Board & CEO Role in Succession Planning. AAPEX January 2012 Lance Woodbury, Kevin Spafford & Dick Wittman

Transcription

1 Board & CEO Role in Succession Planning AAPEX January 2012 Lance Woodbury, Kevin Spafford & Dick Wittman 1

2 #1 Facilitate critical conversations before estate planning & asset transfers Meet with family/key stakeholders Have an agenda Focus on goals & ideas not decisions/strategy Promise feedback: action plans, minutes Story: in-law experience in estate planning Daughter: Why do we have to look at these? Her brother (emergency room doctor): so when you are all standing around the bed crying, I don t have to argue with you when I pull the plug! 2

3 Not enough to say: We just need to communicate Identify what to communicate about Ownership vs. management transition How business is run today vs. in the future Mission, Vision & Values alignment for potential players in the future Governance structures today vs. future Getting it committed to paper No transition decision is fully made until it is written down 3

4 Ownership Management / Labor 4

5 Don t gloss over bad chemistry Natural to create career opportunity for everyone hard to let go Shared mission, vision, values = key essentials You know which players not compatible Bad chemistry seldom works out Force candor about core guidance elements Mentor potential successors on hard realities Some are compatible, others not Be proactive in getting right players on bus 5

6 #2 Educate successors on governance structure Senior generation needs to turn mental picture of management environment into documented picture everyone understands How it exists today Likely structure in the future How role of current boss/ceo will change during and after transition Can t delegate what can t define Pictures are worth a thousand words! Story of 5 C s working on transition plan 6

7 What does your organizational structure look like? 7

8 Board of Directors Policy, Management Direction, Owner ROE & Financial Control Does structure reflect authority & accountability flows? Board Management Responsibility Center Mgrs Advisory Board* The Missing Pieces Pres/Gen Mgr Finance, Mktg Office Staff Cattle & Hunting Manager Crops Production Manager Specialty Enterprises Manager Equipment Support Manager *Advisory Board Insurance Agent Investment Advisor Loan Officer Marketing Advisor Crop Scout Accountant Attorney Cattle Breeding Advisor Forester Wildlife Expert Peer Board- Clearwater Direct Seeders Seasonal Pool: Tom, Dick, Suzie Harry, Sam & Glenda Asst Mgr Bldg Improvements and Rentals 8

9 Role of Board of Directors Setting Policies Determining strategic direction Hiring, directing, evaluation & compensating management Maintaining financial control reviewing performance exercising due diligence 9

10 Job Description Chairman of Board Policy review and refinement Investment analysis Strategic planning Hiring, coaching, grooming successors Performance review and feedback Assisting and advising successors in dayto-day operations without telling them what to do 10

11 POSITION: President/General Manager Administrative Responsibilities Coordinate operational & strategic planning Organize work force Staff (recruit, hire, train) and assign responsibilities (job descriptions) Coordinate workflow Administer communication, evaluation and control systems Execute contracts Provide information and policy input to board of directors 11

12 Policy & SOP culture Policy administration is widespread disaster Don t document implement inconsistently Worst areas violated Compensation Hiring practices Performance evaluations & accountability Solutions: Formally document business operating policies Key policy: Family Employment Policy 12

13 Family Employment Policy Components to keep professionalism in the family business Vacancy requirement & skills required before hiring Economic capacity analysis to support hire Prior experience/training required; apprenticeships Supervision and reporting relationships/nepotism rules Consultation of stakeholders required before hire Correlating compensation/bonuses with responsibility and performance Merit vs. paternalism as criteria for hiring and advancement Avoiding discrimination - family vs. non-family employees/owners Policies on pre-nuptials 13

14 #3 Be a leader in identifying generational influences Genetic coding /Micro-managing What did you dislike most in predecessors? Do you see these traits in yourself? Do you ask for feedback? Work at graduating (in tone, words, and body language) From parent/boss To manager, mentor, delegator, enabler, groomer, board chairman 14

15 Syndrome of Generational Stackup from Mark Green s Inside the Multi-generational Family Business Identify how generational roots impact values, priorities, & risk attitudes 6 generations with different influences, attitudes toward work & family GI Generation ( ) Silent Generation ( ) Baby Boomers ( ) Me! Generation X ( ) Generation Y ( ) Daughter Cori!??? 6 th generation - unnamed 15

16 #4 - Identify critical skills needed to staff for excellence What does it take to excel as: CEO or CFO Human Resource Manager Agronomist/Precision Ag Manager Herd Health Specialist Are these talents in the gene pool if not, how will business staff these roles? Family hire outsider out-source the talent 16

17 #5- Open the books Develop timely and transparent strategy for exposing stakeholders to financial position, trends Share array of decisions that need to be made Wealth needed for retirement security Wealth/investments available to sell, transfer at death, gift, etc. 17

18 Resource Examples Everywhere make this a lifelong learning experience John Ward Perpetuating the Family Business Jim Collins Good to Great; Great by Choice; How the Mighty Fall Mark Green Generational Stackup Don Jonovic numerous books, planners Family Business Institute monthly magazine, workshops Numerous state land grant, Farm Bureau, Farm Credit resources Wittman Consulting - Guidebook/CD Consulting Contacts list Train-the-Trainer Programs 18

19 Family Business Life Cycle Survival Struggle for financial stability Financed by owner s compensation (or lack thereof). Stable Stable product and customer base, profitable for a number of years, still owned by individual or couple. Employment compensation. Offspring returning to business. Professional Ownership spread to siblings/cousins. Business growth and revitalization, introduction of nonfamily management. Institutional Mix of family/nonfamily shareholders, family may not be involved in management, board of directors is governing body. Dividend income. 19

20 The Three Circle System in a Closely Held Business HR, Finance, Purchasing, Legal, Marketing, Public Relations, R&D Management (Compensation) Ownership (Return) Shareholder, Partner, Heir, Investor, Director Confusion and Potential Conflict Family (Relationships) Son, Daughter, Sibling, Parent, Lifelong friend 20

21 Succession Challenges Financial Ownership transitioning $$ value Psychological Ownership transitioning culture, values, legacy and a sense of pride in the business Management transitioning responsibilities, skills, decision-making Family maintaining or enhancing the family relationship during a transition 21

22 Talent Portfolio Understand cognitive, affective and conative strengths of current talent pool (family and nonfamily) Cognitive education, experience, skills Affective preferences, personality Conative tendency in action, drive, instinct Have a clear understanding of the desired profile of leadership positions through above perspectives. Understand the team talent distribution Hire/promote to gaps 22

23 The Board s Role & Opportunity Board members (advisory or formal) bring Potential reality check through questions Experience with other organizations Credibility in guidance Coaching potential Process thoroughness Focus on management (take heat off family ) 23

24 Managing Assumptions Action Reflection Corporate (Family and Closely Held) Decision Making Model Assumptions Confirmation Planning Mutual Education I to We knowledge 24