All right, welcome to another edition of the Inside BS Show. We're now on YouTube every day. So if you're joining us on the audio program, join us on YouTube too.

Just type in my name, Dave Lorenzo, you'll find me on YouTube. Look up the podcast, we're there. So today I'm answering the question, how does succession planning work? And I'll tell you, this question came up after yesterday I did a video describing what succession planning is.

And I did a really good job, if I do say so myself, of describing succession planning for family business owners. And after that video went up, not the audio podcast, the video, somebody sends me a comment on the video and it says, am I supposed to just find somebody tomorrow to take over for me? Well, I'm assuming that if you're the person that wrote that comment, you're the owner, you're the CEO, and I'm gonna make an assumption that your business is doing $5 million or more in annual revenue. Because that's who we talk to here on the Inside BS Show most of the time, our business owners of family businesses doing $5 million or more in annual revenue.

So you're the owner of this business. No, you're not supposed to find somebody tomorrow to take over for you. Here's what you're supposed to do.

Tomorrow, you're supposed to start contingency planning. You should have started yesterday, but you can go ahead and start tomorrow. You're supposed to start contingency planning.

What does that mean? Contingency planning means for your role, who would lead the business for the next 24 hours if you were out of communication with everyone in the business for 24 hours? Then who would lead the business for a week? Then who would lead the business for a month? Then who would lead the business for a quarter? Then who would lead the business for six months? Then who would lead the business for a year? Eventually, you become an investor in the business and you find someone to lead the business full time. Contingency planning is planning for short-term replacements for every position in the organization. Somebody gets sick.

Somebody has to take a week off unexpectedly. Somebody goes on maternity leave. I mean, hopefully you'd have some time to plan for a maternity leave, but somebody has to be out of the business for a period of time, a day, a week, a month even.

Who's gonna fill in for that person? That's called contingency planning. It's a stopgap measure. It's not a full-blown succession plan.

A succession plan is for every role in the organization, who's the next person to step up? Now, here's how that works. For the CEO, you have a list of people you think could take your place. So the first thing you do is you give them all the administrative tasks you're currently doing.

You let the people who are possible replacements for you do the administrative tasks. If there's three people, you divide them, a third, a third, and a third. If there's two people, you divide them in half.

If there's one person, you give them 10 tasks for the next six months and you give them the other 10 six months from now. They're the administrative tasks. That's the first thing you transition in a succession plan.

The second thing you transition in the succession plan are the managerial-type tasks. So the blocking and tackling of management, what needs to be done for the teams to get out and do their jobs, what barriers need to be removed from the day-to-day operations in order for the people on the ground to be successful. As the CEO, what does your executive team need to be successful? You give your number two, or the person you're grooming to be your replacement, after they do all the administrative stuff and they've mastered that, you give them the managerial stuff to do.

Then the third thing and the final thing is the leadership stuff. Now if you have a truncated timeline, you wanna be out in 18 months, you teach them the administrative stuff while you're teaching them the managerial stuff and while you're teaching them the leadership stuff. You do all three at the same time.

But the leadership stuff is the hardest to transition. It's the human side of being the leader. People now are naturally gravitating to you as the leader of the business.

You've gotta transition that and you've gotta get them to gravitate toward the person who's going to be your successor. So gradually introducing them into a leadership role is important. Now they may be in a leadership role, they may be a department manager and you're gradually transitioning them into the leader of the overall firm.

I get that, that's fine. But if they're brand new to leadership, little at a time, teaching them how to have conversations with people as leaders. Now there's something else that you have to teach from a leadership example, from a leadership role.

And one of the things that I'm really proud of as a dad is that I try to teach my kids this number one by example but number two by having conversations when there's an important leadership moment. And that is exactly that, recognizing what the leadership moments are and pulling people aside and explaining it to them. So I'll give you an example.

My daughter's volleyball team had a game that was nip and tuck. The lead was transitioning back and forth from their team to the other team, their team to the other team. And one of my daughter's teammates made a mistake that had cost them the first set.

There are three, you win two out of three sets, you win the game. So they had to go to a second game and the girl was really upset. And the other girls were really upset with this girl that made the mistake.

After the tournament was over, I pulled my daughter aside when we were at home and I said, I wanna explain to you something that, and we'll call this girl Fulana, obviously that's not her name. I wanna explain to you something about leadership. There was a moment where Fulana was really upset and the other girls were really upset with her.

You had an opportunity there and your opportunity was to go over and give Fulana a hug and tell her it was gonna be okay and then turn to the other girls and make a face and tell them to stop getting on Fulana because Fulana's your teammate. And next week, in next week's tournament, Fulana could hit the game-winning shot and everybody would be happy with her. Fulana's gonna be the same person when she hits the game-winning shot as she is today when she made the mistake that cost you the game.

That is a leadership moment and that was your opportunity to set an example for everyone else and stand up for someone who needed help in the moment. That's what leaders do. That's the conversation I had with my daughter.

You have the ability to have those conversations in the moment at work. We often don't take that time because work moves so fast, but it's critical if you're developing someone that you do these leadership things. So if you're wondering how succession planning works, you put a schedule together of first the administrative tasks, then the managerial tasks, and you list out leadership qualities.

You wanna make sure that the people who are succeeding you and the people who are succeeding the other leaders in your organization, you list out the qualities you want in them and then you teach people how to spot those opportunities to coach people up on the leadership qualities. If you do this consciously two or three times a week, I mean, great leaders do it two or three times a day, two or three times a shift. If you do this two or three times a week to start, you'll create an organization that has a culture of leadership improvement, continuous leadership improvement, and creating that culture of continuous leadership improvement is incredibly powerful and valuable for succession planning.

So you wanna know how succession planning works. We talked a little bit about contingency planning, which is important, you should do tomorrow. Then we talked about administrative tasks, managerial tasks, and leadership qualities, and how you can begin your succession planning journey by working on those things.

This is the Inside BS show, we're here every day. I encourage you, subscribe at getinsidebs.com. If you subscribe there, you'll get an invitation to join us for our family business forum, which is something that's available to our members only, but you'll get an opportunity to come as a guest if you sign up for get, if you sign up at getinsidebs.com. You can tell we're doing this without a net, I'm recording these live. Getinsidebs.com, sign up there for your invitation to join us at our family business forum where we go in depth on topics like this.

I can't wait to see you there, I can't wait to see you back here tomorrow at 6 a.m. Until then, here's hoping you make a great living and live a great life.