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Losing a leader

Gregory G. Greenleaf is a senior associate of The Family Business Consulting Group and the former president of the Walter J Greenleaf Co, a distributor serving the metal cutting and manufacturing industry.

John Ward is a co-founder of the Family Business Consulting Group Inc.® Ward is a clinical professor at the Kellogg School of Management where he teaches strategic management, business leadership, and family enterprise continuity. He is an active researcher, speaker, and consultant on family succession, ownership, governance, and philanthropy.

On 9 August, the first full day of the 2008 Olympic Games in Beijing, an American family business leader, Todd Bachman, 62, was stabbed to death in a random attack, and his wife was severely wounded.

Just two days earlier in Italy, Andrea Pininfarina, 51, chairman and CEO of Pininfarina SpA, an auto design firm, died in a traffic accident.

Both tragedies point to the need for good governance to assure that family businesses anticipate and effectively manage an unexpected loss of leadership, be it due to death, illness, or some other factor.

Todd Bachman was chairman and CEO of Minneapolis-based Bachman's, Inc., a 123-year-old company that operates more than 50 floral, landscaping, and garden stores. His death drew international attention because he was the father of a former US women's volleyball Olympian and father-in-law of the coach of the 2008 US men's volleyball team. Company president Dale Bachman, Todd's second cousin, stepped in immediately to handle press conferences. On 21 August, the company board announced that Dale had been elected to succeed Todd, and that another family member, Paul Bachman, had been named president.

The board at Pininfarina acted even more swiftly. Five days after Andrea Pininfarina's death, the company elevated his brother, Paolo, from deputy chair to chairman.

These two family firms demonstrate the value of a smoothly functioning board of directors, one that can aid in the transition when a company's chief executive suddenly becomes unavailable. One of the primary jobs of a board is making sure its company has the right leadership; and part of that responsibility is to assure leadership continuity.

Taking that charge a step further, family business boards are well advised to require that the management team develop an emergency or contingency plan that addresses what will be done in the event of loss of leadership.

Sometimes called a "fire drill," such a plan enables the business to operate while allowing the family to mourn the loss of a loved one or care for a leader who has fallen ill. It also helps shelter family members from unnecessary stress and prevents shareholders from squabbling over who should be in charge.

Emergency plans answer such questions as: Who will respond to the media? Who will communicate with stakeholders, such as employees, shareholders, customers, vendors, and banks? Who will oversee day-to-day operations – an already-designated successor or an interim leader? Will an interim leader be someone from inside the company or outside? Who will be the liaison between the business and the family?

An emergency plan needs to be a written document that makes the assignments of responsibility absolutely clear. It should have the approval of the board, and it should be reviewed annually and updated as needed.

Family businesses are better able to withstand an unexpected crisis when they have healthy procedures for decision-making or good governance in place. While an emergency plan is part of the process, it is something that hopefully family businesses will never have to use. Nevertheless, it can give great comfort to a family and contribute to a business's continued success.

As Bachman's new leader, Dale Bachman, put it: "As hard as it is to move forward, it's important that the company focus on its journey ahead." Having a proper emergency plan in place will ensure that your company can do just that.

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