Friday, November 30, 2007

Death of a salesman

Surviving loss of a leader a matter of prior planning

Atlanta Business Chronicle - by Deborah Held Maslia Contributing Writer

In any business, appropriate succession planning for the untimely death of its CEO is crucial to the long-term survival of the company. In a small to midsized business in particular, care must be taken to address the issue of maintaining employee confidence after the sudden loss of the company's leader. When Dr. Robert Lipson, CEO of WellStar Health System, was killed in a motorcycle accident on Nov. 10, 2006, the first order of business was an emergency meeting of the board of directors to implement the hospital system's succession plan. "Dr. Lipson was working diligently to make sure that we would have a plan," said Pete Wood, chairman of the board. Neither Lipson nor his board felt that the organization's relatively new chief operating officer was fully groomed for the role of CEO. Marsha Burke, chief financial officer of the organization, had been asked by Lipson to step up in the case of an unforeseen event. The board had been in agreement. As with any proper succession planning, all of the key players were aware of the plan. When the board dispersed after midnight, an e-mail of reassurance was immediately sent to all 11,000 employees of the WellStar system, in which Burke was announced as interim CEO. "In a tragic and unexpected situation, [people] need to know who's at the helm and what's going on," Burke said. Employees were assured that they had a leader, that their organization and jobs were intact and that the company was moving forward with Lipson's own vision, she said. "We didn't miss a beat," said Wood. "We just missed Dr. Lipson."

A succession plan starts out well before succession is under way, say local experts.

While smaller companies may not have actual executive boards, it's crucial to the small to midsized company's ongoing success to be in touch with key employees and trusted advisers -- typically the firm's lawyer and accountant -- in order to focus on the business of succession, said Suzanne Travers, founder and CEO of The Grapevine Group Inc., an executive recruiting and recruitment process outsourcing firm headquartered in Roswell.

It's the job of the CEO to identify key issues the business and the CEO will encounter during the next few years, said Matthews. What are the new demands he or she will face as the company and the market change?

"It's an ongoing process," said Matthews, who likens the process to recruitment: "The CEO makes sure he's got the right people in the right positions and that they're being appropriately schooled to take on issues that present themselves for the company."

The forerunners should be told that they're "high-pots" (high potentials), said Matthews, so that they can jockey for future promotion. This strategy also helps assure that the talent doesn't jump ship to another company or leave to start their own firms.

The ideal candidate for a small family owned business, said Mark Weinstein, vice president of firstPRO Inc., an Atlanta-based retained and contingency executive search firm, would be a family member of the CEO, which provides name recognition, and even a spiritual connection, for employees as well as customers and vendors.

There are times in almost any business where an internal successor is not available or not ready for a promotion to CEO. In such an event, "identify an external candidate," said Matthews.

"We advise that unless the external candidate is twice as great as the internal one, they're not worth the risk," said Matthews. "It's a quantum leap" to go outside an already successful company for leadership.

Only if the business is floundering, then perhaps "external DNA" is in order so as to bring fresh leadership ideas to the company, said Weinstein.

A major problem for the CEO of the small to midsized company, said Weinstein, is the fact that "[they] are so busy running the day-to-day operations and facing the demands of their business that there seems to be no time to develop a succession plan."

Also, said Weinstein, people generally don't like to think about the possibility of their own death. Still, "the creation of such a plan is vital."

"The key," said Weinstein, "is to be prepared today for the worst case scenario that could happen tomorrow."

"Discuss it before it happens," said Jennifer Stone, senior client liaison for Administaff's Atlanta office. "[People] don't think straight when they're grieving."

Randy Satterlee, co-founder, CEO and president of Atlanta-based communications company VanRan, knows this all too well.

Last October, her business partner of 20 years died suddenly while the two of them were enjoying a casual conversation.

"We had already started our succession plan," said Satterlee of the company she and Charlie Vanderford had founded in 1986.

"What I didn't factor in to the succession plan was grief. You can have everything planned for succession, but you don't know how you're going to react when you lose someone who's so important" to everyone in the business, personally and professionally.

In a small business especially, work colleagues are a "second family," she said.

Furthermore, for Vanderford's son, his grief was so palpable as to negatively impact his ability to work during the beginning months of his ascension to partner, as per the succession plan, said Satterlee.

After the sudden loss of a leader, employees and vendors alike need time to grieve, said Stone. Stone advocates naming an interim CEO in order to reassure employees that their jobs and their company are secure, and to provide grieving time for etiquette reasons.

"You don't want it to look like a business strategy, even though it is one," she said.

James Robinson, a private wealth attorney with Arnall Golden Gregory LLP, points out that every firm's succession plan is unique, and is arrived at through a process of "mutual discovery" between the CEO and a trusted business adviser.

"The absolute worst situation," he said, "is when nothing is done until someone dies."

Satterlee has her own suggestion for an easy transfer of information during the initial period of shock after the loss of a CEO: "Everyone needs to put together a book" that says what happens if the CEO were to become incapacitated tomorrow -- how would the business run? Whose signature is required to sign checks? Include a list of vendor contacts, all customers and their contact information, etc.

Above all, stressed Satterlee and Stone, verify the life insurance on the CEO and whether it is enough to meet the needs of the succession plan itself, said Bo Wilkins, managing director of Nease, Lagana, Eden & Culley, an Atlanta-based insurance advisory firm for the ultra-affluent.

"With life insurance, you're insuring the life of the owner so there will be liquidity at death to buy out his stock," in conjunction with the succession plan that ensures the company is going to perpetuate in the most efficient manner, said Wilkins.