Why Not Having A Succession Plan Can Derail Your Business — And Put Your Legacy At Risk
Learning to expect the unexpected is a time-honored rite of passage for every small business owner. But when unpredictability strikes in the form of a key executive suddenly resigning or, worse, passing away, the fallout can be devastating. That’s why having a solid succession plan in place is crucial, not only to future-proof your business but to maintain the trust and confidence of your clients and investors.
Yet according to Rocket Lawyer, an online legal technology company that provides individuals and small- to medium-sized businesses with online legal services, 72% of entrepreneurs have no succession plan in place to handle leadership transitions. Meaning that without a well-defined backup plan, their entire company could be at risk should disaster strike.
Just ask New Jersey-based BioAegis Therapeutics, whose co-founder and chief scientific officer, Thomas Stossel (brother of television commentator John Stossel), unexpectedly passed away at age 78 on Sept. 29 while working out at his local gym.
The news not only dealt a major personal setback for the 10-person firm but a professional one as well: The former Harvard Medical School professor’s pioneering research was responsible for the discovery of plasma gelsolin, a naturally-occurring antiinflammatory protein that helps regulate the body’s immune system to better fight off disease. Its unique properties are what the company’s treatments are based upon.
“Everything came out of left field,” says chief operating officer Valerie Ceva. “Tom was a healthy guy in great physical shape who didn’t have an ounce of extra fat on him. … We were just in shock.”
Moreover, Stossel’s passing also came at the most inopportune time: In August, BioAegis reported favorable safety and pharmacokinetic results in its Phase 1b/2a dose-escalation study of plasma gelsolin, and fund-raising efforts for the company’s Phase 2b clinical trials in severe pneumonia — spearheaded by Stossel — was scheduled to begin.
Fully prepared to weather the storm
Luckily, Ceva explains, the company was prepared to weather the storm. BioAegis was structured in such a way as to continuously capture and share internal learning, maintain strategic flexibility and leverage the talents of employees whose knowledge, skill sets and experience overlapped. It was this foresight, mapped out and planned for since day one, says Ceva, that allowed BioAegis to remain resilient despite adversity and keep moving ahead, even in the face of potentially showstopping setbacks.
“We found out about Tom’s passing late on Sunday night,” she says. “By 8 a.m. Monday morning the management team was on the phone and revising its strategic and communications plans. An hour later employees knew what was happening, and we started reaching out to our support network of advisors and experts. Within a week numerous individuals had stepped up to help take on Tom’s different responsibilities and fill in any strategic gaps. Shortly thereafter, we were back to going full steam ahead.”
BioAegis’ successful perseverance in the face of unexpected hardship is uncommon. All too often, as noted in best-selling book “Make Change Work for You,” small business owners are too focused on dealing with the here and now to plan for tomorrow today. Likewise, prioritizing thinking up smart ways to successfully hand off leadership duties to others isn’t necessarily second nature for those who’ve built an organization from the ground up.
Whatever the reason — whether too hands-on, too short-term-oriented or too reluctant to give up control of their enterprise — small business founders are often too absorbed with other priorities to give long-term planning proper attention in their business.
According to surveys by Wilmington Trust, nearly 8 in 10 blame being too preoccupied with managing their firms’ day-to-day operations for this oversight. Likewise, 4 in 10 say that they’re too busy to get around to the task or that potential business hand-offs sit too far ahead in the future to justify the time and resources they’d spending mapping them out in the present.
But whatever the reasons may be for failing to formally map out a succession plan, delaying the process is a big mistake that can cripple your enterprise’s chances of future-proofing itself, suggest market leaders like PNC Financial Services. Rather, the firm notes that it’s imperative for business owners to always have a Plan B ready in case of illness, disability or death, and an exit strategy in place if they’re planning to retire.
“You can’t predict or plan for every eventuality,” says Chris Zimmerman, management consultant with FutureProof Strategies. “But you can certainly prepare yourself and your team in advance to greet many common challenges that small businesses face and exert greater influence over those outcomes that are within your power to control. Making a point to actively think ahead and plan around uncertainty is becoming an increasingly important principle for any small business owner to embrace in today’s growingly unpredictable business world.”
Happily, though, given how increasingly volatile the market is becoming, more business owners are making a point to adopt this philosophy and build succession planning into the fundamental DNA of their workplace.
For example, custom software maker Menlo Innovations pairs two employees together at every PC in its office — and switches these partners weekly. It’s a system that founder Richard Sheridan says is designed to help facilitate knowledge transfer among employees, expose team members to new business approaches and angles and break down the walls that often isolate potential collaborators.
Moreover, the methodology allows employees who possess unique insights — and often become so busy that it’s hard to share their vision, field every request or take time off — to avoid becoming bottlenecks to productivity and enjoy better work-life balance. But perhaps more importantly, by ensuring information disseminates among co-workers, it also serves as a ready fail-safe in case that employee elects to retire or move on to another firm.
“In today’s working world, where businesses and careers are more fluid than ever, nothing should ever be considered permanent,” suggests Zimmerman. “Having a succession plan in place can help you protect your business from whatever unforeseen twists, turns and happenings that the future may bring.”
6 steps to a winning succession plan
With this in mind, experts recommend taking a more forward-thinking approach to business strategy to lay the groundwork for continued success. Here are six ways to create a winning succession plan.
1. Cross-train your employees so skills are shared. Cross-training employees in similar skills and ensuring that information is freely shared throughout your enterprise ensures that no operating process or professional relationship is dependent on the efforts and insights of one single person. For example: All scientists at BioAegis are capable of standing in for one another when performing experiments, and Stossel himself made a point of collaborating with myriad clinical partners to ensure that others were well-versed in his signature techniques. Using a similar system, small business owners can build in layers of redundancy that can help safeguard your organization in the event of an unforeseen loss or departure.
2. Encourage workers to communicate often and freely with others in your enterprise. This includes holding weekly meetings to ensure that colleagues are kept up to date on various initiatives’ progress, briefing peers on current tasks and workloads and using online storage tools to document and share all work performed. That way, if you need to hand projects off to others, they’ll be able to quickly pick up where you previously left off.
3. Partner with external parties or organizations to multiply the number of resources and insights you can draw upon. Creating a broad organizational support system and actively working to partner with external parties or organizations will multiply the number of resources and insights you can draw upon. Case in point: Over the years, BioAegis built a network of expert advisers and supporting cohorts at leading academic institutions and government agencies worldwide. Because of this advance planning, the company was able to quickly staff back up when it needed to find someone to fill an outstanding role or tackle an unassigned task on demand.
4. Break down the silo mentality. Promoting a culture of support, teamwork and encouragement and espousing the value of collaboration will keep information from being siloed off inside the enterprise. This environment will not only make employees become more actively vested in the company’s success but also enable employees to work more effectively together and respond to challenges more creatively.
5. Engage in routine strategic-planning exercises. Challenge yourself and your staff to come up with answers to multiple what-if questions and make sure you’ve covered competitive bases, like how to respond if certain market events or actions by rivals come to pass. Also be sure to account for prospective legal and financial considerations. Increasing regulation, governance and oversight may impact your industry in coming years, so it is crucial to have a plan in place that will allow you to effectively respond and adapt.
6. Start thinking about the future now. “Make a point to block out time in your schedule to start thinking about tomorrow now,” advises BioAegis chief executive and co-founder Susan Levinson. The CEO since its inception in 2011, Levinson’s commitment to identifying and growing talent to fill business-critical positions for the future has helped to ensure success for the company: On October 21 BioAegis Therapeutics was recognized by PitchBook as the most valuable venture-backed company in New Jersey led by a female entrepreneur.
“No matter how small your business is, you always need to be planning for the future,” she says. “Thus, with [any given] loss, a team can readily shift focus from addressing concerns about how to fill gaps to fielding questions about how to best honor a given individual or organization’s legacy.”
Patty Block, President and Founder of The Block Group, established her company to advocate for women-owned businesses, helping them position their companies for strategic growth. From improving cash flow…. to increasing staff productivity…. to scaling for growth, these periods of transition — and so many more — provide both challenges and opportunities. Managed effectively, change can become a productive force for growth. The Block Group harnesses that potential, turning roadblocks into building blocks for women-owned businesses.