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The following article was published in our article directory on December 11, 2013.
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A Succession Planning Process: Beforehand Set Your Goals

Article Category: Business Management

Author Name: Wayne Messick

There was a great line in Alice in Wonderland that if you don't understand where you're going any direction is okay, or something like that. When it involves the succession planning process nothing could be any more accurate that that.

In another article we explain the need for having a commitment to the succession planning process from the top all the way to the bottom of the organization. In one way that commitment is what gets the succession planning process going in the first place.

It is commitment that keeps us asking the clarifying questions of one another and our advisers, testing the direction the plan is taking us-- before it's too late to change it.

That's because the succession planning process, if you truly expect to have an effective outcome you must begin working on it sooner rather than later because the actual decisions made in early stages can have a dramatic effect on all relevant parties. If you start off taking the wrong road it will cost everyone in the end, unless you have a course correction early on.

One particular effect of an effective succession planning process is mental, it makes us feel better, more assured, and more confident we know as much as possible concerning what's waiting for us down the road and around the bend.

The other reason is financial, remember the laws of compound interest and the "rule of 72 �? Compound interest, the kind that works for you rather than against you, comes into play in a big way when you are considering the way to effectively develop an effective succession planning process.

As an example if you could decide, based upon serious discussions with the family, who is really not going to be part of your company's ownership and management long term, wouldn't that make other crucial effective succession planning judgements more appropriate for everyone?

Suppose one of the children moves across the country and starts a life and family there with no intention of returning to run the family business.

If that happens, doesn't it make sense to accept that they are not going to be part of the future generation's ownership and management equation?

Stop kidding yourself about who is likely to be there in the next generation. It leads to bad decisions and your actual successors may get fed up with your dream scenario and leave you dry and high.

Wouldn't it be more suitable for these beneficiaries, the ones not planning to be part of the company's future, if you offered them their "inheritance" right now instead?

They could buy that larger home currently and reap the benefits of its growth in value as time passes making their inheritance from you far more valuable than if they waited decades to receive it.

They may add to or start a business to create their own retirement nest egg. Or perhaps set aside money aside their kid's college educational costs.

Wouldn't that be great?

They would receive their inheritance while you are here to see how it works out for them, as opposed to receiving their inheritance after the worst day of their lives-- when the people they care about more than anybody on earth are no longer around for them to say thanks to.

When these non-business heirs already think their brothers and sisters who have continued to work in the family business already have their inheritance, wouldn't they feel they are being dealt with much more fairly?

Any money you give to these non-business heirs today, even when it represents a significant percentage of your business' current worth is a lot less than the same percent of the estate twenty, 30, or more years from now.

And if you are like most people, your will-- so as to benefit from current tax laws, says something like, "all to mom when dad dies, and then divided equally among the kids"-- means that the non-business beneficiaries will in all probability be at or near retirement age before they inherit anything at all.

Which more than likely also means that your business successors will have to start buying their siblings interest at the time they too are closing in on retirement, in order that their own kids to have a chance to own the business.

What is the point of all this?

If you really plan to treat your non-business heirs fairly, give your next generation successors an actual chance to grow the business for their children and all the while keeping the existing operation whole-- you have to think outside the box a little.

You must have honest conversations with your grown children right now.

Business leaders know that when effective succession planning is the result of making consistently better decisions and they will get better outcomes as a result.

Training, hiring, and all other facets of your effective succession planning process can be based on correct information about the future players. Stop kidding yourself about who is likely to be there in the next generation. It leads to bad decisions and your actual successors may get fed up with your dream scenario and leave you high and dry.

Keywords: succession planning process, management succession planning, what is succession planning, succession planning process, planning for succession

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