The PR field certainly sees its share of job churn, with top executives often jumping to competing firms for more pay, bigger responsibilities and/or prestige. What’s more, a tight U.S. job market (4.8 percent, as of January) might provide fresh incentive for senior executives who had been thinking about testing the waters in recent years but were deterred by high unemployment rates.
That’s why it’s crucial for PR firm owners to have succession plans in place, particularly if they are bracing for a sale. Should an owner decide to seek an exit strategy, the first place potential buyers will look is the second tier of management. Rick Gould, CPA, J.D., managing partner of Gould+Partners, discusses with Bulldog Reporter how to create succession plans that benefit both the owner and the person(s) who will eventually take charge.
What are the key steps to developing a solid succession plan?
Gould: The first thing owners need to realize is that the planning process takes five to seven years before they agree to fully exit from their firm. But having a long-term planning process in place will enable owners to maximize the value of their businesses over time. For starters, it’s hard to plan succession if the owner doesn’t have a clear understanding of his or her firm’s current value. It is also important for an owner to know the factors that could increase—or decrease—the agency’s value within the desired time horizon (or until the owner gets the earn-out and leaves the firm altogether).
In creating succession plans, owners may have to weed out some people who—despite their ability to bring in lots of revenue and manage other people—may not be interested in managing the entire firm. For those executives who are solid candidates to run the firm, owner must ask several questions: What are the personal long-term goals of the individual? If there is more than one manager taking charge do all of them share the same personal goals? Can the current agency principals envision working for another firm (a new owner buying the firm) or even having an owner?
You also need to talk about the vision these executives have for the firm and how they’ll carry on the firm’s legacy. Owners also need to explore what sort of incentives would be agreeable to both the owner and the new managers? These incentives range from periodic bonuses to “phantom” stock options. And most buyers, of course, will insist that an equity participation plan (usually 20 percent to 25 percent) be in place at the time of sale.
What are some of the executive perks that tend to come with the succession-plan territory?
Gould: Our research shows that providing a laptop and cell phone is now considered the norm, and paying for home internet access is demanded by many executives (roughly 25 percent) as well. Flextime and paying for continuing education are also popular, and it stands to reason that both of those areas are increasingly going to command more mindshare and budget from PR owners because of the pace of change in business and technology and the fact that the typical 9-5 business day is getting to be a relic.
I advise not to include corporate cars, motorcycles, limos, car services, corporate apartments, baby sitters, nannies, daycare and dog walkers. Whatever perks you decide to offer your staff, include a list of the perks and the value to the staffer at year-end, either with his W-2, bonus check or annual review.
Rick Gould is author of “Doing It The Right Way: 13 Crucial Steps For A Successful PR Agency Merger or Acquisition,” and “The Ultimate PR Agency Financial Management Handbook: How To Manage By The Numbers For Breakthrough Profitability Of 20% Or Greater” (4th Edition)