THE LAW: Who’ll succeed you if you die

What would happen if a senior leader at your business disappeared tomorrow?

Larger businesses have the resources to prepare a next generation of leaders to assume leadership roles and continue new business growth. But what about smaller companies?

Without a structured plan in place, your surviving employees would likely have to dig frantically through emails, stacks of paper and scribbled notes regarding work in process, passwords and so forth.

A proper succession plan is the difference between a smooth and orderly transfer of leadership and a barrage of complaints from impatient customers and stress for your remaining employees (who are likely already stressed and upset by the loss of a colleague).

Here are some tips to plan ahead.

1. Start now.

As we all learned following the 2020 derecho, the time to fix your roof is when the sun is shining. Such planning can never be too early but can definitely be too late. Get outside help. Work with your lawyer, CPA, financial planner or other professional and help you organize and consider the key issues you will face in transferring leadership and/or ownership.

They likely have a checklist of topics and best practices. Are you passing it down to a family member or selling it to a current employee or other third party?

You must be proactive about preserving documents that substantiates and protects all assets and liabilities, intellectual property, real estate, debts, shareholder relations, licenses and so on.

2. Put everything in writing.

While this may seem cold, your business’ health should not be dependent on a “handshake” deal. There are too many issues and too many opportunities for misinterpretation without documentation. Put everything in writing, including:

When I die file: In this electronic digital age, access to the passwords for your computer and other accounts will be critical. The best practice is to use a “password manager,” a software application designed to store and manage online credentials and generate passwords. Passwords are stored in an encrypted database and locked behind a “master password.” Talk to your IT person about this technology.

Succession agreement/instructions to staff: The company should have a written document that sets forth the successor’s duties and scope of authority in the event of death or disability. It should address the triggering event for assumption of duties because what happens if the leader is only partly incapacitated yet unable to conduct his or her affairs.

Customer matters: The most important duty of the leader’s successor is to continue good customer service. The leader must maintain an updated customer list and whether immediate action is required to attend to the customer’s needs. The appropriate person should contact the customer immediately, emphasize a smooth transition and discuss how the customer wishes to proceed.

3. Transition

Once you have a succession plan in place, don’t just stick everything in a file and forget about it. Whoever you choose to succeed you, spend time training them before handing over the reins. Introduce your staff to your top customers and take the necessary measures to ensure your company’s continued success.

Leaders have a duty to their business, customers and family to ensure that their death or disability will not present a burden. Accordingly, the time is now to take stock, plan ahead and avoid becoming the leader who failed to expect the unexpected.

Wilford H. Stone is a lawyer with Lynch Dallas in Cedar Rapids. Comments: (319) 365-9101; wstone@lynchdallas.com