William J. Rothwell - Effective Succession Planning (2005)(3-e)(en)

Internal and External Relations

Government affairs, coalition building, and public relations were the bedrocks of this component. Accomplishments:

▲Attended local, state, and National Realtor Association board of director meetings.

▲Represented the association at the Triad Real Estate and Building Industry Coalition and at other regional coalitions.

▲Continually represented the association at community events, local government meetings, and association events.

▲Networked with the leaders of the local and state associations.

Continuing Education

One of the key thrusts of this area was attaining the CAE designation, showing a commitment to association management, and continual learning. Accomplishments:

▲Attended numerous coaching and training seminars offered by ASAE, the National Association of Realtors, the North Carolina Association of Realtors, and GRRA on various subjects.

▲Earned my CAE designation.

General Working Knowledge

The final component focused on understanding industry-specific processes, our bylaws, and the financial aspects of the association. Accomplishments:

▲Trained to administer the association’s professional standards and arbitration process.

▲Studied and enforced multiple listing service rules and regulations and association bylaws and rules and regulations.

▲Acted as chapter administrator for 360-member North Carolina Certified Commercial Investment Members, which the association manages.

After working through each component of the succession plan, I submitted a letter to the executive committee expressing my interest in the CEO position. At this point it was May 2002, and I was able to include a detailed description of how I had accomplished the work set out in the plan.

Coming to the Conclusion

A month later, the full board of directors met. The president informed the directors that Elaine was leaving her position as CEO of GRRA at year’s end. Copies of the completed work plan and Michael’s letter of interest were distributed. Discus-

sion ensued about the succession process and whether the job opening should be taken outside the organization.

A minority of board members felt that if Michael were truly qualified, he would win out in an extensive search. The majority of the directors, however, felt comfortable that the plan was comprehensive and that the executive committee had been sufficiently involved through its receipt of progress reports. An open search, in their opinion, would cost the association time and money. After taking a vote, the executive committee was granted permission to interview Michael for the position. If the committee was not satisfied with the interview, the search would be opened, and a selection committee appointed.

‘‘Ten of eleven good-to-great CEOs came from inside the company,’’ says Jim Collins in his book Good to Great. The Greensboro Regional Realtors Association found that to be the case after Michael’s successful interview for the chief staff executive position. In mid-July 2002, more than a year after the draft succession plan was submitted, GRRA’s board president started contract negotiations for the association’s new president. Michael took over the top spot on January 1, 2003.

Mentoring Magic

Since Michael P. Barr, CAE, took over as executive vice president of the Greensboro Regional Realtors Association, North Carolina, in January, he has started his own mentoring program with senior staff. Read what he has to say on the subject.

Association Management: Why did you start the program?

Michael P. Barr, CAE: Being a product of mentoring, I saw the value in developing staff to their fullest and helping them with their career goals. Essentially that’s what Elaine did for me. It’s a win-win for both the association and the employees.

Association Management: What’s involved?

Barr: I meet regularly with staff. We consistently go over both their work goals and professional goals. It’s individualized according to their preferences, because we’re trying to help them achieve their professional best. I take them to conferences, send them to workshops, and help them achieve the designation of their choosing. Basically, I go over their goals and objectives and help them get the education they need to obtain their goals. The board thinks that this is so important that it has increased the budget line item for staff development.

Association Management: Who can participate?

Barr: It’s open to anyone who has expressed an interest in association management. Obviously, it has to be tied to the job. Senior staff is really taking advantage of it.

Association Management: How’s it been received so far?

Barr: I have full participation. Those who have expressed an interest in learning what the top job entails, what running an association entails, are really receptive to learning. Empowering them to take on projects and responsibility has been a big plus in the operation of the association.

Association Management: What advice would you give to staffers?

Barr: Approach mentoring with the best attitude possible. It’s a win no matter what happens. You’re going to do a lot of extra work, but it’s good preparation for executive-level positions. Get ready for long hours.

Resources

Articles

‘‘Executive Selection: A Systematic, Team-Based Approach,’’ Executive IdeaLink, July 2001.

‘‘What If You Were Gone,’’ Association Management, August 2000.

‘‘Mentoring: A Tool for Learning and Development,’’ Association Educator, October 1999.

Books

Knowdell, Richard L. Building a Career Development Program: Nine Steps for Effective Implementation. Consulting Psychologists Press, 1996.

Rothwell, William J. Effective Succession Planning: Ensuring Leadership Continuity and Building Talent From Within. AMACOM, 2000.

Byham, William C., Audrey B. Smith, and Matthew J. Paese. Grow Your Own Leaders: How to Identify, Develop, and Retain Leadership Talent. Financial Times, Prentice-Hall, 2002.

Wolfe, Rebecca Luhn. Systematic Succession Planning: Building Leadership From Within. 1996, Crisp Publications, 1996.

Web Site

Succession Planning Library (www.managementhelp.org/staffing /planning/sccs_ pln/sccs_pln.htm)

Case 4: Small Business Case:

Passing the Torch

Jim Gibney, president of Warren Pike Associates, says he grew up in the business. ‘‘I was always drawn to mechanical things,’’ says Gibney, whose family-owned power transmission and motion control business is headquartered in Needham, Massachusetts ‘‘As a child, I became interested in the business. During the school vacations, I would go in to the business and help out. There I got to learn from one of the best salesmen there is, my father.’’

Gibney characterizes his father as a master salesman and as a leader. He recounts his father’s career at Warner Electric before purchasing Warren Pike Associates followed by the purchases of W.M. Steele Co. and Cohen Machinery Co. to form J.G. Industries, Inc. Gibney says his siblings were drawn to other interests and have pursued other successful careers, but that he followed his

Source: Richard Trombly, ‘‘Passing the Torch,’’ Industrial Distribution, 90:4(2001), 69–72. Used with permission from Industrial Distribution.

father’s footsteps from the beginning. He says that wasn’t always a simple path. ‘‘My father was a hard worker and that was one of the values he instilled in me,’’ says Gibney. ‘‘I worked my way up through the ranks. I’ve been in shipping and receiving, inside sales and outside sales before taking on a role in management.’’ His father still remains active in the company and retains the title of CEO, but after years of working hard for the company, he is able to work on something else—his golf game down in Florida. Meanwhile, Gibney has taken on the role

of president.

‘‘It was an easy transition,’’ says Gibney. ‘‘I have been in upper management for so long and was already very familiar with the business. My siblings had never been involved with the business, so they weren’t concerned with the process of succession. My father and I had discussed it over the years and we knew I would take over when the time was right.’’ Gibney said they did very little in the way of formal succession planning.

‘‘After some internal planning and adjustments,’’ says Gibney, ‘‘we realized that the end of year 2000 would be the right time.’’

Gibney admits that part of the success of the transition relies upon keeping open channels of communication. While nothing was formalized in their planning, the details of succession were discussed and understood by all parties, including JG Industries’ 17 employees. ‘‘Communication is key,’’ says Gibney. ‘‘We have a family atmosphere and we involve the employees in the business. People usually resist change and that can make succession difficult, but we involved them in the process. I think, by being included in this way, they are now excited by new opportunities in a rapidly changing industry.’’

Will his own children take over the family business? Gibney says his children are between the ages of seven and 13, so it is a little too soon to tell if they will be involved. ‘‘Perhaps, down the road,’’ speculates Gibney.

Not all children grow into their parents’ roles and not all successions occur so simply and with such positive results, points out Robert Middleton, a partner with the Chicago law firm of Nisen & Elliot.

‘‘In most cases there are some hard truths,’’ says Middleton. ‘‘Many entrepreneurs spend their entire lives sacrificing time and energy only to have the whole organization fall apart and maybe tear the family apart in the process.’’

Marc Silverman, president of Providence, Rhode Island-based consulting firm Strategic Initiatives Inc., says that when he counsels a family business, the first thing is to try to separate the family from the business.

‘‘Then we can decide what we want for the family and what we want for the business,’’ says Silverman. ‘‘By looking at the family and the business, we can determine what they both need to be successful.’’

Silverman advises a team approach by getting all of the family involved. He suggests a family council to assist in planning for the business’s future and in choosing a leader that will be best suited to the business—as well as resolving issues of the siblings that are not groomed for succession.

Outsiders can be an enormous amount of help, says Silverman, though he

admits that can be difficult for entrepreneurs who are used to doing things in an autocratic style. It is hard to be objective and many of these issues are closely tied to the psychological issues of aging. He suggests bringing in a consultant early in the process if any obstacles develop.

‘‘It is like tooth decay,’’ says Silverman. ‘‘The problem gets bigger the longer you wait.’’ Jefferey Gallant, a partner with Goodkind, Labaton, Rudoff & Sucharow, also suggests that businesses have an advisory board. It may be made up of family members, management, or outside professionals. Gallant says a board can decide on the important issues of who should lead and what their services are worth.

Gallant says he is usually brought in for estate planning and has to bring up the topic of succession. He helps decide what makes the most sense as far as tax options and retirement, as well as for the business.

‘‘The next step is to get all the parties involved to buy in to it,’’ says Gallant. ‘‘It is so much easier when the owner is involved rather than handling these issues as part of an estate.’’

Case 5: Family Business Succession:

The Seeds of a Smooth Transition

A month before Christmas, the garden center at Shiloh Nurseries Inc. in Emigsville, Pennsylvania, looks like a scene from a Norman Rockwell painting, with decorations and holiday greens at every door and window. Along the path leading to the side entrance, flowering cabbages are in full bloom.

Inside, Michael Stebbins, 47, is busy getting ready for a Christmas selling season that will be short because of the late arrival of Thanksgiving. After 27 years as co-owner of the nursery and landscaping business with his partner, Carl Jacobs, Stebbins knows exactly how he wants everything to look.

He also knows exactly what he wants to happen to the company when he and Jacobs retire. Both want Shiloh Nurseries to remain a thriving business.

That almost didn’t happen for the family that owned the company before them. When its founder died with no estate plan, his wife and son discovered they were unable to work together. The son left to form his own nursery business, taking many of Shiloh’s employees with him, and his mother was forced to sell the firm, which was tallying a modest $55,000 in annual sales. Today, Stebbins and Jacobs employ 25 full-time workers and about 40 more seasonal employees, and they expect to post sales of about $3 million this year.

The two owners have six children between them but none who wants to take over the business—they’ve had their fill of nursery life during high school and summers home from college. Nonetheless, Stebbins and Jacobs do have two longtime, highly valued employees—their top salesman and landscape architect,

Source: ‘‘The Seeds of a Smooth Transition,’’ Nation’s Business, 85:4 (1997), 25. Used with permission from Nation’s Business.

and their landscape supervisor—who would like to run a nursery and landscaping business someday.

Stebbins and Jacobs liked the idea of them running Shiloh, so they set up a buy/sell agreement with the pair under which the two employees will begin to buy the company over two consecutive five-year periods. Each employee will purchase 12 percent of the company’s stock during the first five years and another 12 percent during the second, at a fixed price of two times book value (with book value being recalculated annually). Payments will be made on an installment plan bearing interest at the prime rate plus 1.5 percent.

After 10 years, the four principals will decide how to proceed. Jacobs, now 53, is likely to retire then, but Stebbins hasn’t decided what he will do. Possible options include having the two employees purchase the remaining 52 percent of the company at that time or allowing a small number of other key employees to purchase some of that stock.

Either way, Stebbins and Jacobs are glad that the salesman and the landscape supervisor are becoming part owners, because they will be positioned to take over the business when necessary. Shiloh has taken out life-insurance policies on each of the four shareholding partners; the insurance is in amounts sufficient to ensure that if any of the partners dies before the buy/sell agreement is completed, the other partners will be able to meet their obligations under the agreement.

To come up with their plan, Stebbins and Jacobs drew on the advice of an estate-planning firm, Estate Archetypes Inc., in nearby York, Pennsylvania., and on Gordon Porter, a CPA and small-business consultant in Dover, Pennsylvania., before approaching their lawyer to draft the necessary documents.

‘‘One of the reasons I’m inclined to be so sure we’re doing things right is because I’m proud of the fact that we took a small business and grew it successfully,’’ Stebbins says. ‘‘This is the company’s 60th-anniversary year, and I’d like to see it be here for another 60 years.’’

Case 6: CEO Succession Planning Case:

Do You Have a CEO Succession Plan?

Jim Lumpkin’s first move as interim chief executive officer (CEO) for U.S.– Agencies Credit Union was to eliminate the position he’d just vacated. ‘‘The credit union was top heavy,’’ recalls Lumpkin, CEO of the Portland, Oregon, credit union. ‘‘At the time, we were spending too much money on management positions. We needed a CEO who could handle both jobs.’’

Then he insisted that the board undertake a detailed search, both inside and outside the credit union, for CEO candidates. ‘‘Our last CEO felt he was named by default. The board never did a full search so there never was that buy-in that

Source: Bill Merrick, ‘‘Do You Have a CEO Succession Plan?,’’ Credit Union Magazine 67:7 (2001), 52. Used with permission from Credit Union Magazine.

they had the right person,’’ Lumpkin explains. ‘‘I stipulated that I wouldn’t apply for the job unless the board went through a full search process and really looked for who they wanted. That way there wouldn’t be any second-guessing.’’

The board named Lumpkin CEO after a five-month search, and he has served in that capacity for four years. But watching the board struggle through the process made him recognize the need for a detailed succession plan outlining steps the board should take in case of CEO turnover—whether by resignation, termination, or death.

The credit union’s recently completed succession plan details planning and preparation, general board guidelines, steps for emergency succession (broken down by the first day, week, and month), recruiting and hiring, desired qualifications and attributes, and other information. ‘‘We’re a smaller company and we look at our CEO as more of an operational CEO,’’ Lumpkin notes. ‘‘So the CEO needs to know which areas he or she would be responsible for—accounting, asset/liability management, compliance issues, examination processes, human resource administration, and investments. If the CEO leaves, board members might wonder who else will leave and how they’ll run the credit union. I wanted to identify skill sets and experiences they should look for.’’

Among other information, the plan lists nine basic steps for CEO replacement:

1.The board hopes for 90 to 120 days’ notice of intent to leave so it can have an orderly transition. The board would like to hire the new CEO at least 30 days before the departure of the current CEO. It would be preferable to allow 60 days for this transition.

2.The board will appoint a search committee to monitor the plan and recommend final candidates to the full board. The board’s executive committee will make up the search committee in part or in whole. It’s recommended that the committee consist of three to five individuals. It’s advisable that the current CEO not be a member of the search committee.

3.The board will decide whether the search committee will conduct the full search process or whether to use an outside consulting firm. If the board hires an outside firm, determine the company’s responsibilities and cost, and specify details in a signed, written contract. Use a firm that’s familiar with credit union needs and philosophy.

4.The executive committee, with the assistance of the interim CEO and management team, will update the existing CEO job description, organizational chart, and other information, and provide it to the search committee and/or consulting firm.

5.Advertising for the CEO position will appear in local and industry trade publications.

6.All resumes will be reviewed for basic qualities and experience. Interviews will be limited to three to five candidates. The search committee or consulting firm will present the best candidate to the board. If the board

doesn’t accept this candidate, the search committee or consulting firm will present the second choice.

7.Verification of candidate credentials and employability may include, but isn’t limited to, educational transcripts, reference checks, credit bureau reports, CUMIS bond check, medical assessment as allowed by law, psychological appraisal, and chemical dependency testing.

8.Notification of the new CEO will be provided to the Oregon Department of Consumer and Business Services, National Credit Union Administration, Credit Union Association of Oregon, CUMIS Insurance Group, and credit union attorneys.

9.Publish articles in the quarterly newsletter to announce the current CEO’s departure and introduce the new CEO.

‘‘Having a plan makes the board and our state regulator feel better,’’ Lumpkin says. ‘‘Also, staff knows that if something happens, the board will find a match that will fit members’ needs, internal staffing needs, and the credit union’s culture. It builds confidence throughout the credit union and reduces uncertainty.’’

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