Professionals do not do well at business succession planning. This article comments on the problem, its symptoms, and possible cures.
Business succession planning is composed of transition planning and contingency planning. Contingency planning is the planning for certain possible contingencies, such as the immediate need to replace a key person because of death, disability, termination of employment, or other sudden event. Most businesses have some disaster planning in place and at least have some basic ideas in place about what would happen in the event a key person was no longer available to work. Transition planning is the planning for the change of leadership over time reacting to the change in the business. Obviously, the transition plan is a long-term or strategic plan. Because it involves control of the business, the transition plan is difficult to accomplish and maintain.
Most businesses have a contingency plan of some sort and do not have a transition plan. The purpose of this article is to discuss the accomplishment of a succession plan in a professional business, identifying some of the general problems, typical to most businesses, and some of the unique problems, of particular concern to professional businesses.
Implementation of a succession plan requires the same techniques as implementation of any strategic plan in a business. The time for planning must be scheduled. This time will include meeting time but also time for drafting individual contributions to the overall plan. The planning process should be over an identified period of time with all stakeholders (generally owners) involved. Meetings should be used to identify tasks and to consolidate information. A reporter should be designated to document and compile the written contributions of the stakeholders.
A sample planning schedule might look something like this: First meeting - general information session with initial assignment to describe the present actual decision-making process of the business including contingency plan and submit that writing to the reporter. Second meeting – review descriptions of actual decision-making process and contingency plan with the existing governance documents of the business and assign a writing to indicate how the formal governance procedure should or should not be changed. Third meeting – review governance changes submitted and discuss methods of selecting a chief executive officer, including what the threshold qualifications should be for that position (the most important of which will be whether that person needs to be of a certain group, such as an owner). Fourth meeting – review CEO selection process submittals and receive assignment to describe business ownership requirements. Fifth meeting – discuss business ownership requirements submitted and receive assignment to discuss value of the business and funding requirements for new owners. Sixth meeting – review succession plan draft, which will be the reporter’s compilation of all written submissions and receive assignment to edit written succession plan draft. Additional meetings will involve the editing of the plan and determination of the form of the final plan.
There are several unique issues to professional businesses. The first issue has to with the failure of the professional to adequately prioritize time and effectively delegate the management of the business. The second issue has to do with the failure to create and observe governance procedures. The third issue has to do with the lack of professional training within the business, including implementation and maintenance of professional systems to elevate and maintain on a consistent level high standards of practice for the business.
The typical professional business is owner managed. The owner is engaged in a professional practice. Most states’ statutes require professionals to be in charge of the professional practice of their businesses. There is no restriction on delegation of business management activities. Professionals tend to have a very difficult time recognizing the educational requirements and experience necessary for effective business management. Professionals often assume that the business management function can be performed by the professional as time is available. While this is possible, it is rarely the case. What is far more common is that a professional, typically one of the most experienced and highly qualified professionals, demeans his or her professional practice while trying to also manage a business. The management job is rarely done well and the professional practice suffers.
Governance in a professional business typically is not a structured or established process. Important business decisions, especially planning decisions, are postponed, while professional matters are prioritized. Business and management decisions are often made on the basis of urgency rather than importance. Professionals tend to be competent, motivated people who have difficulty delegating tasks. Frequently, because professionals generally are poor at delegation, business decisions are made at too high a level and without adequate information and process.
Professionals who are trying to maintain a professional practice and manage a business also often fail to establish practice systems and training for younger professionals. It is ironic that so many professionals choose to dabble in business management rather than train younger associates, the training and teaching activity being one for which they usually are better qualified.
The steps for a professional business to accomplish a transition plan are:
1. Devote adequate time to planning – this includes development of a strategic plan concerning succession.
2. Delegate business management functions and basic decisions to a business manager who is qualified by education and experience to manage a business.
3. Through the succession plan create and document a coherent governance plan which specifies which decisions are process decisions (needing information and deliberation to make a wise decision) and which decisions are best made at lower levels by the individuals with the experience and education to quickly and effectively make the decisions.
4. Create and maintain systems of practice which stress the quality and process of service created by the business, which are unique to the business and a source of pride for the quality of service rendered.
5. Document and verify the advantages and responsibility of ownership of the professional practice. It should be understood what benefits will accrue to those who assume the responsibility of ownership of the professional practice.
Finally, it is important to start today. Procrastination is the reason most planning is not done. As with most important but not urgent tasks, planning must be scheduled and given adequate time to yield results.
