Leadership transition should be addressed very early in the succession planning process. In addition to a long-term management succession plan, a contingency plan should address a death, disability or other event or circumstance that would prematurely prevent the owner from running the business. A competent professional succession planner with experience with dealerships will work with you to identify and prepare a successor and remove obstacles to a new manager’s success.
The steps to identifying and preparing new management involve the following:
1. Assess the situation.
• Assess the current and future needs of the dealership.
• Ensure that the skill set of the successor matches the needs of the dealership. (In light of the changing business environment, technology, etc., this might not be the same as the current dealer’s skill set.)
• A comprehensive assessment program needs to be in place even when a family
member will succeed. (This may be even more critical in a family member succession, as often owner and manager will not be the same person and conflicts are inevitable.)
2. Perform a formal assessment of prospective managers’ skills and character.
• Owners might want a particular child to take over, or the children might lack interest or the necessary skills. A formalized assessment brings objectivity to help the dealer with what can be a troubling decision.
3. Consider recruiting an active board of directors or forming an advisory board to review or conduct the selection process.
Non-family board members can do the following:
• Validate the owner’s decision
• Expand the owner’s pool of candidates
• Increase available resources (more people, more hours)
• Ultimately serve as mentors for the chosen leader
4. Design a plan for developing the successor’s skills and experience.
• This is particularly helpful in a case where a family member will take over, one with
the right skills but who is not quite ready to run the business effectively.
5. Pave the way with the dealer’s key relationships.
• First and foremost, the manufacturer, whose approval of new management may be required
• The dealership’s bankers
• Key employees, including those not chosen as successors and how they react to new ownership
• Key vendors
• Key customers
The successful transition of management responsibilities is a critical part of a succession plan and even more critical to the ongoing survival of the dealership. Succession planning includes preparing a competent successor to assume the role of decision maker. Without one, an owner’s retirement, death or disability will cause the dealership to falter, maybe even to fail.
Rex Collins is a principal at HBK CPAs and Consultants. He directs HBK’s National Dealership Industry Group, which provides tax, accounting, transactional and operational consulting exclusively to dealers. Rex can be reached by email at email@example.com, or by phone at 317-504-7900.