January - Madison Magazine

COVERSTORYCONTINUED – SUCCESSION PLANNING
Avoid a power vacuum
Ann Kinkade, director, Family Business
Center, and faculty associate, UW School of
Business, adds, “If there’s a crisis, having a
succession plan helps avoid a power vacuum.
In a family business, it helps prevent family
conflict. The more [business leaders] can
demonstrate that they’re prioritizing succession
planning, the more it reassures customers,
employees and vendors—it gives external
people trust in the business.”
Kinkade says ownership-succession and
management-succession planning are the two
primary aspects of the process. “The first refers
to the legal transfer of company ownership.
Management succession is more all-inclusive;
it includes transferring the corporate culture
and values to the next leaders.”
Not all business leaders take the time to do
succession planning. “They all know they
should, and they’re more likely to deal with
the ownership transfer than with management
succession,” says Kinkade.
“Many business owners are so busy with
day-to-day operations that they don’t find the
time to plan,” agrees Googins. “It’s really
important to remember that your business is
something you’ve built, and if you want to take
care of the people important to you, you must
do the planning.”
Take your time and involve the
right people
“Start early; it takes a lot of time,” advises
Kinkade. “Involve all affected parties—in a
family business that includes shareholders and
even family members not involved in daily
operations.”
Begin by identifying your values as a
company. “This varies from business to
business; you might determine that you want
to remain local, that you value your employees
as your No. 1 asset, or that customers are No.
1,” says Kinkade. “Identify what’s important to
you as a company, and for a family business, as
a family.”
Googins adds, “Know that you’ll need to
involve multiple people: a financial planner,
an attorney, an insurance person, an
accountant. Figure out who you’re most
comfortable with and start with them.”
“Then define the evolving role for the
person exiting as a leader,” says Kinkade.
Include plans for the leader’s retirement
income, and set a specific exit and ownership
transfer date.
You’ll also need to plan how to identify a
successor—what skill sets, experience,
education, and knowledge of the business he or
she must have. “Ideally you’ll name a specific
successor in advance, and implement a
professional development plan for them,” says
Kinkade. You may also wish to identify backup
successors, and successors for key
management staff as well as the business leader.
“I’ve had a succession plan in place for five
years,” says Googins. “We set up a separate
company that one of my employees is buying
into as an owner. We’ve agreed on how to
value the business, and if anything happens to
me, she can buy the rest of my company from
my two sons. We have insurance so she’ll have
the funds available, our attorney is in the loop,
and with our accountant, we’ve drawn up
papers so this employee and my sons would be
treated fairly.
Communicate and update
When your plan is complete, communicate
it. “Let your staff, customers and business
partners know what you come up with,” says
Kinkade.
And you’ll want to revisit your succession
plan often. “Stop and look at each area on a
yearly basis,” recommends Googins. “In reality
you won’t need to make changes every year,
but you should meet each year and review it.
Over five or ten years’ time, you probably will
make changes.” ◆
JANUARY 2006 PAGE 09