Succession must be win-win. When I think about win-win, I think of an equation. Equations must balance, right? If you do something to one side of the equation, you do the same operation on the other, or it won't balance.
If you've got the lawyer, CPA and all the other advisors working for the benefit of the current leaders to make sure their exits are sound, and little or no effort devoted to the success of the next generation, how is that a win-win?
To make sure both the current and future leaders benefit, there are three key components a succession plan needs:
- Ownership succession. This is where most advisory teams focus their attentions. However, ownership is not only the easiest part of succession planning, so it should be the final piece of the three-part sequence—not the first.
- Management succession. Management succession is critical to any succession plan. Who will be in charge of estimating? Who will take the lead on contracts? Who is going to maintain equipment? Who will generate new leads and business?
- Leadership succession. A single person or a very small group of people must be ready and able to lead when the time comes. Who will guide the business strategy and serve as the steward of the company’s mission and vision?
Without those three components working in concert, the succession process will almost certainly be ineffective. And in order to tie them all together, you need the fourth—and, I would argue, the most important—component: time.
You've got to have time to teach and mentor successors—a successful transition can take 10 years or more. You need time to go to your peer group or some other source of expert advice and figure out what worked for them in their succession planning. Give yourself time.
For more insights from Wayne Rivers about effective succession planning, click here.