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March 2010
Succession Planning - Who's really running the store?
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 By Robert M. Nemeth, CPA/ABV, CVA, CDFA, CFE
Principal, Succession Planning Team Leader
When most people think of business succession planning, they usually focus on the transfer of ownership. Planning for management succession may be an afterthought, but it is just as important as who will own the Company. Without solid management in place after any transition, the ability of the Company to prosper could be put in jeopardy.
Over the last few months, we have followed the story of Jim and Steve, 50/50 partners at JS Widget Company. Jim, the more senior owner, now understands the benefits of proper business succession planning and how his specific goals and objectives can be crafted into an actionable plan. Let’s continue the story………
When Jim left his last meeting with his Succession Planner, a nagging thought kept bothering him. Steve was the ideal candidate to take over the business from Jim – that made sense. Steve still wanted to work for at least 10 more years. Steve was a master craftsman, but he never really had to “run” the business. He ran the shop production. Administrative headaches and sales were left to Jim.
Jim was somewhat of a control fanatic, so almost all major business decisions were left to him. There were others who worked in the Company with some business skills, but they were never given any real responsibility. As Jim thinks about this, he realizes making all the decisions was great fuel for his ego, but not so good for the long-term health of the Company. Is Steve capable of running the business? Are any of his employees? Now what?
Jim contacted his Succession Planner who explained the concept of a skills assessment. A skills assessment not only identifies an individual’s business strengths and weaknesses, but also his or her leadership ability. Gaps in skills can be identified so that a personal development plan can be put into place for the future management successor. Jim would serve as the successor’s mentor – a new role for Jim, and maybe his most important yet.
Deciding who will manage the business is just as important as who will own it. A skills assessment will help you identify potential leaders who are capable of continuing your legacy.
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