snake, where cutting off the tail is not a problem, but cutting off the head (leader) results in the death of the unit.

Development of the next generation of leader is a paramount task. “It is instructive here to recall that Noah started building the ark before it began to rain.” (Augustine, 2000) Prior planning prevents poor performance. Without the proper methodology being utilized to prepare for personnel turn-over or unavailability, the corporation can be sent into panic hiring, can fail to continue to implement strategic plans because of the loss of a key individual, and multiple other pitfalls because they were not ready.

Short Term Needs

Planning must account for short time frame notification items. What does the company do when two executive VPs are killed in a plane crash? Who has been groomed and is ready to be “acting” in their place until they can be either ramped up to the permanent replacement or until an executive search reveals the best candidate?

When a top executive resigns and moves to a competitor, has the company already instituted a program to ensure that individuals know that strategic plans, customer accounts, and other vital critical business information is in fact the exclusive property of the company and had these key individuals sign off on non-disclosure agreements?

If they had not done this prior to hiring the defecting manager, are they prepared to ensure that incoming key personnel are required to affirm their loyalty in exchange for the position?

Mid-Range Needs

Personnel will retire. The text gives the example of GM and their planning process. Any company that is not preparing a like plan for grooming and testing the capabilities of personnel who may be tapped to be the top executive must seriously consider how prepared they really are to do business. Failing to plan is, in effect, planning to fail.

Retirements with long lead windows give companies ample time to try people in the proposed position, to be more closely mentored, or to be given charge of substantially more responsibility to see how they are able to handle the situations that they will be confronted with when they are given the nod.

Long Term Needs

The United States is entering an era where the baby-boomer generation population will begin to affect balance in the worker availability pool. Starting in 2010, the demographic growth-rate balance starts to shift, and by 2015, the 65-and-over age group starts to grow at a faster rate than the 20-to-64 age group.” (Allier, J.J. and Kolosh, Keneth, 2005)

“Organizations that understand the immediacy of the baby boom exit and thoughtfully prepare for it will be in the best position to achieve unmatched success.” (Allier, J.J. and Kolosh, Keneth, 2005) The authors offer questions businesses should be asking themselves to prepare for the coming demographic change. Some of them are:

> What are your company’s demographics (age, gender, position, years in position and anniversary date)?

> What are your company’s retirement policies? Is early retirement encouraged or discouraged?

> What mechanisms and programs must be put in place now to capture key competencies and critical work knowledge of employees who will be retiring?

> Will your organization need to increase its reliance on new immigrants?

> If your organization is offshoring, what is the age breakdown of your overseas partners?

> Will your offshoring partners face a labor shortage that may impact their ability to provide services?

(Allier, J.J. and Kolosh, Keneth, 2005)

Allier and Kolosh also point out that businesses need to position themselves to deal with the needs of an aging population. There may be a need for unique skill sets and competencies, as well as a need for new or modified product designs to be marketed to the aging population. These issues tie back into business continuity planning. To continue to be competitive in the future, businesses have to prepare for the shifting change in the average age.

Not Just for Executives

When developing succession plans, it is important to remember that the scope should not be narrowly focused to just the executives of the corporation. Steve Nelson, the MSPB’s policy director, said, “Succession planning is often focused on top leadership when we need to be looking at critical skill areas at all levels.” (Welles, 2006)

Marta Brito Perez, associate director of human capital leadership and merit system accountability at OPM, said, “Succession planning has nothing to do with age. Succession planning is just identifying high-risk jobs and how to fill them.” (Welles, 2006)

The Process

The process of succession planning entails assessing what positions are critical to have a succession contingency plan. The positions are assessed, and then the skill sets of the candidates that could fill these positions are assessed, factoring in the time frame that would be required to get them up to speed for the position.

A training program must then be implemented to ensure that there is progress in bringing these individuals closer to a more immediate insertion rate in case a planned position turns over. This will ensure a more seamless transfer for the person in waiting and provide a measure of corporate stability in a challenging time.

Summary

Succession planning is one piece of the overall business continuity planning process. It is a piece that cannot be over looked. Ignoring succession planning will leave the company without properly developed managers and key personnel to fill the shoes of those who leave for whatever reason.

References

(2006). BCP 501: Business continuity planning review 2006. Washington, DC: DRI International.

(n.d). Business continuity glossary. Retrieved May 1, 2007, from Disaster Recovery Journal Web site:

Allier, J.J. and Kolosh, Keneth (2005, June). Preparing for baby boomer retirement. Retrieved May 13, 2007, from Web site clomedia

Augustine, Norman (2000). Harvard business review on crisis management. Boston, MA: Harvard Business School Publishing.

Filson, Brent (n.d). A different leadership yardstick. Retrieved May 1, 2007, from emergingleader

Hatter, Dave (2004, August 6). Without a disaster recovery plan, your business at risk. Retrieved May 12, 2007, from Cincinnati business courier Web site:

Welles, Judy (2006, May 22). Welles: Successful succession planning: Be prepared by matching talented employees to leaders before those leaders depart. Retrieved May 3, 2007,

Mr. Reilly is the President of Emergency Solutions Ltd. His credentials include Certified Emergency Manager from the International Association of Emergency Managers, Certified Business Continuity Professional from DRI International, MBCI from the Business Continuity Institute, and he is a Master’s Degree candidate in Public Administration. His company provides the following services: - emergency planning, - business continuity planning, - training in incident command, emergency response, hazmat response, - health and safety program development and training, - table top exercises, functional exercises, and works with partners for full-scale exercise delivery. - Compliance assistance with NFPA 1600. Past clients include county government, colleges and universities, and private corporations. Contact Emergency Solutions Ltd. today to discuss your project. We canhelp you achieve success! Mr. Reilly can be reached through the company’s website. (c) 2007 Daniel J. Reilly. All rights reserved. Article Source: http://EzineArticles.com/?expert=Daniel_Reilly

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Technorati Tags: business succession planning, Daniel J. Reilly, Importance of Succession

The plan itself might or might not have achieved the family’s objectives for farm succession and transition to the next generation, but it ran out of gas before it was ever completed.

It ran out of gas because there was no one in charge – no one without an axe to grind that is, who was willing to ask the hard questions and push for the answers – so the plans could actually be created and implemented based on good information.

Most succession plans or estate plans or whatever you choose to call them are sold.

That is, someone sold you or your folks or whoever is in charge on the idea that planning for the future succession of the farm is a good thing to do and they are just the person to help you do it.

There’s certainly nothing wrong with that, often we must be “sold” in order to break the inertia that surrounds us. When we were kids we had to be “sold” on taking a bath, brushing our teeth, and putting our toys away. Nothing really changes – the things we know down deep we really ought to do won’t get done unless we’re sold on the benefits of doing them right now.

It’s just that we we’re sold something we either have to stay sold or we’ll lapse into whatever “someday it will all work out” frame of mind we feel comfortable in.

For us to stay sold on farm succession and planning we’ve got to have someone in charge of the process who’ll collect the information the advisors require. When no one is in charge the data received, if it ever is, by your advisors will probably be inconsistent and/or inaccurate.

For example I have heard of farmers, not someone like you of course, providing low-ball figures to their estate planning adviser so they’ll come up with more favorable figures – for them. Inaccurate data at planning means unpredictable results at settlement time. Not what you really want is it?

And what about our advisers inflicted by the NIH syndrome? If you or your folks have advisors who believe that the last good idea to come along was one of theirs – that ideas “not invented here” are not worth considering – you’ve got a potential problem on your hands. What if they are not only wrong – they are unwilling to hear your thoughts or those of other advisors?

I have seen this attitude cause fathers and sons to end up on opposite sides of a conflict that was actually created by an advisor so full of their own infallibility that nothing could be done to move the process forward and away from “the way we’ve always done it.”

Farm succession and ownership transition planning is too important to be left to chance, to the prejudices of others, or even to the pulls and pushes of our personal loyalties.

Naturally your professional advisors want to help. They most likely have the competence necessary to help you work through the technical and planning issues – once the personal goals and wishes are clearly identified.

But you advisors need your help too. They need for you to take charge of the process – it’s your farm – it’s your responsibility – gathering the answers to what’s important is your role – by putting somebody in charge. Somebody who’ll do the leg work.

That somebody we call the planning coordinator, the person appointed who will make things happen.

When it comes succession and planning the role of the planning coordinator is to act as a sounding board – listening to everyone, and I mean everyone. They must also make sure the word gets through to everyone – whether it’s good news or not. They must push for answers to their questions always asking for decisions and actions! And they set and keep the planning schedule – keep the heat on – focus on results.

The good news …

It does not require any experience to be the planning coordinator – in fact common sense is really all you need.

That and a desire to be part of the solution.

Wayne Messick

Link to PressBox – why most famr su succession plans fail

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Technorati Tags: business succession planning, Family farm succession, Farm succession planning

The truth is that there really is only one most important key to succession planning and it is not what you are probably thinking.

Some may say it is getting good advice, or taking advantage of planning strategies, or figuring out what others are doing successfully, or slipping through some clever business management succession loophole.

Or maybe it’s having a conflict free atmosphere at the plant or developing better relationships at work?

Well, you’d be wrong.

Recommended Reading

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• Farm Succession and Strategic Planning Group

Technorati Tags: business succession planning, Farm succession planning