presented to cfma november 7, 2013 by john hughes, m.a. president, ollum consulting, llc
TRANSCRIPT
Presented To CFMA
November 7, 2013
By
John Hughes, M.A.
President, Ollum Consulting, LLC
Supporting Succession Planning: The Role of the CFO
• Succession is a process for balancing continuity and adaptation.
• Succession as process is part of a strategic perspective on the organization, it’s leaders and its people.
• Succession is a learning based growth process for both individuals, teams and organizations.
• Effective succession processes are systemic rather than linear.
• Continuity of leadership is important to all organizations.
Succession is a process, not an event!
How long do they want to work? When do they want to scale back their time
commitment?What do they want for the future?
For self?For the company?For the employees?For owners?For the family?
What plans do they already have?
Talking with the owner/leader about succession
Start-Up
Expansion/
Formalization
Mat
urity
(Driven by personal goals)
(Driven by what's best for the business)
(Business designed around the leader)
(Business more organized but experienced
as being "like a family")
(Leaders and Managers conform to the business)
(Tension)
Intuitive/Opportunistic Direction
Hard Work Trial and Error "Jack of all Trades" "One Man Band"
Outside Expertise Financial Discipline Structure and Accountability Entrepreneurial/Managerial
Tension
Market-Driven StrategicPlanning
Goal Setting Structure & Systems Accountability/Reward Management Development
and Team Building
Stages of a Closely Held Business
Ownership
Leadership
Governance
Family
Multiple Succession/ Transition Processes
How will the next CEO be selected?Will the person be family or non-family? Internal
or external?How will candidates be developed?What role will current leader take?What will the transition look like?Does the leadership structure need to change?
What roles do not have successors in place?How deep is your leadership pipeline?How good is the company at developing leaders?
Leadership Succession
FamilyHow will ownership be transferred?
How will shares be distributed or ownership designed?
(active vs inactive stockholder)
How will shareholders be trained?
Do you have a shareholder agreement?
Ownership Transition
Non Family
How will current owner bought out and by when?
How are shares valued?
How are shares acquired?
How will shareholders be trained?
Ownership Transition
Ownership Plan
Promotion of Business Continuity
Income for Senior Generation
Equitable Treatment of all Heirs
Tax and Financial Considerations
Family Awareness
OWNERSHIP OPTIONS:Active Shareholders OnlyActive and Non-Active ShareholdersNon-Active Shareholders OnlySale of the Business
Transition to a professional board or advisory board
How will Shareholders be represented? (family/non-family)
How can the board support the transition?Help founder/owner maintain appropriate role and
boundaries.Help manage the business and the new leader.Support the development of the new leaderOversee strategy
Governance Transition
Shareholders(Ownership)
Employee
Management (Leader & Managers)
Directors (Governance)
Elect directorsApprove sale of the businessApprove recapitalization and issuance of shares
Select Chief Executive OfficerSet policy (not day-to-day operations)Approve plans and budgetsHold management accountableDevelop and propose plansImplement Board policy and plansOversee day-to-day operations
Carry out assigned tasks
Corporate Decision-Making Structure
Family Planning
Estate Plan Preserve Wealth
Transfer Wealth to Heirs
Philanthropy
Minimize Taxes
Family must redefine the purpose of the business and its relationship to the family.
Mission and values should be revisited and updated if needed.
Strategy should integrate the goals of the outgoing and incoming leaders.
Strategy should overlap the transition.
Mission, Purpose, Strategy and Values
No planCurrent owner/leader not able to let go.Next generation of leaders not prepared.Ownership transfer not plausible/no way to
buy out owner.Family DynamicsTyranny of the urgent over the importantHomeostatic Cultural ForcesSingularity of PerspectiveNot knowing what we don’t know
Succession Derailers
Family Dynamics
Family/Business Overlap
Emotion BasedLoyalty & Belonging
Continuity & Harmony
Task-BasedCompetence &
CommitmentGrowth & Change
Family Business
Family/Business Overlap
Family Business
Functional
Family/Business Overlap
Disruptive
Family Business
Family/Business Roles
Family Employee
Owner
FamilyOwner
FamilyOwner
EmployeeEmployee
Owner
FamilyEmployee
Decision making
Money
Information
Interactions
REACTIVE RESPONSIVE GENERATIVEINTENTIONAL
DIFFERENTIATEPARENT to CHILD
DIFFERENTIATESIBLING to SIBLINGPARENT to CHILD
DIFFERENTIATECOUSIN to COUSINSIBLING to SIBLINGPARENT to CHILD
LEADERSHIP/OWNERSHIPSUCCESSION
BUSINESS/FAMILYDIFFERENTIATE DIFFERENTIATE
BUSINESS/FAMILIES BUSINESS/FAMILIESDIFFERENTIATE
Roles
Mission
Strategy
Values
Roles
Mission
Strategy
Values
Board
Culture
Leadership
Development
FC
Culture
Constitution
Leadership
Development
Personal
Meaning
Sense of
Belonging
Business &
Financial
Acumen
(Prof. Wendy Handler, Babson College)
Stages of "Letting Go"
Operator
(No Role)
Senior Generation
YoungerGeneration
Monarch
Helper
Delegator/Overseer
Manager
Consultant
Leader
Evolution of Succession Planning Across Business Strategies
Start-up Entrepreneurial Managerial Professionally Managed
Starting Growing Maturing Renewing
Back of Replacement Succession SuccessionNapkin Planning Planning Management
• Immediate Needs
• Single Position
• Crisis Management
• Reactive
• Short Term Needs
• Critical Positions
• Risk Management
• Responsive
• Long Term Needs
• Key Leadership Roles/Pools
• Talent Reviews
• Development Plans
• Responsible
• Strategic Focus
• Active, On-Going Process
• Pivotal Talent Pools at All Levels
• Leadership & Organization Development
• Generative
John Hughes, Ollum Consulting, LLC
763-432-2306
Thank You!