So we all know a [succession] plan is needed. But having the wrong plan can be just as disastrous.
It’s said that a little knowledge can be a dangerous thing (“drink deep, or taste not the Pierian spring”). However, what is less often said, yet is ultimately just as true, is that just a little planning can be a dangerous thing. Improper and rushed planning will do you no good (and perhaps even harm).
This is especially the case with succession planning. Oftentimes, the lifeblood of a business is at stake even more than its assets. In that vein, then, a recent article in Registered Rep magazine described the three deadly mistakes of succession planning. The original article has an emphasis on financial advisors, but with a little rhetorical tweaking these mistakes are universal in application.
Don’t “build the wrong bench.”
Don’t stock your management team with the wrong people. Who are the wrong people? That depends on your business, but certainly for a family business that can mean a disinterested family member. It can just as easily mean someone who doesn’t share enough in the business goals or, in the other direction, one who doesn’t think outside of the box enough to see past them.
Don’t turn succession into a contest.
It makes for a great story when we read or hear about executives jockeying into position for a spot at the top, whether on TV or in real life. However, this jockeying doesn’t make good business sense (and come to think of it that’s usually the moral of the story when it is on TV). Competition for succession within a business can be destructive rather than character-building, and the business itself is what suffers.
Don’t act out of fear.
It’s the most obvious and yet also the most difficult when you’re facing big questions. Rather, it’s important to center yourself on the task and get appropriate legal counsel to ensure the success of the process.
You can learn more about succession planning in the Business Succession Planning Practice Center on our website. Be sure to sign up for our free e-newsletter to stay abreast of issues like these that could affect you, your loved ones and your estate planning.
Reference: Registered Rep (January 20, 2012) “The Three Deadly Mistakes of Succession Planning”