Situation: The founder and CEO of company needs to find a successor. She is ready to reduce her role but wants to assure the ongoing operation and future growth of the company, as she will remain the principal shareholder. How do manage succession planning?
Advice from the CEOs:
- Options for management succession and growth.
- One option is to create an employee stock option plan (ESOP) to expand ownership of the company and to help recruit new managers to support growth.
- A second option presented itself through a broker who has approached the company to help them find a buyer for the business. The broker suggests finding a customer who is a potential buyer and also the right fit.
- A third option is to purchase a smaller company with a good CEO and then do an ESOP transaction to allow the CEO to reduce her role while providing new incentives for management.
- Options for maintaining continuity of the business.
- The CEO has identified an individual with the background to lead the company and identify the talent to fill key roles.
- In addition to a leader, what other key roles must be filled? Look at the current and planned organizational charts. Determine which roles must be filled, the order of priority to fill them, and management succession plans for each.
- When and how should the CEO’s plans and options be communicated to staff?
- One approach is to say nothing until either a successor has been identified or an actual deal is in place. This will avoid unnecessary disruption that will accompany and news of the plans.
- On the other hand, if an ESOP is the option, let current staff know early, along with anticipated specifics of the ESOP Plan.
- It is best to be straight with staff once the timing has been determined. Complement disclosure of plans with assurances that the change will be good for staff and that there will be financial incentives for them to remain with the company.
- Be sensitive to what drives and motivates staff – build this into plans to inform them of what is happening.
[like]
