Foun.da.tion: noun: an underlying basis or principle for something. From the Latin fundatio(n-), from fundare ‘to lay a base for.’
Have you ever played the game, Jenga? That is the game where players set up a patchwork of hard wood blocks to make a tall, square structure. Then players remove pieces, one by one, and put them on the top until someone pulls a piece that makes the whole structure fall. Players have to be strategic in their choices so not to remove a piece that affects the foundation, causing the structure to collapse.
Whether you are creating a structure or a business, the first and most important part is the foundation. Without solid footing, a collapse is more likely than if the foundation is strong.
This is also true for succession planning. Here are some insights that may help you determine if the foundation of your business is solid or if it is on shaky ground as you think about succession planning.
When I advise company owners, the first thing I do is look at the foundation of the business. This could include:
- Core personal values of the business owner, such as fairness, honesty, trustworthiness
- Family values to pass to the next generation, such as good character and strong work ethics
- Business mission, vision and purpose, translating personal virtues into the business model
This foundation, or “fiber of the culture,” must be identified and clearly communicated before any other planning begins since this is the basis of the succession plan. Incorporated into these foundational components, however, are other values that need to be taken into account since they are part of the foundation’s structure. They include:
- Financial integrity
- Spiritual guidelines
- Emotional stability
- Business philosophy
- Profit motive
- Management style
When I begin assessing the components of a foundation, I use these values to determine the relationship dynamics of family members or co-owners, leadership structure, attitudes toward wealth and more. This is why each succession plan differs from any other one: no two businesses have the same dynamics, leadership style and values.
If I am working with a family business, it is important for me to see how the generations interact with each other. Is the interaction that of a mentor grooming a mentee or of a parent supervising a child? Is one generation conservative, but the other one wants to take risks? Does one generation value profit over all else, while the other one wants to promote good will with customers and employees? All of these dynamics – and many more – are cues I use to determine how strong the foundation is in order to put a succession plan in place.
Think about it – values can be very personal to someone. They are something that we begin to develop at a very young age from our family, then as children those values take shape as we learn from teachers and mentors. There are times when someone might not want to truly share what they believe, while others are happy to share too much. For those who don’t want to share, this information has to be carefully coaxed out of them by asking them a series of questions to try to get to the true answer.
Have you ever taken one of those behavior tests? As you go through the test answering questions, some of the questions seem to sound the same as other questions you answered earlier. Chances are you would be right. In order to know if someone is really being honest on the test (and with themselves), the test may have multiple questions surrounding the same topic, but asked in a different way, in order to see if the participant answers the questions the same way. If not, the participant may not fully understand their own underlying value or behavior.
That is similar to how I will drill down to get to the root values for key individuals in the business. These values will have to do with family, wealth, business, retirement, passions, leadership and more. At this time we can see if these values align with the business’s vision and mission. Most successful companies clearly state their purpose for all to see.
From here, we begin to see what is most important for the current owners, what they want to see from the next generation (or next set of owners), and how that aligns with the values of the next generation ownership.
Only now can the succession plan start to take shape.
I help business owners put a solid succession plan in place in case something happens to them or their business partners. I provide balanced advice so senior management can understand the ramifications of different scenarios and can choose the right plan for their business.
Contact me to learn more about my succession planning and business continuity services.