Of all the basic and cliched skills essential for business executives – financial, marketing and sales, leadership, strategizing, delegation and time management, and problem solving – risk management may be the most overlooked and taken for granted. Or at least it was, until COVID hit.
Speedbumps are routine facts business life. Dealing with business’ usual speedbump issues has always been somewhere between effective planning and crisis management. Suddenly, there is caution and consensus that, particularly in business hubs like Calgary, managing through the pandemic disruptions was more than a major speedbump. It was a significant teachable moment. Risk management at it’s most unexpected, scrambling and complicated worst.
Although business is now moving forward and a momentum of positivity continues, the past two years of lockdowns and business flux have been a wake-up call. Many had to pivot how they operated their business. They adjusted to the new virtual environment and workers working remote.
While work-life boundaries got blurred, business owners found themselves working harder and longer. Some shut down temporarily, unfortunately, others went out of business or changed their business model. With the COVID curse, owners and employees paid more attention to the importance of good health and life priorities.
“The pandemic has definitely forced businesses to give a serious look at their risk management policies,” notes Nadja Ibrahim, partner at PwC, Tax, Private Company Services. “The foundation of any business must be its values and purpose, and a clear plan must follow. While many private companies have successfully digitized during COVID, executives clearly recognized the importance of growing in a secure way. Risk management is usually set on a list of items to monitor, and for the first time, businesses had to quickly address the unknown and rethink their way of doing business. It also taught them to make sure they have the right people in place before a problem comes up, ideally experts in their fields. During an emergency, businesses should always make sure to manage the short-term challenges with the long term in mind.”
In addition to priorities like cash flow, business projections and strategies and navigating the new normals of operations, there is a surge of interest in succession planning. Stats and trends show that until recently, most business leaders talked the talk but relatively few walked the walk of continuity and succession planning. The numbers show that fewer than a third have a formalized succession planning process and while 86 per cent of surveyed leaders considered succession planning an important priority, about 14 per cent reported doing a good job with it.
Stats show that about half (51 per cent) of business owners do not have a succession plan. Of the other half (49 per cent) of business owners that do have a succession plan, 41 per cent have an informal plan. Only eight per cent have a formal written plan.
According to a recent survey by the Canadian Federation of Independent Business (CFIB), seven in 10 business owners agree that the pandemic has changed their thinking about continuity, succession planning and how they plan to retire or exit their business. The survey documents the new, post-pandemic business reality that 42 per cent of business owners will retire later because of the COVID fallout and 57 per cent estimate the value of their business has dropped and it tracks that many business owners are delaying their succession and retirement plans, and the majority feel that the value of their business has gone down because of COVID broadsides.
The CFIB survey also cautions that this has major implications for the future of Canada’s entrepreneurs and their families.
Some business leaders begrudgingly admit that, aside from hardcore factors and competing business priorities like the economy and market trends – procrastination has always been a denied but key factor for continuity or success planning.
And then COVID happened. Life changed. Business changed. Employee work routines changed. Business owner perspectives changed. And strategizing about the future changed. Including businesses suddenly seeing the light and prioritizing the essentials of continuity and succession planning.
“One of the key learnings from the pandemic is to never wait until something becomes urgent,” she says. “Succession planning and investing in people is something that is a recommended approach for all business planning, especially for business continuity, and keeping in mind that it is a very volatile recruitment market. Having a pipeline for talent, both internally and externally, investing in building a strong recruitment brand is prudent for all growing businesses.”
Lynne Fisher, national team leader with MNP’s SMART Services underscores that, “According to the Harvard Business Review, the greatest ‘churn’ in employee turnover is in the 30 – 45 year age group. For many business owners, this is precisely the age group in which they are seeking their successors, as these individuals have the right amount of experience and the right skills, paired with a 25 – 30 year runway.
“This combination puts them into the high demand category in the labour market. Everyone wants them and is willing to sweeten the pot to attract them, through benefits like ownership and profit sharing. Combined with the impact of Baby Boomers exiting the workforce the need for thoughtful succession planning becomes even more urgent and acute. For business owners, this means that they must consider new measures and approaches to attract and keep good talent at all levels – including ownership and profit sharing, enhanced focus on creating strong culture and team.”
Fisher underscores that the composition of the leadership team, and their individual retirement goals, can certainly have an impact on the succession of the business. “If the majority of individuals in leadership roles of a company all expect to leave the workforce in five to 10 years, business owners may face difficulty in realizing their own succession objectives, if ‘keeping the business in the family’ is a priority. Business owners should consider the expected retirement timeline of their key employees, to ensure their retirement plan and business succession and have strong employees remaining to lead the company when the owner, and other key personnel exit.”
There’s a misleading business stereotype that Boomers are retiring while Millennials are job jumping. Ibrahim emphasizes that while that while Boomers are retiring, Millennials are not necessarily jumping from job to job. “Yes, it is currently an employee’s market, and they are looking for specific things when they evaluate a work offer. Now more than ever, potential employees want a flexible work schedule, an environment that allows for a healthy work-life balance, good benefits and the possibility to explore their skills and be trained at the workplace. When companies listen to our people, they will stay.”
Prioritizing continuity and succession planning have become long-term offshoots of COVID’s impact on Calgary business. “As businesses rebound and head into post-pandemic management,” Ibrahim adds with savvy and positivity, “business leaders are prepared for factors such as financial challenges including inflation, the fragility of capital markets and geopolitical issues. Risk management and value creation will need to be updated constantly to deal with unexpected disruptions.
“Technology will also become a more important aspect of all aspects of business, from crypto to transitioning to electrical vehicles. The world is becoming interconnected on platforms, and more detailed tech expertise will be required. These factors must all be considered. When making key decisions about the future of the organization, businesses will need to position themselves for the future by accelerating change and transformation.”