Russell Bell: Succession plan lessens potential for failure

Russell Bell PHOTO/FILE

Every successful business, no matter what industry, has to face the issue of succession at some point in its evolution. With the "baby boomer" generation moving towards retirement, more and more businesses of all sizes and shapes will consider the mechanisms necessary to pass future ownership and running responsibility to the next generation.

Transitions of this kind can materialise in many ways. In positive circumstances, there is the natural progression of business owners from their successful business(es) to other projects. In more difficult circumstances, transition can be forced on owners by ill health or the need to deal with negative economic circumstances.

Whatever the catalyst for change, one thing remains true in all circumstances - without a formal succession plan the potential for failure is exponentially higher than would have been the case if a plan was in place. And the downside risks associated with poorly executed succession can crystallise in many ways. In my experience, the most prevalent of these are the loss of key people, impairment of intellectual property and diminished financial return on buyout (or a combination of all three).

In my work, both locally and nationally, I am frequently asked about succession and how businesses should plan for their long-term future. My response is that you can't just wait until transition day and "hand over the keys". This approach can be unsettling for those coming through and often results in key people leaving the business and taking their potential with them.

The best approach is to have a plan which is tailored to your particular business circumstance and your needs as owners. This is especially the case for family businesses which dominate in Wanganui.

In compiling a succession plan there is also no "off-the-shelf" solution. In my view, this is a good thing because all succession approaches must be specifically designed to meet the goals and objectives of the business concerned.

Trying to force any business "into a box" or apply a formula from a text book might look good at first, but is ultimately prone to difficulties because the essence of the business and the things which made it successful in the first place are likely to be lost.

At the heart of good succession planning is a defined strategic vision for the future together with identifying and retaining the key people who will carry that vision forward.

This means a core management group should be established and confirmed and a formal plan is compiled so everyone understands and has bought into the future direction. Following this, the structures necessary to achieve both the future goals of the business and the transition of key people are identified, defined and documented together with key milestones on the journey.

Succession is a time for collaboration and honesty. A full and frank assessment must be made of the skillsets on hand and the gaps that need to be filled to ensure the achievement of objectives. At this point, mentoring of the next generation is of primary importance, supported by training.

Succession is a simple and essential concept for today's businesses and, as you embark on the journey, complexities will arise which must be strategically met and overcome.

-Russell Bell's Zenith Strategic Solutions is a specialist Wanganui business advice and consultancy practice - 021 2442421.