Looking forward is easy to do, especially when you are dreaming of your next step to amp up the business. However, say the words “succession planning” and suddenly looking forward stops as many believe “we aren’t there yet,” or “I’m done, my estate plan in buttoned up.”
To many, the phrase succession planning reflects the end because most believe it is about a buy-sell, exit strategy, retirement, taxes and what happens to the estate after death. When in fact it is the opposite. Succession planning is just the beginning.
Is your perception of “planning” getting in the way of building business value?
Yes, considering contingencies around a key leader’s potential incapacitation, an exit strategy, estate and financial planning are key areas of focus. However, those are only parts of the whole and discussing them does not mean retirement is soon or a death is expected. It means there is a plan to protect your family and business if the unexpected were to happen. If you have taken steps to address such contingencies, wonderful job – you are further along than many. But don’t stop there, as many business owners tend to do. What is often overlooked are those things that build the foundation for sustainable success and builds value such as:
Change is all around us. Shifting generational perspectives and advancements in technology are impacting how owner’s find and keep talent, approaches to selling and service. Add into the mix regulatory policies, manufacturer mandates and market disrupters. Business owners, now more than ever, must think ahead to leverage strengths, opportunities and embrace innovation or accept the possibility of decreasing market share.
Critical, and often overlooked by business owners as a part of the succession planning process is engaging in strategic planning. This process involves your key leaders and develops or refines you mission, core values, and a 3 to 5-year vision with action steps to achieve identified objectives. Based upon the perspectives of those involved in the planning process, the strategic outcomes may focus on recruiting top talent, building bench strength, growing the business, identifying alternative revenue sources or simply finding better ways to sell more cars, service customers and drive profit.
Once complete, tie everything, meaning; performance metrics and compensation plans to the achievement of the strategic goals. This way, your plan will come alive versus live on the shelf.
Are your people inspired by your culture and motivated to drive the needle? Your business only has a chance to succeed now and into the future if you have strong talent who are inspired by the organization’s mission and vision. This is evident by how much the organization practices fulfilling the mission and vision every day. For example, if a core value of your operations is something like, “our people are our family,” is that practiced in daily interactions between management and employees?
In addition, are there high performers who behave counter to your culture? Do you have a high employee turnover rate? How many people have left and boomeranged back into your organization?
These issues impact employee morale, behavior and performance, which ultimately has an impact on your bottom line. Bench strength, for every key area of your business, is essential for building value and positioning your organization for long-term success. If there are performers who are toxic to your culture, good talent will become frustrated and find other places to develop their career, leaving you will little options to develop your bench. Consider:
- Identifying those with high potential, acknowledge their talent and create pathways for development into leadership roles.
- Identifying those who are high performers, but counter to your culture. Clearly communicate organizational expectations. Put them on a short leash for sustained improvement or sever the relationship as fast as possible.
- Creating a policy for boomerang employees to limit the re-entry to no more than 1 more time. Do not allow under performers or those who are counter culture back into your organization.
Family impacts business decisions whether they are actively employed or not. Perceptions and attitudes are never neutral. For example, if a spouse does not get along with a partner or key manager, it will most definitely create stress. Consider environments where siblings, cousins, parents, nieces/nephews may be actively employed together and/or inactive shareholders. Perceptions and attitudes can make any simple environment complex, and the car business is anything but simple.
When multiple family members are present, a question we often get is “How do you determine who will be successor while keeping positive family relationships?” This can be a dicey situation. If not addressed carefully resentment and fear of favoritism can create a cut throat competitive environment amongst family members.
What to do? Business owners who implement governance policies early on find agreements preclude disagreements. Best case scenario is discussing, before family is of age to enter the business, all possible contingencies of family influence on business decisions. Including, but not limited to, requirements for:
- Employment: Prior employment, education, industry experience etc.
- Performance: Behaviors, attitudes, skills and knowledge as family members will act as role models to other employees.
- Considered for Leadership positions:
- Further training, years of experience etc.
- Successor owner.
One last item business owners often overlook is the definition of family. Family does not necessarily mean you are blood related. Long term employees, family friends etc. can create as much acrimony in the business as blood related due to the murky emotions that impact business decisions. In addition to the items above, think about what additional agreements could help you create clear expectations to avoid uncomfortable challenging emotional discussions with those you care about.
Owner/leaders often overlook how their behaviors and attitudes influence the culture of the business. We find many business owners are perplexed because they do not understand that as much as they talk and work to ingrain certain core values and a specific culture in the business, it doesn’t seem to stick. This is usually due to misalignment of a dealer’s behaviors and professed core values.
If a dealer is professing team, but the perception of the business is to fuel his/her lifestyle, it gives off a “WIIFM – What‘s In It For Me mindset.” This is the attitude that will play out amongst managers and employees. However, if the owner/leader professes and behaves in a way of what’s in it for “we” the behavior in the business will begin to mirror that of the owner.
Because business owners are at the top of the organizational chart, it is often difficult for them to get perspective on their own attitudes and leadership effectiveness. In these situations, consider hiring an outside experienced advisor or confide in a good friend. Receiving outside perspective can go a long way in your journey to become an effective leader.
Rather than looking at succession planning as something you do to prepare for the end, consider the value it brings to your business by making it the starting point. It is a wonderful process that allows you to start with a vision in mind while helping you build and grow your business well into the future. By engaging in the process, business owners can build a business that can provide opportunities for the community and their family, impact lives, fulfill their vision and sustain through multiple generations.
Sign up for our monthly e-newsletter to stay informed on how to overcome related succession planning issues.