The Right Tool for the Job

Jan 12th 2009, Legacy By Design

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Kevin Spafford

December 2008

My knuckles pay a painful price every time I use that darn open-end wrench.

In the succession planning business, we use a many tools. Some of the devices are written questionnaires and others are participatory exercises. They’re used to identify problems, isolate concerns and segregate issues. Tools can be used to test a hypothesis, guide a meeting, create a learning environment and implement solutions. Some of the tools we employ are created in-house, others are standardized off-the-shelf and some are used with permission from complementing professionals in a specialty field. Our job is to find and then engage the right tool for the right circumstance.  

The right tool for the job can be the difference between success and failure.

But the difference between a good tool and the right tool may be as Mark Twain wrote in 1888, “The difference between the almost right word & the right word is really a large matter--it's the difference between the lightning bug and the lightning.” Below is a tool to assess the readiness of a family for succession planning. Though it is ‘off-the-shelf’, and not specifically geared to agribusiness, the concerns are universal and warning signs are appropriate for any family operation. The Quicktest is an excellent weathervane for family harmony or friction. It may indicate a gentle breeze of everyday challenge or the raucous winds of a pending disaster.  

Take a few moments, complete this simple Quicktest and assess your family’s readiness for succession. 

QUICK TEST---Family Firm Succession Readiness

INSTRUCTIONS: Check each item present in your family firm and add below.

• Emotional Cut-Offs (Family members who do not talk to each other)
• Excluding type alliances (typically a destructive triangle in which 2 people exclude a 3rd person)
• Rage-like feelings towards other family members
• Threats of lawsuits between family members
• Family conflict which affects board or management meetings or the workplace.

• Lack of advisory board or Board of Directors with true outsiders
• Lack of valid buy-sell agreement
• Lack of unified mission
• Refusal to allow outside advisors (attorney, CPA, banker, etc.) to intervene or enter system (i.e.: valid estate plans rejected)
• No liquidity for shareholders

• Non-standard compensation schedules
• Underperformance of a family firm.
• Threats by well-trained second or third generation family members to leave firm
• Decision-making based on emotion and relationships rather than business logic

• Unclear or unrealistic succession plan
• Lack of specific date for succession
• Lack of named successor
• Lack of training program for successor(s) and management
• Isolated CEO
• Lack of interest by CEO in matters outside the business

6-8 items: Serious Problems Putting Firm and/or Family at Significant Risk of Failure

• Persistent pattern of rapidly decreasing revenues with no proprietary product or service

Used by permission: © Ralph M. Daniel 2002

Rarely will we see an ‘excellent’ score. It is very difficult to run a family operation on a long-term basis and not uncover areas of concern. Besides, a growing business is always seeking avenues for development and methods to improve. The Quicktest can serve as warning sign. Like a lighthouse on the coast it will signal impending danger. It can become a communication device; use it as an outline to discuss concerns with active family and loyal employees. This tool may sound the alarm to take immediate action and seek professional help. Or, in a worst case scenario, it could spell doom, and a family may use it for triage before all is lost.  

A tool is only worth what you get out of it. Properly employed it should make the job easier, increase efficiencies and improve circumstances. Diagnostic tools assess a situation, repair tools fix it and evaluation tools monitor effectiveness. The right tool for the right job can be the difference between success and failure.  

 

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