The overlooked drill that could save your business

ILLUSTRATION BY RUTH MACAPAGAL

The “fire drill” is an immediate need for any business.

A fire drill is a contingency plan designed to address emergencies, specifically, what would happen if the head of the company falls sick, passes away, or abruptly leaves? This plan should be well thought out, with all necessary elements in place to be executed smoothly.

An example from one of our clients highlights the importance of a fire drill. Chaos ensued in a Middle Eastern family business where the founder passed away suddenly, leaving his four sons to take over the business. With no succession plan in place, the family was plunged into chaos and infighting overnight.

They called us when it was almost too late. By that time, the family members were already embroiled in intense conflicts, communicating only through their lawyers. Meanwhile, top executives exploited the situation, paying themselves huge bonuses without oversight. The family was unaware of the company’s operations or finances, similar to David Copperfield’s magic tricks, where only the magician knows the whole trick, and each team member knows only a part.

Ultimately, management benefited while the family suffered, as they continued to fund the business, paying hefty salaries without understanding the underlying issues. Without a fire drill, chaos and financial disputes are inevitable.

Are you a David Copperfield or a Steve Jobs?

In business, you want to be the opposite of a Copperfield. Everything must be documented, written down, or video recorded, so someone else can seamlessly take over. Take the example of Steve Jobs and Tim Cook.

A case study in succession planning

Steve Jobs, the co-founder of Apple, was known for his visionary leadership. However, he also understood the importance of preparing for the future. Jobs meticulously prepared Tim Cook to take over as CEO. This preparation involved:

• Gradual responsibility transfer

Jobs delegated significant responsibilities to Cook over several years, allowing him to gain a comprehensive understanding of Apple’s operations.

• Clear communication

Jobs communicated his vision and strategy to Cook, ensuring that he understood the company’s direction and goals.

• Public endorsement

Jobs publicly endorsed Cook, providing confidence to shareholders, employees and customers that Apple was in capable hands.

This detailed and strategic preparation ensured a smooth transition, maintaining Apple’s stability and growth even after Jobs’ departure.

Does this apply to all businesses?

All businesses, of course, not just family firms. Every company, regardless of size or structure, should have a contingency plan. This includes departments and business units. We have seen time and time again with our clients how important it is to have a deep bench across the entire organization. This makes a business truly sustainable and scalable.

Consider a small tech startup—if the lead developer suddenly leaves, does the team know the codebase well enough to continue without significant disruption? Or take a large multinational corporation—if a regional manager quits unexpectedly, is there someone ready to step in and maintain operations?

The magic of the deep bench

One of our clients in the United States is a typical gung-ho entrepreneur who liked to make decisions by the seat of his pants before he got me and my team on board. Whenever there was a position going vacant, even for a top spot, he got really anxious to fill it as fast as possible but he did not look at quality or fit. He just filled it with whoever he thought could more or less do the job. He lost millions of dollars in profits year after year because the people were a bad fit.

We coached him to brace himself, make sure he gets the proper job specs together first, and then follow a clearly laid out plan to fill the positions with the right people. This may take more time than hiring on the spot. But lo and behold, after a year his company was making so much more profit, everything was running more smoothly, and most of all he had less headaches and less challenges that were escalated to him.

Always have a No. 2

We’ve observed many clients experiencing severe headaches and sudden panic when no deep benches for major positions exist, and no number twos are in place that have been properly groomed. When the top person leaves, chaos ensues.

A deep bench means having a team of capable individuals ready to step into leadership roles at a moment’s notice. This involves:

• Training and development

Invest in training programs that develop employees’ skills and prepare them for future leadership roles. For instance, a retail company might implement a management training program for store supervisors to groom them for regional manager positions.

• Knowledge sharing

Encourage a culture of knowledge sharing where information is not siloed but accessible to all relevant parties. For example, in a law firm, ensure that junior partners are involved in key cases and understand the clients’ needs and strategies.

• Regular drills

Conduct regular drills and simulations to test the readiness of potential successors. This could be as simple as having a deputy step into the leader’s role during a meeting or handling a project independently.

Hire for competence

When a key person leaves, the instinct might be to hire quickly to fill the gap. However, it’s crucial to hire for competence, not just to fill a hole.

Here are some more practical examples and mistakes some of our clients made before we consulted them how to improve their approach:

• Retail chain example

A retail chain faced a crisis when their head of operations suddenly resigned. They hastily hired someone with impressive credentials but little understanding of the company’s culture and processes. This led to poor decisions and a drop in performance. A better approach would have been to identify internal candidates with a deep understanding of the business, even if they lacked some experience.

• Tech startup example

A tech startup lost its CTO and quickly hired an external candidate. However, this new hire struggled to adapt to the startup’s fast-paced environment and collaborative culture. Instead, promoting a senior developer who was already familiar with the company’s technology and culture could have ensured a smoother transition.

• Family business example

In another family business, the CEO retired and the board hired a new CEO based on industry reputation alone. The new CEO’s management style clashed with the company’s established culture, leading to high employee turnover and a decline in morale. A more competent approach would have involved promoting an internal candidate familiar with the company’s values and operational style.

Don’t wait for a crisis to realize the importance of a fire drill. Start preparing today to safeguard your business’s future. Are you ready to transition from a Copperfield to a Jobs? Your business’s continuity depends on it.

Tom Oliver, a “global management guru” (Bloomberg), is the chair of The Tom Oliver Group, the trusted advisor and counselor to many of the world’s most influential family businesses, medium-sized enterprises, market leaders and global conglomerates. For more information and inquiries: www.TomOliverGroup.com or email [email protected].