What does succession planning look like to you? It probably looks like a long term process.
One where the new successor can slowly be groomed over the years, and maybe you’re even there for a while after the transition to help advise them. That sounds like a great plan. But what if it doesn’t go that way?
As the coronavirus (COVID-19) pandemic has made clear, things may change in an instant for the worst. In such an instance, a traditional succession plan may be too cumbersome or indistinct to execute. That’s why every company should create an emergency succession plan.
When preparing for potential disasters in the past, you’ve probably been urged to devise contingency plans to stay operational. In the case of an emergency succession plan, you need to identify contingency people.
Larger organizations may have an advantage here as a CFO or COO may be able to temporarily or even permanently replace a CEO with relative ease. For small to midsize companies, the challenge can be greater — particularly if the owner is heavily involved in retaining key customers or bringing in new business.
Nevertheless, an emergency succession plan needs to name someone who can take on a credible leadership role if you become seriously ill or otherwise incapacitated. He or she should be a trusted individual who you expect to retain long-term and who has the skills and personality to stabilize the company during a difficult time.
After you identify this person, consider the “domino effect.” That is, who will take on your emergency successor’s role when he or she is busy running the company?
A traditional succession plan is usually kept close to the vest until it’s fully formulated and nearing execution. An emergency succession plan, however, needs to be transparent and well-communicated from the beginning.
After choosing an “emergency successor,” meet with the person to discuss the role in depth. Listen to any concerns raised and take steps to alleviate them. For instance, you may need to train your emergency successor in various duties or allow him or her to participate in executive-level decisions to get a feel for running the business.
Beyond that, your company as a whole should know about the emergency succession plan and how it will affect everyone’s day-to-day duties if executed. Now may be an optimal time to do this because COVID-19 has put everyone in a “disaster recovery” frame of mind. It’s also a good idea to develop a communications strategy for letting customers and suppliers know that you have an emergency succession plan in place.
The pandemic is teaching everyone the importance of being prepared, even for the unexpected, such as the pandemic itself. Take the time from learn from this experience, and consider your own emergency succession plan. For help in developing both an emergency succession plan, and a traditional one, please contact your Rudler, PSC advisor at 859-331-1717.
RUDLER'S TAX MANAGEMENT & PLANNING TEAM
This week's Rudler Review is presented by Becca Johnson, Staff Accountant and John Wood, CPA, CVA.
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