(April 4, 2005) — Every now and then, we get reminders of how fragile humans are, that we could walk outside and meet an untimely demise.
That might sound cliche, like advice your mother might give you about appreciating life and living each day to its fullest. Cliche, that is, if it weren't true. Take Ipex Inc. Chairman Tom Torokvei for example. He died of a heart attack in February while on vacation with his family.
Last week, we covered the story of Plymouth Foam Inc., a family-owned firm in Plymouth, Wis., whose two owners and vice president of operations were all on a plane that crashed in Michigan.
It's a nightmare to imagine, but it's a scenario you have to consider.
Let's set aside the Grim Reaper's role for a moment. What would happen if your firm's board had to fire its top three executives, as in the case of Royal Group Technologies Ltd.? Attrition alone demands having others groomed to step in once top executives step out.
It might seem obvious, but it's often overlooked. Studies have shown that succession is an ignored component of business planning, subject to the same emotional reaction as preparing a will.
Even large companies with outside boards of directors do worry about succession planning. In a recent survey of directors by the Washington-based National Association of Corporate Directors, nearly 10 percent said their board's work on CEO succession was below acceptable levels.
But the matter is critical for any organization, public or private, whether it generates $800 million in annual sales or just $2 million. Especially in the case of family ownership, what would happen to the company if family members died or were incapacitated?
You can't predict what will happen next, but preparing for anything is key. Plymouth Foam executives weren't scrambling to find someone to run the company, because co-owner and President Scott Roberts, who was killed in the crash, had a plan in place. Founder Tec Roberts, still vice chairman of the board, had acted years before that to sow the seeds for an adequate succession plan.
There are plenty of examples of other firms in the plastics industry that have experienced a tragedy, such as Rowmark Inc. of Findlay, Ohio. After the death of its founder in 1997, Rowmark has in place a succession plan that continually is assessed.
“We have to train our people on the vision that we're trying to create, and therefore your skill requirements change over time,” Rowmark President Duane Jebbett has said.
If you haven't yet, put a team together that can frequently evaluate and retool a succession plan based on your firm's changing needs. Make sure the plan addresses every part of the organization. Identify your most loyal employees and corporate priorities that will continue rolling even if one of the wheels falls off.
Especially in plastics, having the know-how decentralized is critical. Make sure key employees possess the technical knowledge necessary to keep running the business. We realize running your business keeps you busy, but it's a worthy investment to make a succession plan. Your firm's future depends on it.