Time for a fire drill
April 19, 2017
By Martha Sullivan, CPA, CVA/ABV, CM&AA, CEPA
Partner, Succession Planning Practice Leader
One of the rituals of our school days we often remember clearly is the fire drill. We were taught what to do in case of a fire – head for the nearest exit, feel for warmth on a closed door, congregate at the safe place and so on. While the chances of a fire breaking out was relatively low, the instructions were clear to everyone and were practiced so, in the case of a real emergency, the steps needed to keep everyone safe flowed naturally. Panic and chaos was mitigated.
So why don’t we do that in our businesses?
Last year, the news was filled with the loss of David Goldberg – the vibrant leader of Survey Monkey and husband to Sheryl Sandberg. The 48-year-old was on vacation, working out at the resort gym where he slipped on the treadmill, fell, and suffered a catastrophic head trauma, later dying at the nearby hospital.
At the time of his death, Survey Monkey was a rocket ship Silicon Valley darling with great plans for growth and eventual IPO. However, since his death, the company has been reeling with many management changes. For example, one of the board members stepped in briefly as CEO while they sought another candidate. That candidate crashed and burned in six months and now the same board member has been named CEO. Within weeks of coming back on board as CEO, a layoff of 100 employees was announced. A quick skim of company reviews on the jobs and recruiting site Glassdoor reveals chaos and confusion around strategy, execution and opportunity. One reviewer summed up their impressions with the header “Hot Mess Management.” Ouch.
No doubt, this is not what Mr. Goldberg would have wanted. Had he known the vacation trip was to be his last, one can only imagine he would have done things differently, putting in place and communicating a contingency plan for such a tragic event. Perhaps he would have planned and practiced the fire drill so everyone would know:
- Who is in charge: Identifying who is leading the company overall as well as key positions such as sales, marketing, operations and finance
- What should be done with the business: Continue operating or sell it? Are the right pieces in place so continued operations are even an option?
- Continued operations: What are the directives of the buy-sell/operating agreements in the event of a shareholder death? What insurance policies are in place?
- If sell the business: Who should handle the transaction? Who should be considered as buyers? Who should not be considered?
- Compensation plans to aid retention: Are there, or should there be, incentive compensation plans in place to help retain key people through the transition to new leadership?
- Strategic plan: Are we operating with a strategic plan we can continue to execute while we move through our grief?
The development of such a contingency plan can be as simple or as detailed as one wants to make it and will vary from person to person, company to company. The critical thing is to do it and then communicate it.
Nobody wants to envision themselves in the situation of a fire or other tragic event. Should the fire ignite, it will be scary for all involved. However, if the fire drills were prepared and performed, lives will be saved, injuries will be mitigated, and the “hot mess” avoided.
Isn’t that the goal? Think about it, then get down to preparing your own fire drills for your business.