Plant the Tree Yesterday

There’s no argument that developing a successful succession plan requires a significant time commitment and support from company team leaders. Business owners and companies that fail to invest in succession planning are putting the business at significant risk. Most business leaders don’t make conscious decisions to avoid the succession planning process, as they understand its value, but the daily grind of running their business can get in the way.

With that being said, could there be other equally important physiological reasons why business leaders don’t engage in succession planning? There are numerous studies on why humans defer making important and necessary decisions, but none are more telling than a survey conducted by FuneralWise.com. The survey polled 2,647 individuals. Only 21 percent of those polled had made funeral plans, and of the remaining individuals, only 27 percent intended on doing so. Could it be that the fear of our own mortality is another reason why leaders of companies forgo the succession planning process altogether? Quite possibly.

On average, 10-15 percent of corporations appoint a new CEO each year. According to “Succession Planning: What the Research Says” by Harvard Business Review, “most boards are unprepared to replace their chief executives.” The article cites a study that revealed only 54 percent of boards were preparing for a new successor, and 39 percent didn’t even have internal candidates who’d be ready to replace the CEO if an event occurred. Although the process can be time-consuming, succession planning is key to the longevity of any corporation.

It’s been said that the best time to plant a tree is yesterday, and the same holds true for succession planning. It’s safe to assume that company leaders will continue to be so consumed with their daily management responsibilities that succession planning efforts will continue to be pushed aside to the corner of the desk. However, there’s an interim succession plan that would allow the business to “plant their trees yesterday” by protecting their business in case of an unplanned event, such as the death or disability of a key employee.

Meeting with a qualified insurance agent to review the benefits and costs of key employee life and disability planning would be one way to begin a succession plan. During the underwriting risk assessment process, the company may obtain critical health information that could actually push succession planning to be a top priority. A key life and disability insurance plan would ideally become an additional component of a succession plan because it offers the following benefits:

1. Helping to retain and reward key employees.
2. Putting the company in a position of strength to deal with the financial impact should an unplanned event occur before a formal succession plan is installed.
3. Creating an asset that sits on the company balance sheet that can serve a dual role as the funding for future buyouts.

The first step toward developing a succession plan begins with the realization that the need is critical to the company’s ongoing operations. Plant the tree yesterday.

Reference: Harrell, Eben. “Succession Planning: What the Research Says.” Harvard Business Review, Nov. 14, 2016, hrb.org/2016/12/succession- planning-what-the-research-says.