“Denial syndrome” is typical of
business owners who can’t conceive of not being at the helm of
their enterprise — and therefore
have not prepared for that eventuality. Yet with seven out of 10 of
Canada’s small and medium
businesses owned by aging baby
boomers, the incidence of disability and death is increasing
and, along with it, the risk of
ACME Electronics experienced this first hand. The controller answered a phone call one
morning to learn that the CEO,
the owner of the business, had
experienced a heart attack the
previous evening and was in the
hospital. With only three people
on the management team, none
of whom were capable of assuming the CEO’s role, suddenly
there was a serious void with an
immediate impact on the company’s ongoing operations and
When it comes to the heart of
an organization’s labour force—
the executive team — many
owners of mid-size enterprises
have denial syndrome when it
comes to planning for the temporary or permanent exit of a key
person — including themselves.
Based on a three-person executive team whose members are
around the age of 45, actuarial
statistics suggest that the chances
of one member dying before age
65 is nearly 50 per cent. The risk
of disability significantly raises
the odds: the probability of one of
those people suffering a long-term (90 days or more) disability
prior to age 65 is over 78 per cent.
In the past, organizations subjected to an unexpected executive void would often experience
serious profitability declines and
subsequently fail, or become
involved in hasty mergers or
sales. In ACME’s case, the shareholders were fortunate to be able
to arrange for immediate interim
management support to assume
responsibility for the CEO role.
This allowed the rest of the team
to continue focusing on their
respective areas of responsibility
and enabled ACME to seamlessly
maintain day-to-day operations
and meet customer commitments. Eventually, when the
CEO recovered from his heart
attack and decided to retire, the
Having a contingency plan in place to address
“the big four” — death, disability, disagreement
and departure — is obviously the ideal scenario.
However, this is simply not a reality for many
mid-size enterprises today.
interim management team was
retained to sell the business in
the ordinary course, at going-concern value.
This example illustrates why
interim management is expanding
beyond its traditional scope of
business growth and transition to
encompass unforeseen absences
within executive teams. Many
small and medium enterprises
have no contingency or succession plans in place and are
unable to address sudden executive departures. While owners
tend to be very protective of the
physical and financial assets of
their businesses, they frequently
overlook protecting its vital
human assets: experience,
knowledge and leadership skills.
Thus the voluntary or involuntary exit of the owner or other
key person can precipitate the
rapid demise of a business.
Often, management team
members lack the expertise or
available time to fill in for one of
their colleagues: CEO, COO,
CIO, GM or other key executive.
Given today’s intense time pres-
sures and demands, if an execu-
tive team experiences a sudden,
critical void due to death, dis-
ability or serious illness, the
company often requires an
immediate replacement. Simi-
larly, the discovery of serious
wrongdoing by one or more sen-
ior members of management can
force an immediate termination
for cause, or required resigna-
tion, leaving the remaining man-
agement team in disarray, and
the business in crisis.
Uwe Manski heads the
interim management division of
BDO Canada Limited, which
helps entrepreneurs manage
through transitions and crises.
He is the former president of
BDO Canada Limited.
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