Presented To CFMANovember 7, 2013

ByJohn Hughes, M.A.

President, Ollum Consulting, LLC

Supporting Succession Planning: The Role of the CFO

• Succession is a process for balancing continuity and adaptation.

• Succession as process is part of a strategic perspective on the organization, it’s leaders and its people.

• Succession is a learning based growth process for both individuals, teams and organizations.

• Effective succession processes are systemic rather than linear.

• Continuity of leadership is important to all organizations.

Succession is a process, not an event!

How long do they want to work? When do they want to scale back their time

commitment?What do they want for the future?

For self?For the company?For the employees?For owners?For the family?

What plans do they already have?

Talking with the owner/leader about succession

Start-Up

Expansion/

Formalization

Maturit

y

(Driven by personal goals)

(Driven by what's best for the business)

(Business designed around the leader)

(Business more organized but experienced

as being "like a family")(Leaders and Managers conform to the business)

(Tension)

Intuitive/Opportunistic Direction

Hard Work Trial and Error "Jack of all Trades" "One Man Band"

Outside Expertise Financial Discipline Structure and Accountability Entrepreneurial/Managerial

Tension

Market-Driven StrategicPlanning

Goal Setting Structure & Systems Accountability/Reward Management Development

and Team Building

Stages of a Closely Held Business

Ownership

Leadership

Governance

Family

Multiple Succession/ Transition Processes

How will the next CEO be selected?Will the person be family or non-family? Internal

or external?How will candidates be developed?What role will current leader take?What will the transition look like?Does the leadership structure need to change?

What roles do not have successors in place?How deep is your leadership pipeline?How good is the company at developing leaders?

Leadership Succession

FamilyHow will ownership be transferred?

How will shares be distributed or ownership designed?

(active vs inactive stockholder)

How will shareholders be trained?

Do you have a shareholder agreement?

Ownership Transition

Non Family

How will current owner bought out and by when?

How are shares valued?

How are shares acquired?

How will shareholders be trained?

Ownership Transition

Ownership Plan

Promotion of Business Continuity Income for Senior GenerationEquitable Treatment of all HeirsTax and Financial ConsiderationsFamily Awareness

OWNERSHIP OPTIONS:Active Shareholders OnlyActive and Non-Active ShareholdersNon-Active Shareholders OnlySale of the Business

Transition to a professional board or advisory board

How will Shareholders be represented? (family/non-family)

How can the board support the transition?Help founder/owner maintain appropriate role and

boundaries.Help manage the business and the new leader.Support the development of the new leaderOversee strategy

Governance Transition

Shareholders(Ownership)

Employee

Management (Leader & Managers)

Directors (Governance)

Elect directorsApprove sale of the businessApprove recapitalization and issuance of shares

Select Chief Executive OfficerSet policy (not day-to-day operations)Approve plans and budgetsHold management accountableDevelop and propose plansImplement Board policy and plansOversee day-to-day operations

Carry out assigned tasks

Corporate Decision-Making Structure

Family Planning

Estate Plan Preserve Wealth Transfer Wealth to Heirs Philanthropy Minimize Taxes

Family must redefine the purpose of the business and its relationship to the family.

Mission and values should be revisited and updated if needed.

Strategy should integrate the goals of the outgoing and incoming leaders.

Strategy should overlap the transition.

Mission, Purpose, Strategy and Values

No planCurrent owner/leader not able to let go.Next generation of leaders not prepared.Ownership transfer not plausible/no way to buy

out owner.Family DynamicsTyranny of the urgent over the importantHomeostatic Cultural ForcesSingularity of PerspectiveNot knowing what we don’t know

Succession Derailers

Family Dynamics

Family/Business Overlap

Emotion BasedLoyalty & Belonging

Continuity & Harmony

Task-BasedCompetence &

CommitmentGrowth & Change

Family Business

Family/Business OverlapFamily Business

Functional

Family/Business Overlap

Disruptive

Family Business

Family/Business Roles

Family Employee

Owner

FamilyOwner

FamilyOwner

EmployeeEmployee

Owner

FamilyEmployee

Decision making

Money

Information

Interactions

REACTIVE RESPONSIVE GENERATIVEINTENTIONAL

DIFFERENTIATEPARENT to CHILD

DIFFERENTIATESIBLING to SIBLINGPARENT to CHILD

DIFFERENTIATECOUSIN to COUSINSIBLING to SIBLINGPARENT to CHILD

LEADERSHIP/OWNERSHIPSUCCESSION

BUSINESS/FAMILYDIFFERENTIATE DIFFERENTIATE

BUSINESS/FAMILIES BUSINESS/FAMILIESDIFFERENTIATE

RolesMission

StrategyValues

RolesMissionStrategyValues

BoardCulture

LeadershipDevelopme

nt

FCCultureConstitutionLeadershipDevelopment

PersonalMeaningSense ofBelongingBusiness &FinancialAcumen

(Prof. Wendy Handler, Babson College)

Stages of "Letting Go"

Operator

(No Role)

Senior Generation

YoungerGeneration

Monarch

Helper

Delegator/Overseer

Manager

Consultant

Leader

Evolution of Succession Planning Across Business Strategies

Start-up Entrepreneurial Managerial Professionally Managed

Starting Growing Maturing Renewing

Back of Replacement Succession SuccessionNapkin Planning Planning Management

• Immediate Needs

• Single Position

• Crisis Management

• Reactive

• Short Term Needs

• Critical Positions

• Risk Management

• Responsive

• Long Term Needs

• Key Leadership Roles/Pools

• Talent Reviews

• Development Plans

• Responsible

• Strategic Focus

• Active, On-Going Process

• Pivotal Talent Pools at All Levels

• Leadership & Organization Development

• Generative

John Hughes, Ollum Consulting, LLCjhughes@ollumconsulting.com

763-432-2306

Thank You!