August 7, 2020
Making Succession Plans a Priority
by Heidi Dorn, Dinsmore & Shohl LLP
In the midst of this national pandemic, we wish that we would have had the personal foresight to plan for certain things - like a major downturn in the economy, home schooling and toilet paper.
For businesses, succession planning and planning for the unexpected crisis is essential to ensure the continuity of the business and protection of the interests of clients and customers. This can be a daunting task, and one often put on the back burner. However, there are a number of reasons that succession planning should be a priority, since it serves as a form of insurance for your business.
Succession planning is a preventative tool that both protects client and customer interests and ensures business continuity. Failing to plan for an unexpected crisis can result in harm to clients, customers, the business and the business owner’s family. The benefit of developing a plan is that it allows for the orderly transfer of power & proper handling of pending matters and satisfies fiduciary and professional obligations. The goals of succession planning are to prepare, respond and recover from an unexpected crisis.
The unexpected crisis can take many forms, including an accident, illness or death, a natural disaster, sudden departure of key employees, an adverse publicity event, or a data breach. Any one of these can have devastating effects on the business and, importantly, its clients and customers. Without a sufficient plan in place, businesses risk exposing confidential data, which could result in harm to clients and customers and end a meaningful relationship with business constituents. Also at risk are a multitude of other interrelated duties and services to clients and customers. Therefore, businesses should take adequate, preventative measures to ensure that client and customer interests are protected.
All businesses should have a transition plan in place to ensure business continuity, to ensure the continuation of superior services and to address progressive business and talent growth. This requires the business to prepare in advance and develop a plan by evaluating risks to the business, while accounting for client and customer concerns and needs. The plan should be thorough, yet flexible enough to adapt to a variety of issues that may arise both inside and outside of the business.
The current pandemic and economic downturn in which we find ourselves, has brought to light the difficulties of maintaining a business or firm during a crisis. Resources are scarce, courts have closed, clients may have difficulty paying bills, and businesses may not have a sustainable business model (or cash reserves) to continue paying employees. These challenges become exponentially more difficult without a plan in place, and where reactive decisions are being made spontaneously. As daunting as this time may be, it can be an opportunity for businesses to be creative and generate new business, as well as to reassess and adapt, which may leave the business more agile in the ever changing business, legal and consumer marketplace. After all, necessity is the mother of invention, and some of the best ideas and inventions have come out of crisis.