Constructing a Succession Plan Actionable Steps

Transcription

1 Constructing a Succession Plan Actionable Steps Presented by Alan Richardson MBA, CExP, Certified EOS Implementer arichardson@tomorrowiscoming.com Tomorrowiscoming.com

2 Actionable Steps - Agenda Three phase proven process Building family & business data profile Goal definition & Planning family meeting Leadership development & transition timetables Building post-retirement cashflow projection Managing collaborative succession planning team Estate tax exposure & wills/legal agmts review Resource Review

3 Three Phase Proven Process Phase 1: Diagnostic Situation assessment, gaps to overcome, alignment of goals/objectives/timeline, etc Phase 2: Plan Design & Implementation Implementing components 1-5 of comprehensive BCSP Business management system Business Continuity Business (Management & Ownership) Succession Personal Financial Plan Estate Plan Phase 3: Annual Business Review

4 Six Components of Comprehensive Business Continuity & Succession Plan (BCSP) 1) Business Plan and Management System 2) Business Continuity Plan 3) Succession Plan a) Management b) Ownership 4) Personal Financial Plan 5) Estate Plan 6) Annual Business Review Need collaborative advisor team Business/family advisor Attorney CPA/Tax advisor Insurance advisor Certified Financial Planner

5 First steps First priority: define decisions that need to be made (not make the decision); what is interest in employment and ownership? Define process to define the criteria to make the decisions Are you asking them to come back to something undefined? Remember that s why planning and professionalizing your policies matter.

6 Building family & business profile Ask: What do you & advisory team need to take inventory (start with 3-ring binder) Biographical information resumes, family information, BD, addresses, goals, personality profiles Business Profile History of the business - narrative Governance Tax returns, financial position & trends Insurance coverages Estate plan documents, wills, trusts, POA, etc.` How much are we paying professional advisors to accumulate this information?

7 Goal definition & family meeting No one right way to define goals Pages Legacy Workbook; ProAgtive lists Family meeting strategic approaches Page 8 Legacy Workbook-Pre Meeting Conversations Excellent place to handle fair vs. equal talk

8 Which hat am I wearing?

9 Consensus

10 Consensus I fear repercussion if I disagree. The group bulldozes me into it and/or is unsympathetic to my point of view. The group is unskilled at listening to contrary points of view and at creating/finding ways to accommodate differing needs. I am not confident in expressing ideas and let go of my opinions because it s too hard or too embarrassing to struggle with expressing them. The leader or authority figure favors a certain point of view and I don t want to appear uncooperative.

11 Selecting the successor Does process differ if DAD: is involved in the picture? not around to influence the process? Does it make a difference: who is older? who has more tenure? whether candidate is male or female? who has the most ownership?

12 Challenge: Mentoring vs Micro-managing Making the transition from Boss/CEO to Board Chairman Graduating From Parent To supervisor, manager, mentor, delegator, enabler, groomer Tools: tone of voice, words, body language

13 Avoid Bossing Tendency : Define attributes of ideal manager Facilitator not boss Empowers people doesn t micro-manage workload Focuses on people, resources, information, technology Promotes teamwork, positive thinking and professionalism Willing to be accountable to the board of directors Consider if this applies to your situation p. 44 Successors are not entrepreneurs starting their own businesses; successors are managers who assume a going concern with its own set of complex challenges. Entrepreneurs are risk takers who thrive on the edge and revel in challenge. Next generation leaders must be adept at creating systematic processes, financial control and team building.

14 Youth Message: Don t draw wrong conclusion about procrastination Is avoiding succession the real issue? How reduce fear factor Don t criticize way they did it Seek 1 st to Understand (Stephen Covey 7 Habits) Focus on celebration of successful career Help predecessors find role in retirement Focus on Extending career path! 14

15 Think long and hard about being right In some cases,

16 Leadership Development Transition Timetables What roles will transition? Current job descriptions and skill sets defined? Options for who will assume key roles Case Study Agronomy Manager retires Duty listing Successors decision-makers`

17 Building Post Retirement Proforma Cashflow Projection Can be huge obstacle creating fear and retirement procrastination Itemize sources of income and living costs before and after retirement Assess adequacy of income to provide financial security and achieve retirement goals See pages Legacy Workbook-Assessment Review Sample Cashflow worksheet

18 Compiling & reviewing estate tax exposure, wills & legal agreements Conditions, goals, laws change see pp Don t assume local advisors have these well organized and up to date May take team effort to assess estate tax risk Accountant, attorney, insurance agent, banker Succession and Estate Planning create opportunity to dust off, review & revise

19 Timely review vs. The Plan? Plan = Blueprint for specific future actions Based on facts as we know them today and expectations of future landscape as best we can predict today Guided by short & long term goals Fact of life: facts change, landscapes change may dictate CHANGE in the plans Timely review needed to keep plans viable

20 How do we avoid tragedies? put it in writing! Define vision, values & management process for those moving forward Put right people with right talents in right seats Be conscious of the three circles Reduce retirement fear extend career path for patriarchs & groom successors Set goals & develop strategy to reach targets Implement professionally; engage advisory team & peer networks Commit to accountability review performance regularly & honestly

21 Consequences Lack of Professional Planning Approach Unexpected outcomes Outdated strategies can t compete or exploit opportunities Don t optimize decisions purchase vs. rent vs. hire/share Anxiety & Stress destroy business teamwork & extended family ESPECIALLY TRUE IN SUCCESSION!

22 Advisors Can Play Useful Roles Defining board roles Setting compensation board, CEO, Blood family Strategic planning Ownership transfers (capital injections/withdrawals) Getting incompatible players off the bus Champion for disenfranchised owners Guiding financial analysis discussions Running effective meetings board, family council Transitioning management duties Sounding board for family conflict issues

23 Advisory Team Candidates Accountant Attorney Insurance Agent CERTIFIED FINANCIAL PLANNER TM Practitioner Business Advisor Banker Pastor

24 Building Collaborative Team Assess current local advisory team; is outside facilitation needed? What is your family communication culture? Technical knowledge of group? Potential conflicts of interest? Establish ground rules this is TEAM sport! Be on guard for the sale vs. advice & counsel; be willing to invest financially for positive plan See page 76 Selecting an Adviser

25 Selecting Advisors 1. Fit/match your core values 2. Have knowledge, experience and wisdom 3. Get things done 4. Know other experts/advisors with specific expertise 5. Are collaborative 6. Let your spouse select they are comfortable with in your absence

26 Where to start? Concerned Parent Appoint on-site Transition Coordinator, or Transition Task Force Map out transition steps and management process needing clarity 3 D s Discuss, decide, and document Organize information (3-Ring Binder) Join peer networks; form advisory teams Attend management training TEPAP, Harvard AgBus Seminar, Top Prod.

27 Who can help? Tap qualified facilitators and resources Family Firm Institute (FFI) Farm Journal Legacy Project Succession planning websites Ag Progress Transition Point Business Advisors WCS Consulting Contact list /consulting-contacts/

28 Resources - Farm Journal Legacy Project Print enews Online Tools Live Events Cultivating Multigenerational Success in the Agricultural Community.

29 Recommended Reads Crucial Conversations Patterson, Grenny et al Getting to Yes: Negotiating Agreement Without Giving In Fisher and Ury Perpetuating the Family Business John Ward Good to Great Jim Collins Midas Curse Perry Cochell & Rob Zeeb The Enduring Legacy: Essential Family Business Values Lance Woodbury Traction Gino Wickman Farm Business & Estate Planning Neil Harl How to Run Your Business so You Can Leave it in Style John Brown E-Myth Revisited Michael Gerber Make knowledge building in family business excellence a lifetime journey.

30 Next Take one small step Document your history o Document the significant events by year o Share the history with members in the business and your family Assess where you are today, your resources, challenges and goals Build your future history (your goals) for your family and the business for the next few years: identifying significant future events (retirement, exiting, entering, etc.) Meet with your advisors (business advisor, attorney, CPA, CFP, etc.) to share with them your goals and where you need assistance

31 IF IT S WORTH DOING. IT S WORTH DOING RIGHT

32 Time for Questions... Alan Richardson, MBA, CExP, Certified EOS Implementer 4400 Westown Parkway, Suite 405 West Des Moines, IA