Q. Why was there no business succession plan at Lakkard?
There was no succession plan at Lakkard because of a series of factors that were not acted on to achieve a legal succession plan. There are 10 factors all forming the Succession Matrix; “owner motivation and perspective, personal financial planning, business structuring, business performance, strategic planning, leadership and management continuity, management synergy and teamwork, successor preparation, family dynamics, and family governance” (Rawls group).
In looking at the business owner motivation and perspective, CFL did not fully understand the responsibilities that he had with the various stakeholders involved in the Lakkard Leather Company. While he fully understood those of suppliers and customers he neglected those of employees and their families through his high handed governance. Furthermore, his personal financing was not good because the businesses was at a standstill since 2005 making him unable to obtain assets, liquidate the company, and make the firm financial independent. This is the same for the company’s structure where it had negative cash flow, poor management, and was not liability protected.
There was no management synergy and teamwork in the company where all crucial departments such as procurement, accounting, and human resources were run by one person—CFL. This affected the morale of employees where it was recorded that there was a lot of employee absenteeism. Management continuity was also a mess where there was no person to take responsibility when CFL was absent. This was evident when the owner CFL had an accident. The son Peter Lakkard had to take responsibility despite him having no experience in managing the company. Conflict in the family also contributed to absence of a succession plan, where the mother, Sandra, and son, Peter, were against the father’s, CFL’s, preferences. LCK was also not able to identify a successor and groom him/her ahead hence the reason why there was no succession plan.
Q.2. How could CFL have better managed this process?
CFL had a great vision of starting his own company, a correct mindset to financial freedom. However, the problem arose from poor management, absence of strategy, and poor family governance (Tiettz 2011). In considering the three factors, CFL would have implemented a strategy that would avoid future conflicts like the one experienced with his son. In poor management, CFL was notorious in authoritatively controlling key departments in the company. The critical departments were accounting, manufacturing, procurement, administration, and human resources. Therefore, he should have delegated some responsibilities to other qualified personnel so that he could have ample time to strategize for the future. In addition, CFL should have introduced a marketing and sales department which was missing in the company. This is because the company depended on old and loyal customers for their revenue. Marketing and sales would have attracted more customers who in turn would have contributed to more revenues for the company; hence financially independent.
The family is an area where CFL should have put effort in creating harmony. For instance, his wife Sandra had a crucial role in designing the company’s products but it was understood that he was always left out of administration and business strategy decisions. This can be a great de-motivator and create betrayal that was witnessed when his wife sided with her son in fighting CFL’s decisions. The same is true with his son, Peter, where he was always kept in the dark never given a chance to work in the company. And when he worked CFL was always contradicting Peter’s proposals. Hence, CFL should have given his wife more managerial responsibilities, listened to proposals she had, and discussed on daily activities the company experienced. He should also have listened and implemented some of Peter’s ideas which had a higher probability of making the company succeed. Lastly, after involving all family members in the business, CFL should have drafted a will and a succession plan for a smooth transition in case of an accident like the one that happened (Rawls group).
Q3. What would you do now if you were (a) CFL, and (b) Peter
Both CFL and Peter had a great vision for the business but the difference arose from the management and leadership methodology, and what they wanted in the future. CFL had a leadership style of authoritative and management style where he was in charge of everything. Furthermore, CFL was majorly concerned with his retirement benefits hence the reason why he contemplated selling the company to Carabbazo—an Italian designer. Consequently, Peter’s leadership style was transformational where he wanted to positively change aspects such as employee motivation, reduce wastage, and increase revenues. His management was also team work and wanted every worker to feel like part of the Lakkard family. Peter’s vision was that he would one day inherit the company hence needed it to perform well financially and be able to attract young, skilled personnel. Therefore, there is a conflict of interest and for a smooth transition both parties should come up with effective decisions where:
A. CFL
Openly discuss issues affecting the company to his wife and son. Such as the Carrabazo offer, and profit margins of Peter’s designer bag
Negotiate with his family on how the family would best be managed and the leadership required.
Provide information of the company’s history to his son and groom him for succession. He should make a succession plan.
Increase employee performance, satisfaction, and motivation through incentives and assurance of their future.
B. Peter
Should openly go to his father, CFL, and clearly articulate his plans for the company and that he wants to inherit the company from him.
Propose to his father on methodologies of reducing wastage in the business so that they can save on finances.
Come up with evidence that his innovation, the designer bag, had a potential of bringing in more returns hence safeguarding the Lakkards future.
Negotiate with his father to give him some responsibilities which he would bear the consequences if anything went wrong.
Reference
Rawls Group. Family Business Succession Planning: what are the critical factors. Available at:
youtube.com/watch?v=OUs004-ZJR0
Tiettz, M., 2011. Conflict over leadership and succession in a successful business: The Lakkard Leather Company. Ontario: Richard Ivey School of Business Foundation
