Succession planning is perhaps one of the most difficult aspects of business for company owners, said a management consultant specializing in this area. Richard L. Jones of Management 2000 Inc. said there are two reasons owners seek successors: To ensure their families are taken care of if something should happen to them, and to save their companies.
Jones said one of the biggest mistakes company owners make is to say, ``I need somebody to replace me.'' That can't be done. Part of this attitude stems from the environment these owners create for themselves and the companies they have built.
``I find owners consider a company a living thing - a part of them - and their legend lives in their company,'' Jones said.
Owners seeking a successor need to ask themselves a series of questions: Why are they seeking a successor? Will the successor come on a full-time or interim basis? Will the successor come from outside the company? Will that person be a family member?
Next, Jones said, owners must determine what expertise will be missing when they leave the company and what skills or expertise the successor will need to replace those elements.
Finally, an owner must decide,``What will I have to give up to help my successor succeed?'' Jones said. Likewise, successors must take care not to set themselves up for failure.
``It's equally important for the successors to set parameters for their careers,'' Jones said.
These parameters then be translated into a contract answering questions for the successor such as: Why am I here? What will my responsibilities be during the first year? In three years? In five years? What about compensation such as pay and stock ownership plans?
One of the most crucial elements to ensure success is to realize that in a company builtby one person, it is only after the owner has ``operationally retired'' from the company that the successor really can begin to implement new management methods and procedures, Jones said.
``This is out of respect for the person who grew the business,'' Jones said. ``They fought through the hard times. The business came from this person and his efforts.''