It’s a nightmare scenario for any organization whose brand or operational structure is largely built around the expertise and industry standing of a charismatic owner or leader: that individual’s sudden, untimely passing.
Fiat Chrysler (FCA) was forced to deal with just such a crisis in recent weeks when longtime CEO and turnaround wizard Sergio Marchionne died due to complications from shoulder surgery. It was later discovered that he had also been treated for an undisclosed long-term illness in Switzerland for more than a year. FCA said it was unaware that such treatment had been occurring.
Many North Americans will recall that Marchionne, a Canadian-Italian auto industry legend, had pulled Chrysler from the brink of bankruptcy and steered it back to profitability after the Great Recession of 2008/09 when automotive giants such as General Motors were also teetering on collapse.
Business succession plan put into action
FCA was forced to act quickly. The company named the former head of its Jeep division as the organization’s new CEO while filling his many other roles—Marchionne wore several hats and ran multiple divisions under the diversified company’s banner—and was able to reassure everyone from shareholders to the media that their succession plan was being executed in an organized manner. We can bet Marchionne’s sudden deterioration caused at least a few sleepless nights across the company, but to FCA’s credit, the company was able to respond quickly to avert disaster.
Would your business be able to react as promptly if you, or a key management team member, were to either quit, be terminated, fall ill or, in a worse case scenario, die unexpectedly? The answer is a resounding ‘no’ for most organizations. It’s a point we emphasize with clients during the corporate and personal succession planning process: you must have a plan in place because unexpected events can and do happen.
Think strategically when developing a business succession plan
On the business front, that means acting now to put in place a viable succession process that could be implemented at a moment’s notice. This can be a highly involved process because many companies managed by owner-operators have a dearth of successors waiting in the wings to take over the business. Some might plan to hand it off to an adult child, for example, but all too often formulate such a plan without asking their offspring whether they really want to take over the business. In other cases, the child wants to take it over, but lacks the necessary experience and expertise to maintain operations and keep the company growing. Identifying potential successors is critical, as is training them to take over, ensuring they understand your client base and needs, how the business works, and much more.
In FCA’s case, as you would expect, they clearly had a documented succession plan in place that was implemented without delay. As a publicly-traded multinational, this was an operational must-have. But you don’t need to be running a giant corporation to do the same. Most entrepreneurs don’t, having a vague idea of how their succession plan will be deployed, but often fail to document it in a comprehensive way outlining, methodically, steps for its implementation. While it may seem like a daunting task, not taking the time to draft a succession plan will be even more time consuming and challenging for those who might be forced to take over at a moment’s notice.
Be proactive about business succession planning
Lastly, succession plans are also important when tragedy doesn’t strike. I’m referring to situations where entrepreneurs look to exit their organizations in an orderly fashion through a sale or by passing it on to a new CEO—a common consideration nowadays for retiring Baby Boomer business owners. Having your affairs in order will send a message to prospective buyers that yours is a well-oiled machine and not a potential money pit of organizational headaches. A well-managed transition to new ownership will also help to retain employees and avoid costly turnover. This is especially important in industries such as technology where the retention of a few key staff members could be the lynchpin of any business sale.
By all accounts Sergio Marchionne’s passing was tragic and shook FCA, but it didn’t bring the company to its knees. By taking a proactive approach to business succession and being prepared for the worst, the organization was able to react effectively to what could have been a bottom-line disaster. Entrepreneurs would be wise to heed their example.
Marshall Egelnick, Managing Partner