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May 2, 2013

Avoid the pitfalls of transition planning

  • A recent study found that nearly half of family businesses do not have an up-to-date strategic plan, and nearly two-thirds have no succession plan.
    Bechtel Consulting Group


    I recently was speaking with a young contractor at an Associated Builders & Contractors event, and learned that his father, the founder, was easing out of the business and handing the reins to him and his brother.

    I asked how that was going, and was impressed to hear that the transition was part of a well thought-out strategic planning process. As a result, things so far had gone largely without a hitch.

    Kudos to them! If only their wisdom and foresight were more widely shared in the industry — or the broader spectrum of family-owned businesses, for that matter. Unfortunately, the figures are not encouraging.

    It’s a fact that we are at the forefront of the largest wealth transfer from one generation to the next in the history of mankind. Much of this wealth is wrapped up in family-owned businesses, and so the transfer will involve the business, as well. Yet, many of these businesses appear to be headed there without the benefits of adequate planning.

    A recent study by the Pacific Family Business Institute found that nearly half of family businesses do not have an up-to-date strategic plan, and nearly two-thirds have no succession plan. Yet, two-thirds of those same businesses also hope to keep the business in the family.

    Contractors are no exception. I met another industry member recently who told me that his firm’s owner had just passed the business off to his son, whose training and background were completely unrelated. The son was bright and resourceful, but was handicapped by the absence of any formal planning to guide his decision making. As a result, the company was somewhat adrift.

    Of course, the underlying question here is “Why?” I’ve raised that with many leaders over the years, and usually get one of two basic answers: “We don’t think we need one” or “We’ve tried it in the past and it didn’t work.”

    In this article I’d like to offer some insights on the second of these.

    When the process breaks down

    There are a number of variations on the “It didn’t work” theme, but here are some of the more common ones:

    • Planning by the pound (1). The planning process collapsed under its own weight — that is, it became unwieldy to the point where it ground to a halt. When that happens, it can stall any future planning efforts.

    • Planning by the pound (2). The plan is impressive to read, but realistically impossible to implement within the firm’s financial and human resource constraints. Again, the effort bogs down; in this case at the execution end.

    • The “do-it-yourself” conundrum. Leaders often think their own team can do the planning without outside guidance. Two problems can result: (a) If no one really understands the process, it winds up being the blind leading the blind; and (b) it cross-purposes the leader to simultaneously facilitate the process and be a participant.

    • Garbage in, garbage out. The senior management team does its planning in a vacuum — that is, relying on their own hunches, instincts and anecdotal knowledge, rather than on objective data. Whether the resulting plan accurately reflects reality becomes a matter of chance. To quote an old proverb: “You can’t read the label when you are sitting inside the jar.”

    • Lack of follow-through. Too many plans wind up gathering dust on a shelf because of a failure to turn their goals into marching orders. A strategic plan, by definition, addresses long-term goals. In order for the plan to succeed, those goals must be broken down into shorter-term action planning.

    • Failure to build internal alignment. If those who must implement the plan don’t fully understand or appreciate its rationale or goals, they won’t be fully on board and the implementation will be fragmented. Internal alignment behind the mission, vision and objectives is critical to get the most from resources and assure long-term success.

    Transition planning is essentially strategic planning with a twist. And, in the transfer of a family business, there are at least two other unique issues to be addressed:

    1The current owner — especially if he or she was the founder — may have a clear vision in mind, and a clear sense of the firm’s mission and strategic direction. But without a plan, those views may not be understood or shared by the next generation.

    2The transition process must take into account the key roles to be played by family members to assure a continuity of leadership and management. In the absence of a strategic or transition plan, it’s likely that the related issues haven’t been addressed, and those people may not be adequately prepared.

    These are just some of the more common challenges contractors encounter in their efforts to plan. No wonder there is such skepticism. But not planning is worse, as it leaves the firm in a reactive mode with no real control over the pace or direction of its growth.

    Getting on the right track

    The answer is not to run away from planning, but to tackle it in a systematic, step-by-step approach. In very broad terms, it boils down to several basic steps:

    1Revisit your vision and mission. What is your central role within the industry, and what do you want the firm’s future to look like?

    2Take stock of where you are today — your internal strengths and weaknesses, and external opportunities and threats. Be careful to choose those that relate directly to achieving your mission and vision.

    3Putting (1) and (2) together, determine what you can realistically accomplish over the period covered by the plan — e.g. set realistic goals.

    4Lay out action steps to set you on the right course and assure you won’t deviate down the road.

    Finally, remember that a strategic plan is not an end, in itself. It is a dynamic tool, a lens through which to observe changing circumstances and make prudent adjustments. In that way, the plan becomes a template for decision making and a way to help you stay optimally attuned to your environment.

    As a rule of thumb: The object of planning is not so much to be right, as to be ready.

    A seasoned practitioner with more than 25 years of experience, Richard Bechtel has a diverse knowledge base that spans organizational dynamics, strategic development, succession planning, corporate positioning, market research, marketing and communications planning, and sales management and training. He is founder and president of the Bechtel Consulting Group in Kenmore.

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