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Having A Hard Time Creating Buy-In? You May Be Confusing the Business with the Legacy

Not too long ago, a client asked how he could get his family members more excited about the family business.  "What would you do?” he asked.  "Well, what are you trying to sell them: The business or the legacy?"  I asked.  He paused and then replied, "I don't know the difference." 

Does that sound familiar to you?  If you're the family leader, can you distinguish between the business and the legacy?  While they may be one and the same to you, other family members may not make the same connection.

The farther away potential successors get from your motivation and perspectives, the more likely they are to have different understandings of what the legacy really is.  As an example, one of my clients has done quite well for two generations by pretty much ignoring the "green" movement.  Now comes the tail end of the third generation, and guess what repulses them about the business? 

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How to Focus On Outcomes and Get People In the Game

Some people are more effective than others when it comes to succession planning.  A few people are good at it because they have multiple generations of experience supporting them; others are good at it because they have the right team of trusted advisors looking after their interests.  In both cases, they have a proven model they can depend upon.

As you participate in your own succession journey, with or without benefit of such experience, there are a few factors that will be important to drawing people into a developing legacy.  When applied deftly, they make the compelling difference between ambivalence and commitment.  Consider these points.

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Why Employee Contracts Are So Important to the Succession Planning Process

Business Structuring is a critical factor of the interdependent Succession Matrix®. Business Structuring impacts the nine other factors of the Succession Matrix® and accordingly, those other nine factors positively or negatively impact Business Structuring. For more information on all ten factors, refer to the International Succession Planning Association website at www.ISPAssociation.org.  

Business Structuring actually consists of two sub-factors, Business Organization and Business Documentation. Business Organization refers to the actual structure of the business as a corporation, LLC, partnership, etc. and its alignment to the strategic goals the business has for the continuation of success through the next generation of owners and managers. Business Documentation, as the name implies, refers to the actual documentation that formalizes the business organization as well as agreements regarding the disposition of ownership, leases of equipment and real estate, and contracts with vendors (franchisers, distributors, lenders) and employees. With respect to employment contracts, I am often asked what role an employment contract has in business succession planning. In light of the volume of curiosity, let’s embrace this subject.

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Don't Overlook the Employment Contract - How It Can Impact Your Exit Strategy, Cash Flow and Protection from the IRS

As a dedicated business succession planner, I am often bringing up the subject of employment contracts. The predictable initial response is “I hate contracts and what role could an employment contract have in my business succession planning?” This question generally comes from someone who has 80% of his/her net worth tied up directly or indirectly in their business and does not have a prayer of retiring without concerns about their financial security. They are plagued with the concerns of “Where am I going to get income?” and “How will I replace my current benefit package?”  Fortunately, the employment contract can be a very valuable tool in relieving these concerns and facilitating business succession planning.

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Don't Overlook the Employment Contract - How It Can Lock In Your Competitive Edge

In addition to employment contracts being beneficial for business owners, they also can play a very important succession role with key managers. Business owners commonly have concerns that key managers, critical to the continuation of the business’ success, could be recruited away by a competitor. There is also concern that the key managers could become frustrated with their perception of the succession plan and jump ship after the owner’s retirement rather than give the successors a chance to earn respect.  And the nightmare of nightmares is that with access to customer lists, processes and technology, a key manager could hook up with a competitor and inflict devastating damage on the business. These concerns about the commitment of key managers commonly impede exit strategy, successor identification and preparation, the transfer of management responsibility and the transfer of stock.

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Succession Planning and the "Right Time" Myth

"I probably should do something about succession planning, but the timing just doesn't seem to be right.  There's a wedding coming up, we've got another grandchild on the way, and none of our children seem to want to have anything to do with the business.  Maybe I should just sell it."

That's a distilled version of a conversation I recently overheard in an airport.  I was minding my own business, and I heard those magic few words that immediately drew me in:  succession planning.  What really struck me was how creative and rationalizing we can be when faced with actions we don't really want to take. 

In reality, the best time for succession planning is similar to the best time for planting an oak tree, twenty years ago.  But, for whatever reasons, it didn't.  So that takes us to the second best time:  today.

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Debate vs Brainstorming - Which One Actually Generates the Results You Want

Some people like to think out loud.  In fact, they must talk in order to think.  They love brainstorming; it’s how they create their map of reality.  The problem is that they think everyone else has to engage in the same technique in order to have an abundance of good ideas.  As a result, they subject whatever group they happen to be playing with – family, business, community – to the same process of “out loud” and “out of the box” thinking.

These brainstorming fanatics have even gone so far as to set up rules on how this unbridled creativity is to take place.  The most important rule requires that no one say anything negative or critical of another’s ideas.  In many cases, groups – family, business, community – leave a room pleased that the walls are covered with contributions.  This ideal, feel good boost to productivity or problem resolution seems to be the ultimate in creativity.

There’s only one problem...

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How Emotions Can Triumph Over Reason

Whoa! I was totally not prepared for the meeting I just had with my client. I thought I was. In fact, I was very prepared based upon our last meeting and all the decisions that had been made.  However, life, and clients, have a way of throwing you curve balls. Sybil showed up again!

The bottom line is that I came into this meeting ready to facilitate the client making some substantial asset transfers to his youngest son – it was supposed to be a slam dunk. The transfer was going to be of B-Member units in a real estate LLC.  The transfer was for tax planning purposes and to bring the youngest son up to parity with his older brothers on transfers that the father had previously made to them. The transfer would have had no impact whatsoever on the client’s control of the asset or on his income. Simple, right? No brainer, right?

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Exit Strategy and the Joe-Pa Syndrome

There is a lot at stake in succession planning: family legacies, business value, financial security, and family harmony.  The goal of succession planning is to create a seamless transition of ownership, leadership and management while avoiding the classic “new leader” shock and awe that diverts mission focus, erodes management enthusiasm and dissipates organizational momentum.  

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Successor Identification - Create A Program for Testing Them Out!

Shel Silverstein writes children’s books.  In one called The Missing Piece Meets the Big O, he covers the role of succession development with a simplicity and singleness of purpose.  For our purposes, the Big O is access to the legendary corner office; and the missing piece is the person who sits in that office after you are finished with it.

But, before there can be successor development, there must be a successor identification program in place.  That successor could be a family member, a key manager, or a partner.  Regardless of which, the person chosen must also be a leader.

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8 Must Haves In an Executive Coach

Performance coaching produces results that many organizations find wanting in the traditional performance management and appraisal culture.  The major difference is that coaching occurs in real time; and performance appraisal is retrospective and occurs – usually – well after the fact.  The practical impact is that coaching is appreciated and performance appraisal is resented.

Theoretically, every manager/leader should also be a coach to direct reports.  Maybe, someday, that will happen.  Imagine the impact on the organization from a personal and professional development standpoint if managers understood how to be an effective coach.

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Effective Leadership - What You Don't Know, Could Kill You

To borrow from Thomas Jefferson, each of us holds many truths to be self-evident.  Most of those go beyond the scope of life, liberty, and the pursuit of happiness.  He and his colleagues built a republic around that relatively simple concept.  Every two years, we subject ourselves to an election process that, as many elected officials like to point out, has consequences about future choices and decisions regarding our collective welfare on local, state, and national levels.

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When Tax Laws Change, Estate Plans Need Review

I sat down with a long-term client earlier this week and was reminded once again of the importance of regularly reviewing your estate and succession planning. This client is the majority owner of a family owned company and has his children involved in leadership roles. He is in his second marriage to a woman who is not his children’s mother.

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Change In Heart, Leads to Change in Plans - Is Your Succession Planning Strategy In Alignment?

Another situation I dealt with recently during an annual review of planning involved what I refer to as a “five minute bomb.”  Five minutes before the end of the meeting with a client, when I’m preparing to leave and go home, he says to me “oh, there’s something else I forgot to tell you” and it is inevitably an intense subject that requires much more than five minutes to handle.

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Family and Business - Maintaining a Healthy Balance

When I think of the word balance, one of the images that come to mind is a gymnast carefully and bravely performing on the balance beam. As a sports enthusiast and competitive person, occasionally when I am channel surfing (which my wife loves), I come across a gymnastics competition and find myself captivated by the athletes and their level of focus, commitment and talent. Although I have never been a gymnast, it is apparent that becoming a successful gymnast and performing well on the balance beam requires an incredible amount of mental and physical preparation. Naturally, it also requires the athlete to have great balance. Like gymnastics, owning and working in a family business requires a tremendous amount of dedication and effort in order to achieve a healthy balance between family and business.

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Do You have a "Control Freak" Culture - Can Your Business Survive In the Future?

Every day as I interact as a succession planner with family-owned businesses, I encounter control freaks. Unfortunately, control freaks do not want to be known as such and try to disguise their attitude and management style. Therefore, as I assess what is going on relative to the family and the business, I look for signs that help me understand how the family and business works. By doing so, any control freaks are almost always revealed. In this process, it is important that I be sensitive to these signs because a control freak generally handicaps, or even curses, a succession planning initiative.

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The Control Freak Culture and It's Impact on Successor Development

As I expressed in my previous post, the deployment of a succession plan should address the organizational and family issues that can impact the continued success of the business through the next generation of owners and managers.  Assuming a control freak has been at the helm, activities would include assessing the impact of the control freak and development of plans and processes that can discontinue the inherent handicaps to the continuation of success.

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How to Overcome the Curses of a "Control Freak" Culture

A thorough succession plan addresses the organizational and family issues that can impact the continued success of the business through the next generation of owners and managers.  A control freak at the helm significantly complicates two components of the Succession Matrix: successor identification and development and management teamwork and synergy. Notably, the control freak represents a barrier to the development of successors and supporting managers who have the confidence and competence to operate the business when the control freak inevitably loses his/her physical or mental ability to drive the business.

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Please! What Is Succession Planning and Why Do I Need to Involve Outsiders?

The process of succession planning is significantly different for a privately-held and/or family owned business compared to a publicly held company.  For our purposes today, we’ll be dealing with the privately held because most businesses fall into that category.

Depending upon your advisor’s field of expertise, the definition of succession planning takes on a variety of meanings.  For some, succession planning is all about wills, buy/sell agreements, trusts, and estate planning.  For others, it’s about business performance and for another set of advisors, it’s all about family harmony.

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If I am Considering Sale of My Business As My Succession Option, What Should I Be Aware Of?

There are two general classes of buyers for a business: internal and external. Internal buyers would be one or more key managers who could provide succession leadership. External buyers would be third parties including of course complementary vendors. 

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