Fire drills for the family business

By Mark Green

family business failed to show up at work, thus triggering the alarm bell. As morbid as this might sound, the purpose of the drill is to see if the family and the business are ready to handle this crisis in the absence of the leader. The focus of the fire drill is on understanding how the family, management and ownership systems respond to this change and learning the strengths and weaknesses of your succession plan.

In conducting a fire drill, we focus on three key areas: the technical aspects of succession planning, communication and continuous learning.

Technical Aspects of Planning

ownership and leadership fronts) require more information or experience'to fulfill their roles. The drill should also help to identify changes in policy or structure that need to be made to ensure that the business can be managed well in a crisis.

Good planning requires a team of professionals that can work together and is willing to revisit the plan on a regular interval in order to keep the plan current. Everyone who is part of the succession plan should be aware of, and prepared for, the roles they will be asked to play, which leads to the importance of communication.

Communication

DEMEMBER your school days l\when vou were sittine in the classroom and all of a sudien you heard the loud sound of an alarm bell?

At first you were startled, but after some quick instructions from your teacher, you lined up and exited the room. You walked across the schoolyard and away from the building and stood outside for the next l0 minutes or so waiting to be told that it was safe for you to head back to your classroom. In the meantime, your teachers did a systematic check to make sure that everyone was out of the building.

From your perspective, this little interruption offered welcome relief from time in class. Fortunately, it was just a fire drill and was not a real emergency. Each year you would practice a few fire drills, and over time it would become a routine for you that someday might end up saving your life in a real emergency situation.

The fire drill serves as an excellent metaphor for the family business when looking at the process of succession planning. In a family business fire drill, we pretend that the leader of the

At the core of any disaster plan is the process of planning. Planning requires us to assess and map out our current environment and then develop a process to achieve our goals. In a family business, it is essential for effective succession planning that we know the details of ownership and organizational structures to know how decisions are made and who can make them.

From an ownership perspective, we must understand our estate plans and buy/sell agreements. In the business, we must understand reporting relationships and decision-making responsibilities as described by the organizational chart. The purpose of reviewing these documents is to determine how ownership and management decisions will be made in the absence of the leader.

In the planning process, we must also make sure that these technical structures not only match our goals, but also result in a manageable business. We need to make sure that the people who will step into new decision-making roles are prepared for the responsibilities they will take on. The fire drill should help us identify areas where future decision makers (on the

At the very core of family business is the importance of open and honest communication. While this is difficult enough to ensure when someone is alive, it is almost impossible if there is no written plan for succession. But putting plans on paper in a family business is not enough; all who are affected by it must understand the plan and how it works.

It is surprising how often we find that, in the process of conducting a fire drill, mature family members who are experienced and working in the family business do not clearly understand the plan. Outside of the family, it is also surprising that many nonfamily executives who have worked closely with the founder for many years have never considered that they might someday report to a family member who has not been active in the business.

By conducting a fire drill on a regular basis, these assumptions can be addressed, and over time, any lingering unknowns can be clarified.

Continuous l.earning

Just as with the fire drills in school, there must be opportunities to practice so that we can improve our perfor- mance as well as learn more about the subject. ln conductine a familv business fire drill. w,e sontctimes break dor'"'n the drill into thrcc components: the first hours. the first week. ancl the first month withor.rt the leader.

By tircusing on these time fran.tcs. we can practice the types of decisions and who can ntake thent fronr the managentent. ownership and farrily pcr\pe( ti\ es. Dcvelopins I pr,te cr: and repeating it builds our confidcnce in case thcre is a real entcrsency. At each step of the wuy, wc spend tirne reviewing and learning what u'orks and wh:rt nceds to bc improvcd.

This is esscntial , cspecially when a real disaster strikes. since practical leirrrting !tr itles ur dulinr: ir erisis. espccially thc emotional loss o1'a family nrembcr. For this reason. we suggest that a farnilv business conduct a fire drill perhaps as ol'tcn ils once ir year to make sure that evcrl,one understands the process and is comfbrtablc with it.

Thc family business fire drill is a simplc tool thiit can be a key elentcnt of your risk mana-eentent plan. While the thought of bcing out of the picture ot.your lamily business is a bit unscttling. facing the cventualiry is thc hest wav to dcal with the diff-icult issuc of succession planning.

By conducting a drill on a regular basis. yctu will learn more abitut your falnily busincss ancl begin to see hou, you can lmprove thc odds ol'survival of the family busincss by activcly planning fbr the future . To assist vou in your quc\t lilr irnpror inu r,rul tltlds of surl'ival as a family business. regu, larly check in with your prof'cssional advisors. learn fiom othcr farnily businesses. and spend tirne working on your fnrnily business.

Howcver. thc nrosl irnportlrrrt clernent is to lav out your goals ancl discuss thcm with your fanrily.

Hopcfully. you will never have ir real emergency'. In that case, thc real benefit ot'the firc drill is that mcnrbers of the business and family are talkin-c about plans tbr thc futurc and ensuring that proccsses ancl structurcs arc in place to suppofi a smooth transition.

- Mctrk T. Green, Ph.D., ts eu usso(.rera w i t lt t h e I.' u tn i I y B u s i rt e.s.s (.- t n.r u I t i rt.q

Gntup, Muricttu. Gu. Rauch ltinr ut (E00)

5 5 I -06 -1 3 t t r,q r c e n @ a.f t t rt i I y - b t t,t i r e.s.s.t o rr r.

RLltrinteL/ ttith lttrmistiort fntn liuttilt Busint.st Adriurr, rr coptrilllttt,d publitttiort ol l:ttrnih f,ntcr prisL I'ubli.sherr. No lorti()n rtl thi.s artiL lL nttt ht, r(l't,',ltt,,.l r irlt t,' t',,...i,,1..tt ..i Lt,tt,l. t t., rprt,,

Jerry Farley, ex-Thunderbolt Wood Treating, has joined J.H. Baxter & Co., handling sales and marketing for Baxter's Eugene, Or., wood preserving facility. He is based in Portland, Or.

Doug Smith, Hartnagel Building Supply, Port Angeles, Wa., has been named president and c.e.o. of parent Lumber Traders, succeeding Arnold Schouten, who has retired.

Doug Hart, ex-OrePac, has been named v.p. of market develoPment for International Wood Products, Clackamas, Or. StaceY Baker, Joanna Campy, and Dick Salvino are new to the Tumwater, Wa., branch.

Henry S. ttHueytt Long, Jr., exPelco, has formed a new consulting and training company, Mountain Creek Group LLC, Chattanooga, Tn., to evaluate mill oPerations, with an emphasis on operational metrics and management performance.

Deber Dodd, ex-Harwood Products, is now trading Douglas fir timbers for Hillsboro Forest Products, Springfield, Or., from his home in Laytonville, Ca.

Wes Taylor, ex-Gray Lumber, is now an account mgr. at CaPital, Tacoma, Wa.

Roger Rutan has been Promoted to v.p.-sales & marketing at Timber Products Co., Springfield, Or.

Alyson Kingsley, Collins Cos., Portland, Or., has been promoted to sales for Collins' new UPPer Columbia Sawmill in Boardman, Or.

Daniel Mergil is store mgr. of the new Lowe's Home ImProvement Center in S. Chino Hills, Ca.

Pat Webster has been named President and chief operating officer of Universal Forest Products Inc., Grand Rapids, Mi., effective January 1,2009. He will be succeeded as president of UFPI's western division by Dick Frazier.

Kelly Lewis has joined the new Private equity division of Building Industry Partners, Los Angeles, Ca. Jason Fraler is new to the mergers & acquisitions firm's New York office.

Stuart Smythe has retired from Simpson Door Co., McCleary, Wa., after 33 years with the company, including 23 years as a lumber buyer.

Jerry Winnady has been appointed interim executive v.p. of the Forest Products Society.

Ken Dunham, executive director, Lumber Association of California & Nevada, Sacramento, Ca., has been appointed to the board of directors of the California Forest Products Commission.

Paul Salsgiver has joined Activant, Livermore, Ca., as executive v.P.. heading up hardlines & lumber. Kevin Roach has joined its wholesale distribution group in Yardley, Pa.