Mitch Wienick

1

• Some Key Facts
• 90 of U.S. businesses are family owned
• 33 of the Fortune 500 are family owned or
  controlled
• Only 30 of family owned businesses succeed to
  the second generation
• And only 15 of family owned businesses survive
  into the third generation

2

• Why Does This Happen?
• There is no qualified successor
• Businesses fail to plan for succession

3

• A Brief Story Not About a Small Business But
  Relevant
• When Orrin Smith became President/CEO of
  Starbucks in 2000, planning for his succession
  was his top priority
• He established a 2005 exit date when he would be
  62 years old
• Two years into his job, Smith realized internal
  candidates were too unseasoned to assume his
  position by 2005
• He decided on an outsider, Jim Donald, the
  President/CEO of Pathmark
• Starbucks gave Jim Donald a 90 day dedicated
  immersion
• He worked in the stores to understand the
  customer experience
• He observed firsthand the coffee-roasting plants
• Then he was made head of North America
  Operations, Starbucks largest business
• Progressively he become accountable for more
  pieces of the company
• One task was to plan for his own successor before
  he succeeded Smith
• His ability to assess and develop a talented
  replacement was carefully monitored by the Board

4

• Overview of the Succession Planning Process
• Is business succession within the family or other
  executives viable?
• Develop your succession plan (and your
  successors)
• Monitor plan implementation
• Coordinate your succession plan with personal tax
  and estate planning

5

• The Viability of Succession
• Are your children capable of running the business
  when you retire?
• Are they interested in succeeding you?

6

• Seven Critical Competencies for Business Leaders
• Leadership
• Multi-Business or Multi-Functional Experience
• Value-Added Solutions
• Change Management
• Alliance Building
• Financial Acumen
• Courage and Integrity

7

• Leadership
• Strong and passionate can form, lead, and
  motivate high-performance teams
• Continually demonstrates a commitment to the
  business and dedication to its success
• Excellent organizational and communication skills
• Personal and professional integrity

8

• Multi-Business/Multi-Functional Experience
• Diverse experience in the organization
• Track record of successful contribution in
  multiple assignments
• Effective in working in a matrix management-
  oriented organization
• Ability to work and make decisions in a
  fast-paced environment

9

• Value-Added Solutions
• A proven track record of creating new solutions
  and improving existing products
• Quality oriented, focused on making continual
  improvements

10

• Change Management
• Build cooperation among all team members and
  motivate them
• Understand the components of organizational
  design that promote change

11

• Building Alliances
• A demonstrated track record of building and
  growing strategic alliances
• A skilled negotiator

12

• Financial Acumen
• A proven track record in meeting financial
  targets
• A strong business sense and knowledge of the
  financial environment

13

• Courage
• Decisive with a sense of conviction
• Ability to find new solutions and take
  calculated-risks
• A commit to invest in RD

14

• Succession Plan Development and Implementation
• Accept that a succession plan is necessary
• Clearly identify your successor
• Start the process early
• Establish a clear timetable for the process
• Obtain outside advice
• Develop a clear business plan extending beyond
  your retirement
• Retain key non-family employees
• Fair doesnt mean equal relative to your children
• Review the progress of the plan regularly

15

• Onboarding and Assimilation of New Key
  Executives
• Its less straightforward than you think
• Suppose you need to go outside for a new C-level
  executive (e.g., a COO)
• Does the following sound familiar
• Perhaps you hire an Executive Recruiter (whose
  fees range from 25 to 33 of first year
  compensation)
• The search might take 3-4 months and involved 10
  days of interview time for you, your staff, and
  your board
• You may have to pay an upfront signing bonus in
  addition to market based salary, bonus, and
  equity
• The mere fact that youre hiring an outsider may
  trigger other senior management departures
• The new hire will now run and control a major
  part of the business
• So, given this big investment and responsibility,
  do you just want to let this new person sink or
  swim when coming on board?

16

• Types of Transitions
• Promotion to a more senior functional role or
  moving from a functional role to a general
  manager position
• Moving to a new position within an existing
  organization
• Moving to a new position in a new organization
• Moving from a staff to a line position or
  vice-versa
• Taking over either (a) group facing very serious
  problems or (b) a group widely viewed as very
  successful

17

• Key Reasons for High Outside Hire Fail Rate
• Executives from outside the company are not as
  familiar with the organizational structure and
  the existence of information networks of
  information and communication
• Outside hires are not familiar with the corporate
  culture and therefore have greater difficulty
  assimilating
• Outside hires are not familiar with your style
  and approach, and you provide no usable guidance
  in this area
• Outside hires are unknown to the organization and
  therefore do not have the same credibility as
  someone promoted from within
• A long tradition of promoting from within makes
  it difficult for companies to adjust to
  senior-level executives who are viewed as
  outsiders

18

• What Needs to be Shared Performance History
• How has the organization performed in the past
  and how do people think it performed?
• How were goals set?
• Were internal or external benchmarks used?
• What measures were employed? What behaviors did
  they encourage or discourage?
• What happened if goals were not met?

19

• What Needs to be Shared
• If business performance has been good, why has
  that been the case?
• What have been the relative contributions of the
  organizations strategy, its structure, its
  technical capabilities, its culture, and its
  policies?
• If business performance has been poor, why has
  that been the case?
• Do the primary issues reside in the
  organizations strategy? Its structure? Its
  technical capabilities? Its culture? Its policies?

20

• What Needs to be Shared The Present
• Vision and Strategy
• What is the stated vision and strategy of the
  organization?
• Is it really pursuing that strategy? If not, why
  not? If so, is the strategy going to take the
  organization where it need to go?
• People
• Who is capable and who is not?
• Who can be trusted and who cannot?
• Who has influence and why?

21

• Some Basics That Need to be Shared

22

• Organization
• Organization charts
• Biographies and backgrounds of key executives
  with whom new hire will be interfacing
• Organizational and executive developmental
  histories
• Systematic and structured orientation meetings
  (including regional facility tours) with you and
  others

23

• Whats Your Preferred Working Relationship
• Formal versus informal
• Written versus verbal
• Group versus individual
• Tight versus loose
• Broad guidelines versus detailed metrics

24

• Business Content Documentation
• Strategic plans
• Operating plans
• Board presentations
• Analyst/Industry reports
• Acquisition/JV plans and write-ups
• Climate/employee satisfaction surveys
• Category structure/segmentation analyses
• New product analyses/pilot project summaries

25

• Decision Making
• Formal processes and procedures
• Spending, decision making, and approval
  authorities
• Informal processes, networks and power centers
• SEC/Sarbanes-Oxley requirements for foreign
  transactions/JVs/alliances
• Rules on disclosure, controls and documentation,
  and compensation

26

• Leadership Expectations
• Priority areas
• Goals and objectives
• Deliverables and timeframes

27

• It Doesnt End at the Beginning Ongoing
  Coaching for Success
• Business strategy development
• Personal mentoring
• Sounding board availability