Friday, May 26, 2017

Follow the Leader

(What Happens When the Leader is Gone?)

By: Michael Beels

In the manufacturing industry, it’s desirable for family-owned businesses to be passed down from one generation to the next. Without a proper succession plan in place, a c-level family member’s sudden death or unexpected disability can cause a multitude of problems. Fortunately, proper succession planning—which strives to circumvent these unpredictable events by having a thorough program of plans and responses in place to optimally fill key leadership positions—can help lessen the disruption and deter family infighting. 

The following are some frequently asked questions I’ve received about succession planning and some helpful answers:

Q: Why do you need a succession plan?
A: There are more than 200,000 family-owned businesses in Michigan that do not have a formal plan to carry on the owner's vision after he/she is deceased or exits the business. With only 35% successfully making the transition to a second generation, both legacy and jobs are at risk. 

Q: What goes into a suitable succession plan? 
A: Above and beyond the need to find resources for financial planning, estate planning, business valuation, operating agreements, buy/sell agreements, trusts, etc., a business owner should consider the following: personal income requirements, future involvement, upcoming investments and legacy. 

Q: Who needs to be involved?
A: All family members, even those who are not currently part of the business must be privy to a succession plan. Key employees should be included, too.

Q: What strategies should be incorporated?
A: Tactics include any business competencies that need to be developed for key personnel to achieve strategic goals, planning the transition of roles and responsibilities of key management members, and determining whether the successor of the business will be found internally or externally.

Q: How often should it be updated?
A: At a minimum, annually.

Q: What should be top-of-mind when developing a succession plan?
A: The business owner must determine what they want to do with the business. Do they plan on handing off the business to a family member? Sell the business? Remain an active participant even after retiring? Answering these questions will lead ownership down the correct path for succession planning. It is highly recommended that business owner’s plan for “Emergency Succession.” What will happen if the leader were unable to remain in that role due to emergency purposes? What if they become disabled, incapacitated or even die? Would the business continue? Everything from key contacts to computer passwords must be addressed. 

Q: How can a succession plan positively impact customers?
A: Consumers become loyal to a company because of consistent work culture, efficiency of output and level of production. In order to meet and exceed current customer expectations, manufacturers must be able to maintain their daily routines no matter what the situation may be.

Q: How does a succession plan benefit employees? 
A: When a company’s culture, ethics, routine and rules suddenly change, employees may become flustered or disengaged, putting an organization at risk of making mistakes, decreasing levels of motivation and diminishing productivity. The abruptness of the situation may also result in an employee feeling disconnected, lacking support and left wanting to leave. Succession planning allows employees to adjust organically to the transition with gradual ease, while maintaining their level of productivity and motivation.  

Plan for the unexpected
Most importantly, don’t delay setting up a succession plan for your business. If you’ve already done so, congratulations! Keep in mind, however, it might be time for a review. To schedule your free assessment with the Michigan Manufacturing Technology Center (The Center), click here

About Our Expert

Michael Beels 
Lean Program Manager

Michael Beels has served as a Lean Program Manager for the Lean Business Solutions Team at The Center for more than 12 years. He a Certified Family Business Advisor and RAB/QSA Certified Internal Auditor. His areas of expertise include Succession Planning, Change Leadership, Workforce Engagement and the entire portfolio of Lean strategies and methodologies. To read Michael’s full bio, click here. 

Since 1991, the Michigan Manufacturing Technology Center has assisted Michigan’s small and medium-sized businesses to successfully compete and grow. Through personalized services designed to meet the needs of clients, we develop more effective business leaders, drive product and process innovation, promote company-wide operational excellence and foster creative strategies for business growth and greater profitability. Find us at

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