Who will run the company if the CEO dies unexpectedly?

The untimely death of Ken Hendricks, CEO of ABC Supply, in December of 2007 was both a shock to the system and a wake-up call.

How many businesses have a plan in place to address a situation like this? If you or one of your employees suddenly died, is there a transition plan that would kick in?

These are sobering questions but unfortunately, most businesses do not plan for the sudden departure of a key employee, whether that would be as a result of an accident, medical condition, or someone who chooses to leave our employ.

Sure, we can have a life insurance policy that provides the business with a death benefit for "key employees," but that is designed to address the financial impact caused by the event. It does nothing regarding the loss of knowledge, expertise, talent, skills, or abilities of the employee.

Uncomfortable issue

This is a challenging and uncomfortable subject for most businesses to deal with. The issue transcends all industries.

I have even seen it affect a funeral home when the owner suddenly passed away as the result of an unfortunate traffic accident. Even in a business where people deal with death on a daily basis, they were not prepared for the loss of the owner.

There is no question that the death of the owner/leader of a business can have a devastating impact on the company going forward, but even the loss of a key employee can send a company reeling.

Succession planning forces the organization to develop options for the potential "what if" scenario that no one hopes will occur. Succession planning makes the business leaders look at the multitude of possibilities that could develop and asks that a series of plans be crafted to address each possibility.

I suggest the management team treat this exercise as they would a strategic planning event because that's really what it is. This requires the team to set aside uninterrupted time, usually a day, at a location apart from the business.

Undivided attention needed

Creating a solid succession plan demands your undivided attention. As your team wrestles with this issue, identify contingency plans that will address the sudden death of key personnel, then develop a series of plans that deal with an extended illness, or a sudden resignation:

• Who will assume the duties of that vacant position?
• What knowledge, skills and abilities will we be missing?
• Who within the organization could be asked to take on some or all of the workload?

Having a series of succession plans in the queue can help you sleep at night.

While you're planning for the business you might want to reevaluate your personal life to see if your will is current and that your estate plans have been updated:

• What has changed in your life since that will was first drafted?
• Should the list of heirs be reduced or expanded?
• Are there charitable organizations to add or drop?

A will and estate plan are documents that require periodic review and now is as good a time as any to complete that task.

I have two wishes for your business, first that you would complete the work necessary to craft a series of succession plans, and second that you will never, ever need to implement any of them.

May you and all of your key people retire from the business and enjoy many years of fun and relaxation.

Bud Gayhart is interim director of the Center for Innovation and Business Development at UW-Whitewater.