Successful Succession Planning - Success is in the Details
THE COUNSELOR
Volume 10 • Issue 2 • February 2020
The Counselor is a monthly newsletter of Hallock & Hallock dedicated to providing useful information on estate planning, business succession planning and charitable planning issues. In this month’s issue, we will discuss the importance of paying attention to the details. If you are interested in learning more about the ideas and processes discussed in this newsletter, please contact us for an initial consultation.
John Wooden is generally recognized as the greatest college basketball coach in the history of the game. Beginning in 1964, his UCLA Bruins won 10 national championships in a twelve year period, including seven in a row. During one amazing stretch, the Wizard of Westwood’s teams recorded 88 consecutive victories. John Wooden knew success. With a who’s who of future hall of fame basketball players running the court, one would presume that all of Coach Wooden’s practices were devoted to very sophisticated and highly nuanced matters. But that was not the case.
In his book, Back from the Dead, former UCLA great and NBA star, Bill Walton tells the following story:
I had dreamed about playing basketball at UCLA since I was twelve. Now, here I was, and the reality was better than the dream. The first day of practice, October 15, was also the day after John Wooden’s birthday and also, by tradition, media day. . . . There was always a cake and lots of smiles and laughter at the beginning. The transition to real practice the next day was seamless. It was all so exhilarating. . . ..
We were ready to roll all day that first time out. Just before the start, always at 3:30 p.m. sharp, Coach Wooden called all the freshmen together and walked us into the locker room. There, he sat down on a stool and began his lecture to us. We sat there like dutiful sponges ready to soak it all up, knowing that he was about to give us the key to heaven on earth, show us the path, guide us to become the next great team in history.
His first words were, “Men, this is how you put your shoes and socks on.”
Wait, what?? “This is how you put your shoes and socks on.”
The greatest coach of the greatest collection of players in college basketball history started each season with a lesson on something we all learn before kindergarten. In his book, They Call Me Coach, Coach Wooden explains his method this way:
Over the years I have become convinced that every detail is important and that success usually accompanies attention to little details. It is this, in my judgment, that makes for the difference between champion and near champion.
One of the little things I watched closely was a player’s socks. No basketball player is better than his feet. If they hurt, if his shoes don’t fit, or if he has blisters, he can’t play the game. . . . I didn’t want blisters, so each year I gave in minute detail a step-by-step demonstration as to precisely how I wanted them to put on their socks - every time. . . .
Coach Wooden knew, “the little details are vital. Little things make big things happen. . . .”
No matter what you may be trying to achieve in life, this same lesson can be found again and again - pay attention to the details. In Ben Hogan’s classic book, Five Lessons, The Modern Fundamentals of Golf, the first lesson is devoted to the grip. Hogan explains that while most golfers find discussion of the grip to be boring, true students of the game understand that “the grip is the heartbeat of the action of the golf swing.” An entire chapter is devoted to this, the smallest of details - how you hold the club.
Whether it is for a farm or ranch, or some other family business, attention to the details of the succession plan are vital. Skipping details that seem hard, boring, mundane, or less interesting can have severe consequences down the road. What are some of those details?
Choosing the Right Successor. In the business classic, Good to Great, Jim Collins explained: “The executives who ignited the transformations from good to great did not first figure out where to drive the bus and then get people to take it there. No, they first got the right people on the bus (and the wrong people off the bus) and then figured out where to drive it.” Sometimes in succession planning family businesses will default to certain people, such as the eldest son, to be the natural successor. Decisions by default lead to consequences by default. Though it is hard and sometimes calls for difficult decisions, the detail of choosing the right successor is one that cannot be ignored.
Training the Successor. Even the right person will struggle to find success if there is not proper training. Spend time in the weeds. Figure out the various systems and processes in your business as well as the roles and responsibilities. Make clear detailed instructions that set forth the processes. Create an organizational chart with sufficient detail as to who is responsible for the various jobs in the business. Repeat until it is ingrained in your company culture. Remember Coach Wooden: “Men, this is how you put your shoes and socks on.” Don’t assume a basic level of knowledge. Start with the basics.
Understand the Numbers. There are two crucial numbers that people need to understand. First, what is the value of your business? Second, what amount do you want to receive per month or per year in retirement? Failing to understand value early in the succession planning process is crucial. Skipping that step can mean a lot of wasted time down the road if the parties cannot ultimately agree on value. Agree early on the method for establishing value and then determine the value. This should happen at the very beginning during phase one of the succession process. Depending on how long the process takes, this may need to be updated from time to time. It can be tedious and boring. But, the numbers don’t lie. Whether transition will occur by gift, inheritance, sale, or some combination, it is vital that all parties to the succession plan know the value of the business. In a like manner, do the work to figure out what you want to receive in retirement from the business. This number will by necessity be derived, at least in part, from the value of the business. If you don’t know where you are going, it will eventually cause the succession plan to stall and possibly die.
Each step of the succession planning process is full of opportunities to spend time giving attention to detail. These details may be as large as who will be the successor or as small as where to hold the next family meeting, but the details always matter. Set yourself up for success. Begin with the end in mind. Determine each of the steps along the path from where you are to where you want to be, then understand the steps that must be taken to get from one stone on the path to the next. This method will reveal the details to you that must be addressed in order to truly find success.
If you want to learn more about the farm succession planning process, please start with our four part series here. If you are ready to get started, you can begin here. We’re prepared to help you prepare!
This Newsletter is for informational purposes only and not for the purpose of providing legal advice. You should contact an attorney to obtain advice with respect to any particular issue or problem. Nothing herein creates an attorney-client relationship between Hallock & Hallock and the reader.