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Succession Planning Lets You Call the Shots

1 Jun, 2015 By: Jim Kahrs, Prosperity Plus

Why is succession planning so important? Obviously, it provides for the business owner to transition into retirement. Because of this, many people have a tendency to confuse succession planning with exit strategy planning. However, there are other reasons for succession plans. What if something were to happen to the dealership owner or to one of the key managers or employees?  Unfortunately, I’ve seen situations where someone becomes ill or passes away unexpectedly, leaving the dealership vulnerable. These unplanned events wreak havoc on a business. With no plan in place, those left behind are left scrambling to come up with a plan which, in many cases, ends up being a fire sale.

In a planned succession, you’re calling the shots and replacing someone proactively You typically have time to plan and handle the things that need to be done to ensure a smooth transition. Since the person is still there functioning in his/her role, the worst case is, it takes longer than expected for the exit. When facing an unplanned replacement there tends to be confusion and turmoil. In most cases, there are issues that go beyond the business that have to be dealt with and these usually do come first. For example, if a key person in the dealership becomes ill the focus is on his/her recovery while the management of the dealership becomes secondary during that period of time. The worst case scenario for the business here can be catastrophic. The moral of the story is; plan for the unexpected and be ready.

It is important to determine which positions require a strong succession plan. They are typically the senior management positions such as President, Director of Administration, CFO, VP of Service or Service Manager, VP of Sales or Sales Manager, etc. Once you’ve determined the need for a plan, there are some things you can do early in the process. First, make sure that you have a good write up of what each of these managers does. We refer to this as a hat write up and it contains things like the purpose of the post, the products or expected outcomes from the post, the key statistics or performance measures of the post, and the duties and responsibilities of the post. This can and should be followed up with detailed procedure documents outlining exactly how each of the key duties is done. Ideally, these should be in place for all positions in the dealership anyway. As an executive of your company, look at your job and the jobs of your key people and try to imagine what would happen if you or these key people weren’t there. Which areas would cause the biggest problems or leave the biggest holes?  These are the areas to concentrate on right away. Get them written up as soon as you can.

Start with a Chart

You need to create a succession planning chart. This lists the key people in the business and identifies potential successors. We usually look at each position and determine three different levels of preparedness. First, (we) have a successor named and already on board with the company and who is fully trained and ready to take over the position. The second level is where we have a successor on board but they need 1–3 years of training and experience to be ready. The third level is where we have not identified a successor.

One element in succession planning that is often overlooked is the need for oversight. If the owner or leader of the company is suddenly unable to work, the team can be left without the leadership needed to succeed. It is a good practice to name a Board of Directors for the dealership that would be able to help guide the business in case of an emergency. This board can consist of trusted colleagues or business advisors who can help the managers navigate a transition. Members of this board may include your business consultant, accountant, banker, owners of other dealerships, other local business owners, etc.

An unplanned replacement is typically the most disruptive. A sudden need for replacement is usually due to a catastrophic event. In this case, a plan needs to be worked out in advance that outlines the steps required to safeguard the company and keep things on track. It works well to list out the major actions that will need to take place in the first 24 hours, the first week, the first month, etc. Planning this process out in advance can mean the difference between making it through this event or having the company go under.

Time is the most important asset you have. A good succession plan can be drafted while time is on your side and far in advance of it ever being needed. As a side benefit, it has been established that dealerships that invest the time and effort in creating succession plans are more successful than those that do not. Just by putting your attention on the future you inevitably find yourself drafting other business plans that help you build a stronger more successful business.


Jim Kahrs is President and Founder of Prosperity Plus Management Consulting, Inc., a leading consulting company in the office channel.For company information visit http://www.prosperityplus.com or email Kahrs at jkahrs@prosperityplus.com

About the Author: Jim Kahrs, Prosperity Plus

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