ArchivesBoards of Directors Archives — C. Lynn Northrup, CPA, CPIM

Succession – Planning for the Future

December 22nd, 2008

One of the key components of succession planning is deciding where the business should be going and who is going to provide the necessary leadership. This process is a double edged sword. It involves planning for both owners as well as the business. Things can get pretty emotional in family-owned businesses. Accordingly, it is very important to make sure the planning process gets done properly.The emotional process is what stalls many initiatives. It is critical to have a skilled outsider to help to balance the emotions, personalities, and politics of the family-owned business. An objective facilitator with no stake in the outcome dramatically increases your chances of success.

Organizational planning combines development of ownership plans with strategic planning for the business. Achieving balance between these two plans is the key ingredient. This function is where facilitators can earn their money. They balance management interests with ownership goals and the board. Many family-owned businesses don’t have a formal board of directors’ function. We think that boards provide a balance point between owners and management. The board provides a key role in providing continuity between business strategy and long-term vision that helps to preserve owner’s value.

When owners and the business look to the future, the shareholders have to ask the following questions:
• Where do we want to be in 5 to 10 years?
• Can the business survive without the founder?
• What are the goals of non-family team members, entrepreneur owners, and family of the entrepreneur?
• What are the strengths, weaknesses, opportunities, and threats associated with this business?

It is amazing how many family-owned businesses haven’t developed a succession and transition planning process. A well-designed and systematic succession planning process focusing on the family, management, and the organization of the business pays big dividends. This represents a huge opportunity for family-owned businesses to step up and do what they need to do. Planning for the future pays off.