Exit Strategy Part 3 – Succession Planning

Funny how a discussion regarding politics and election cycles got me thinking about Succession Planning. The question that got all this really going had to do with how we raise up true Statesmen in our present political climate. Where do we find those that can be critical thinkers that act on principle and not on the dictates of a political party? The same questions are relevant to business. Where do we find and develop our next CEO, Vice Presidents, Boards of Directors and Small Business Executive/Owners?

So, we find the business entity in a moment of transition that is significantly going to affect operations. A senior executive is leaving. It doesn’t necessarily matter why but in this case; it is one of the top three decision makers in the entity. An Exit Strategy is being executed whether it is personal or that of the organization. What happens now? Let’s take a real life example; the CEO of General Motors (GM) is gone. The example being that I have defined every key person in the SMB environment as an executive and if your number one in the organization you’re most likely the CEO or President. What’s happening if you are gone? Who’s there to step in? Who will succeed you?

Succession planning is big business for Human Resources and Organizational Consultants. It is often thought of as the thing that heavy hitter and large corporations do to make sure that the good old boys keep the wraps on things. Wow, what wrong thinking that is. As we see with the GM example, the Board of Directors made a decision to remove the CEO and now are in a hunt for a new one not to keep an old boys club going but to increase the value of the company to the stakeholders.

The idea of increasing value of the business entity in a sustainable manner into perpetuity is a first principle of a Succession Plan. The basic concept for all businesses no matter what the size is should be to understand how to keep the entity moving forward with the inevitability that the most senior leadership will exit at some point for any of the reasons that I discussed in Exit Strategy Part 1. When someone heads out the door, what happens is a long conversation but the question here is – who is ready to step in?

I look at Succession Planning as an investment in critical assets of the business entity. As you know, I view a business as a Living Entity so that means there must be stewardship of that which is part of the entity. With that thought in mind, developing the individuals to succeed is critical to the growth and development of the business. Ensuring that someone will be able to step into the next role in leadership and management is critical. That is why I think that this list is some of the top reasons for a Succession Plan as part of the business entity Exit Strategy.

• It will prepare current employees to undertake key roles
• It develops talent and long-term growth
• It will improve workforce capabilities and performance
• It most often improves employee commitment and therefore retention
• It will meet the career development requirements of existing employees
• It will most certainly counter the increasing difficulty of recruiting employees externally
• If done right, it focuses on leadership continuity and improved knowledge sharing
• It will provide for more effective monitoring and tracking of employee proficiency levels and skill gaps
  

I believe that in short, Succession Planning is simply training and better yet, mentoring. I know, too simple yet very difficult to implement especially if there are a lot of ego’s in the senior management hallways. Just a quick reminder, the sustainability of the business entity isn’t just about you; it is about the longevity of the business.

OK, ego’s aside. All the HR experts and academics will agree that without a plan several things could happen to the organization such as:

• ß Loss of expertise and business knowledge
• Loss of business continuity
• Damaged client relationships
• Time and effort to recruit and train replacement employees
  

What are the basic things that should be in the Succession Plan?

• Identifying roles for succession
• Developing a clear understanding of the capabilities required to undertake those roles
• Identify top performers in all departments and make sure that they are engaged and satisfied to stay with you for a long period
• Prepare and develop employees to be ready for advancement into each identified role
• Understand the time needed to backfill the key roles
• Continually review and check the process of succession and whether planned individual development has taken place
  

You are thinking; well, I’m just a two, maybe a three person shop at best. What do I need to think about this for? I would suggest that you reconsider what Murphy can do in any business and that if you’re that entity that was just mentioned, what happens to the other couple employees if you exit unplanned? Honestly, any lack of planning leads to potential failure of the business. Without proper succession planning, the future success of the business is left to chance once the leadership is gone. Under these possible circumstances, if the entity succeeds at all, it is by default rather than planned.

Proper business continuity for sustainability is dependent on succession planning that can help prevent a business from being frozen and discontinued. If the business entity is family owned, a plan also helps avoid conflict among family member and between heirs and surviving owner-executives. Remember, that no matter the size of the business entity; it endures the same pain when it has to go through management changes. It all scales according to the complexity of the organization as a Living Entity.

If the entity is a corporation with a Board of Directors, the discussion does become even more complex when it comes to CEO and Board Member succession planning. It is even coming to the point that legislation is in effect for publicly traded companies that require succession planning for CEO’s. Ah, another discussion.

BI – Business Intelligence for Small Businesses or Business Continuity First?

The term business intelligence (BI) refers to technologies, applications and practices for the collection, integration, analysis, and presentation of business information and also sometimes to the information itself. The purpose of business intelligence is to support better business decision making. It dates to 1958.[1] D. J. Power explains in "A Brief History of Decision Support Systems,"1

This is a real mouthful for the small businesses that are non-employee based or fall into the category of less than 100 employee’s. As we note in our other comments and book, most small businesses are 1 to 10 person companies. The question becomes:

What is BI for the small business?

Simply put the rhetorical question to you is:

How important is you your information and can your company continue if something happens to you?

For the small business environment, I look at this as more of business continuity question. It is great to have all the data available for making decisions but what good is a lot of data (information) if it becomes overwhelming or that is all someone gets consumed with. What is important to the small and even medium businesses is simple and good information that keeps a positive revenue stream and how to get to that positive cash flow. We'll talk more specifically about using technologies and the resulting information at another time.

You, as the owner of a non-employee or low employee count company should look at what makes sense in maintaining your information technologies continuity as well as your organizational continuity in the event of a disaster. Many small businesses have unforeseen events occur that affect their location of business, often their homes, or their personnel, including themselves. I know, I talk about some of these personal experiences in the book. The important concerns for the business is to keep it operational in the event of a bump in the road of life. Continuity is Key! I just want to throw out some real basics to consider.

Data and information related
The question is: How important is your data? Too many small businesses never, never take the time to backup their data.

Quick things to do -

• USB memory stick technologies are cheap. This is cost effective removable backup storage.

• Removable or portable hard drives are cheap. Even the basic backup software in the Microsoft or Apple operating systems will work better than nothing.

• If you can, take your memory stick off site and keep it somewhere else. Just in case of fire, theft or other disasters.

• If you are still paper driven and not much about computers, take your files that are older than a year and put them in a storage unit out of your office. Heck, that does two things: keeps them safer and cleans up the office.

• Or, make copies and store them someplace.

Personnel related
If you are a non-employee business, the continuity of keeping your business operating in the wake of personal injury or disaster is totally dependent on your level of organization. If you have employee’s than ensure that you have trained one to two people with the capability of keeping things running if you are not around. Heck, you may not experience a disaster and just want to go on vacation!

Quick things to do -

• Have a road map to your processes and procedures.

• Have a list of where your important documents are. Keep this in an obvious place in your desk and have it labeled.

• Communicate to your spouse or a trusted person where the keys, road map and list are.

• Did I mention Communicate!! Somebody needs to know what is going on with your business so that there is not more insanity in the midst of tragedy.

I have lived through unforeseen events that took me out of the picture and seriously impacted one of my first businesses. Not for the lack of education. Heck I was an MBA candidate. No, it was because I did not pay attention to the application of business techniques for continuity and disaster recovery. I discuss the details of these points and other Life Lessons Learned for SMB's in the book that will be released at the end of this summer.

The real point here is to keep the business operating and ensuring that all the bill get paid, the customers are retained and that the business stays healthy.
Continuity is Key!


1 Power, D.J. A Brief History of Decision Support Systems. DSSResources.COM, World Wide Web, http://DSSResources.COM/history/dsshistory.html, version 2.8, May 31, 2003.

Hey! Where've You Been

Wow! Times seems to move fast especially when wanting to keep up with all the great happenings on the Net and life in general. So what does all that have to do with NCDCS and the seemingly Missing-in-Action for this Blog? The fact is we've been getting our Facts in order and verified. What do I mean by that? Well here's a review of some of the Facts regarding why we are doing what we're doing:

• Small business is the driving force of the economy in the US. The statistics are there and with 26 million small businesses active in the economy and 7% of the adult population attempting to start a small business every year.... Well there is a lot to cover. More on the statistics in the future...

• Most sites on the Net and books written read like text books. So when we talk to folks about the hard knocks and real lessons of life in business from cradle to grave; our perspective and discussion resonates. Heck, we're going to revamp stuff on our site as well to get it to have meaning and interest to small businesses. We've had to many comments that we look like we talk to the large corporate level of folks when our heart and intent is to make sense of business concepts with a "Napkin" approach. KISSIOMD. Oh, the acronym comes from my daughter - Keep It Simple Stupid, OH! I Mean Dad.

• Most of the business journals and local government entities don't really have a clue regarding the needs and functionality of small or even medium size businesses (the SMB environment).

• Most economic development councils are tuned into the 10% of the large businesses and don't know how to stimulate economic growth in the SMB environment.

• There are a lot of misnomers out there regarding the ins & outs of LLCs. Especially when it comes to the realm of funding and financing the entity.

• There is little thought given to the fact that a business has a personality and that the SMB environment misses this perspective altogether. That's what the book that Tom is finishing will really dig into.

So, we've been busy validating what we suspected to be true. We have a lot more that we've learned, validate and are putting into the book by Tom and seminars will really get into the nitty-gritty in a fun common sense way. Dang It - business should be fun!!

Mostly, in all candor, we've been really drinking our own medicine. Thankfully we know who turns the distasteful palatable so that we can excel and succeed.

With that, we won't leave you hanging again for such a long time. We'll be getting more moving.

Thanks for stopping by!!