The Most Common Myth of Succession Planning
What do you think is the most common Succession Planning Myth?
I come across this all the time.
Hint: It has got to do with the Timing of Succession Planning.
I am sure you would have got it by now.
Most people think of succession planning as something related to age. They think this is something to be thought of at age 60 or if they decide to ever exit the business or sell. They think there is time to think about this later. There is no urgency. This is like someone saying, “I am not going to die today; hence I don’t need life insurance now. I will look at it later”.
Imagine a client were to tell you this. We would jump immediately and say “Sir, you need life insurance because life is so unpredictable.” For all the wisdom that we impart, we forget to follow our own wisdom. Most businesses or firms do not have life insurance. I am not talking of Key Man Insurance here; I am referring to Succession Planning as Life Insurance for the business.
What do you think happens to your clients in this case? What about your team and family? My colleague had called a financial professional in Gujarat last year only to figure out that the founder had passed away a few days ago. My colleague was simply too shocked to react but promised to help the family. This gentleman had passed away leaving behind a son who did not know much about the business.
One of the things to remember is that you don’t do succession planning because something is going to happen to you tomorrow or any time soon. Fear is never the reason to do this. Prudence should be the reason to do it. You do it as a part of building a multi-generational business or a real business that can continue in your absence. The firm should continue to retain value and that value should be attractive and transferrable to other firms. Your clients should be well taken care of and so should your team and family be. You owe it to your clients, team, and family.
Think about Apple and Steve Jobs. Just because Steve Jobs was a charismatic CEO and entrepreneur did not mean the firm did not have a succession plan. They had a solid executive team and Tim Cook along with the team at Apple took the firm to even greater heights.
What can you learn from this example?
Firms that have a succession plan are able to build massive value, retain it and then transfer it successfully. This is often a point missed out by many. How about firms in our industry?
Most think of succession planning in a very naïve and insecure way. Someone will take away something; so best is to not plan and leave everyone exposed. Nothing could be further from the truth. The goal of succession planning is to think about your firm from a long-term perspective and to start building value from today.
Starting to act today gives you the opportunity to course correct and to build on elements of value that I had covered in last week’s post. Read it if you missed it last week.
Succession Planning is not a 1-day job or something you can just get by recruiting 2 people. It is a Process and like all processes, it takes time. The benefits of a great process compound over a period of time and this process is no different.
At the risk of being repetitive, Succession Planning is never about age or your desire to sell. It is about taking care of your clients, your team, and your family. It is about caring. It is about your responsibility towards them and continuing to make a difference in their lives even in your absence.