Fewer than half of north America’s business owners are thinking about succession planning
Once upon a time, executive succession planning was a staple of corporate due diligence but with all the issues confronting business owners today the topic no longer receives much attention.
A recent Harris/Decima survey reveals that only 46 percent of business owners are thinking about a succession plan or already have one in place, while a vast majority (80 percent)Â have yet to identify a successor for the CEO should he or she leave unexpectedly.
The research firm conducted the study among 650 US and Canadian business owners and found that larger businesses are more likely to have a formal succession plan in place (45 percent as opposed to 14 percent of smaller ones). In addition, 78 percent of larger businesses believe that having a formal succession plan is very important, whereas 42 percent of smaller companies don’t see it as a top priority.
Some larger companies are taking the initiative and looking for a replacement ahead of time. For instance, the board of directors at Cedar Fair Entertainment, an amusement and water park company, announced today its plan to retain one of the world’s top executive search firms to assist with succession planning.
The Ohio-based firm’s CEO’s employment agreement is set to expire on January 2, 2012 so the company is currently reviewing internal and external candidates. A decision is expected by the end of the second quarter of 2011, Cedar Fair said.
‘While business owners should probably start planning five to 10 years before transitioning control, it’s never too late to start,’ says Mike Stanton, vice president and wealth advisor at Harris Private Bank. ‘The more time you have to plan, the more effective the plan can be. For example, over time you can transfer ownership shares of a company without gift tax ramifications and, through that transfer, minimize future estate taxes.’
‘Succession planning is not something that can wait until the last minute,’ said Erica Kuhlmann, managing director of Harris’ Food & Consumer business. ‘In the end, a well thought-out plan could be the difference between a smooth transition and a turbulent handover.’
Data compiled for this report were collected between September 22 and October 10, 2010. Small businesses were defined as having fewer than 49 employees, larger businesses comprised 50 or more.
