The Manchester United experience shows how vital it is to get succession right, an accountant has warned.
Ross Prince, audit manager at the Midlands office of national audit, tax and advisory firm Crowe Clark Whitehill, said it remained early days for new manager David Moyes but the change at the top nevertheless highlighted lessons applicable across business.
He said: “The departure of a figurehead or key member of a company’s senior team can have a dramatic effect on results – just take a look at the football world and the departure of Sir Alex Ferguson.
“Sir Alex retired after 26 years of reinventing Manchester United into the most successful English team of the last 20 years and many have commented that Moyes has an almost impossible task in maintaining this incredible output.
“The transition has already proved a challenge, with United lacking the dominant start to a season that was previously expected as routine.”
Putting aside the obvious fact that key individuals in any organisation really do make the difference, the key, said Mr Prince, was to consider how a business best retained inspiring individuals and managed their succession.
He went on: “From the ‘big-billing’ name in a corporate law firm to the visionary founder of a successful family business there are people who are not irreplaceable, but not easily replaced. However, with proper forward planning, the use of appropriate tax incentives, and a little innovation, it is possible to avoid dropping to ‘mid-table’.
“For a starter, why not incentivise your key people to stay and grow the business by offering them share options?
“The Enterprise Management Incentive scheme provides a tax-efficient way of giving them a minority stake in the business, can be linked to any performance incentive you like, and is used to enable some participation in the realisation of company value on sale. As you are providing options and not shares, control remains with the existing board/shareholders.
“A bonus structure that provides something ‘a bit different’ can also work wonders. While there are few employees that will turn down a cash bonus, other incentives, such as a car-parking space or a better office as a reward for long service, can often provide a more visible, long-term, reward.
“Ultimately, no matter what incentives you provide, you must prepare for the fact that key individuals may decide to leave. If this is due to retirement then, OK, you should have already planned how to fill the gap and already identified, trained and incentivised their successor to be even better. If you haven’t, then you should start this process now and make sure there is a sensible timescale and budget for doing so.
“But, what if your star player leaves to join another club? What if they take their skills and reputation across town and start turning out for the opposition?
“Too many businesses are unable to put hard figures on what their key people bring to them – like the value of key accounts that result from personal relationships, or the efficiency of a team with a superstar head of department, or the value of insurance or warranty claims saved as the result of a diligent compliance officer.
“Structured management information enables you to understand who is critical to your operations and to be retained at all costs. It enables robust risk management to be undertaken and safeguards put in place to mitigate any threat of over-reliance on your one ‘Wayne Rooney’.”
Sir Alex had planned his departure, stating “it was important to me to leave an organisation in the strongest possible shape and I believe I have done so”.
Mr Prince noted: “He identified his key players and future stars but it remains to be seen how effective the management of his own succession will be.
“For starters, can any new figurehead thrive and innovate when their predecessor has only really moved upstairs?”