September 26, 2020
Ensure Business Continuity by Planning for the Unexpected
Ensure Business Continuity by Planning for the Unexpected
Many business owners and leaders believe they have planned for the unexpected effectively. They have a succession plan, as well as disaster recovery plans for a variety of unforeseen circumstances. However, they often seem to forget about one crucial aspect: themselves.
Business leaders sometimes forget they are human, and that life happens. You might have already put a succession plan in place. However, for most people, that means thinking about retirement.
But what would happen if you were involved in an accident and became disabled or passed away? How would the business carry on without your presence, be it temporary or permanent?
As a business leader, you have an obligation to develop a business continuity plan that addresses what will occur if something unexpected happens to you. You need to consider a number of factors, chief of which is who will run the business if you are no longer able to.
Understanding the Importance of a Business Continuity Plan and What to Consider
Developing a Business Continuity Plan is essential to ensuring that the business keeps functioning, no matter what happens to the CEO. Like a succession plan, though, there are quite a few factors you need to consider.
Our story begins with Dave, Jim, and Julie discussing Business Continuity Planning during one of their lunchtime runs. Dave is a governance lawyer, while Jim and Julie are both successful entrepreneurs.
Jim has admitted that he doesn’t have a Business Continuity Plan in place. His firm does have disaster recovery plans, because they were required to obtain ISO 9001 certification. In terms of a succession plan, he feels it’s far too soon to consider because his children are still young.
However, he never even considered the importance of a Business Continuity Plan. Julie’s situation is a little different. Her family owns a multi-generational business started by her grandfather, which her brother now runs.
Her family business has been lucky in that they’ve been able to count on family succession for those times when the CEO might be unable to work.
However, she further explained that their Family Constitution requires them to regularly assess the senior management to identify potential candidates to take over leadership of the company in unexpected circumstances.
It’s important to have a plan in place for what would happen if the unforeseen were to occur and the CEO becomes disabled or passes away as it can take years to prepare a person to become the next CEO.
While Julie’s brother would ideally love for one of his children to take over, there is no guarantee this will happen. To manage the risk, they’ve incorporated corporate-owned life insurance policies for the CEO and personal disability coverage to ensure that financial concerns won’t be an issue if anything happened to him.
Julie further explained that the business continuity plan had to take into account family dynamics, business management, and shareholders, which have all been applied to every governance issue.
They have a Family Mission Statement, a Family Constitution, and Family Council that they’ve used to address issues such as perpetuation of family values, communication, dispute resolution, management development, and ownership transfers.
Jim pointed out that the key to success seemed to be communication and Julie agreed.
Developing a Business Continuity Plan
Julie gave an example of how her brother had looked around the firm for a successor almost immediately after he took over leadership of the business. At first, he considered one of their cousins, who had been working for the company for 5 years. They were smart, self-motivated, and well-liked and seemed to be a good fit.
However, the cousin didn’t want to wait, believing they could succeed faster elsewhere forgoing the multi-year process required to be groomed into a leadership role at the family business.
Julie’s brother opted then for another solution. He put together a business continuity plan that included everything involved in structure, governance, process, successor qualifications, procedure and communication.
The plan included two situations. One assumed that her brother would eventually find a family member who would be a good successor. That person could then go through the entire process required to prepare the CEO.
The second assumed that her brother would become disabled or die before that person was prepared to lead the company. In both cases, a management committee would be set up to deal with business continuity. Her brother also considered establishing a family advisory board made of up of senior management and outside experts to help mentor any succession candidate.
Business continuity is essential to a firm and should be considered part of the company’s risk management. After all, if a company’s leadership is compromised, then the business will suffer without a plan in place on how to deal with it.
In essence, do you want to be the one to decide what happens to your business when you can no longer run it, or do you want fate to decide?
Key Factors to Ensure the Success of a Business Continuity Plan
- It’s a dynamic process that takes a multi-generational perspective and should address everything from growth and leadership development to leadership transition and exit strategy.
- It should be developed in an environment of open and continuous communication.
- It should include every aspect of the Family Enterprise System.
- The family is in charge of the process for the family, which includes establishing who can lead the process and what level of readiness is present and which areas need further development.
- It includes a variety of elements such as governance, structure, transactional activities, and relational work.
- It allows for constant change, growth, and development of human, intellectual, social, and spiritual capital.
- It spans multiple stages, namely reflection, planning, execution, measurement, and adjustment.
- Requires interdisciplinary team approach.
- Must have the final goal of creating value across generations.