When Founders Form Companies They Usually Focus On The Produ

When Founders Form Companies They Usually Focus On The Product And Th

When founders form companies, they usually focus on the product and the customers they hope to generate. The founders are usually of the same mindset and intention about what they want their company to do and how they would like it to grow. What many companies fail to plan for is the inevitable death of one of the founding members and what that might mean for the vision and purpose of the company. In other words, what would the management structure resemble if one of the founding partners had to deal with the heir of the deceased partner? For example, once, two middle-aged founders focused on the same mission, creating and living by their cultural values and vision, diligently reaching out to their target market, and productively engaging their customers.

One partner unexpectedly died. After the funeral, the surviving founder finds himself now working side-by-side with the recently deceased founder’s 17-year-old son or daughter. Very quickly, the surviving founder may realize his new, young partner may not share the same values and vision that founded the company. The surviving founding partner may ruefully wonder, “How could this have happened?” This scenario happens more frequently than one might think. The scenario also demonstrates the value and importance of succession planning, governance, and planning for the unthinkable.

Founders should plan for such events before forming the company. In this case, when the founding partners decided to enter into this venture, they should have thought carefully about how the company structure and vision might change if one of them outlived the other. The time for this planning should take place when the emotional good faith and positive energy are at their peak so they can follow previously prescribed guidance in the event the unthinkable happens. One of the first steps a company should take after forming the idea of a company is for its founders to create guidance that will continue to provide clear instructions on how the company should move forward in the event one of the founders is no longer in the picture.

We call this process succession planning. We mention succession planning first here because often founders think of it much later in the development process of a company—much to the company’s own detriment. As part of creating the structure of the new firm, the founders should give careful consideration to the creation of its board of directors. One of the board’s first tasks is to hire a chief executive officer (CEO) to perform the necessary, day-to-day leadership tasks for the firm. The most important of those duties is for the CEO to select an executive management team that will run the day-to-day activities of the operation.

This process includes all of the basic functions of a firm, such as marketing, sales, finance, human resources, legal, and production. The board of directors is responsible for ensuring the firm follows its mission. The members of the board are also responsible for approving the company budget and any material expenditures recommended by top management. These expenditures could include building a new plant. Strategic purchases, such as property investments, also require approval by the board.

The board provides the function of looking outward into the industry in which the firm competes to provide additional vision and insight for the firm. Finally, the board approves the strategic plan presented by the firm’s top management. Governing boards typically meet every quarter, or however many times their charter requires. The more effective governing boards typically form functional special board subcommittees in which the members review the recommendations created and submitted by top management. The subcommittees’ main purpose is to review and provide its recommendation to the board for final approval and implementation.

The functional special subcommittees typically form around the areas of finance, production, and compensation. In the special committees, top and executive management present the required reports and analysis for discussion and review to enable the special subcommittee members to fully understand how the performance progress of these functional areas achieve the goals and objectives set forth in the budget and strategic plan. These subcommittees are where the board reviews and discusses any potential changes for future planning to keep the company on course. Once board members complete these committee meetings, each subcommittee makes its presentation and recommendation to the governing board for either its approval or recommendation, or for its recommendation to the board not to accept the reports from top management in that particular functional area.

Only then will the governing board act to implement or reject the recommendations from the special subcommittee. Again, the board typically views these endorsements through the prism of how well these recommendations fit within the mission and culture of the organization. Governing boards do not involve themselves with day-to-day operations of the firm. Day-to-day decisions are the role of top management. The governing board selects top management to run the daily, functional activities of the company.

In review, the founders have pooled their ideas, formed their product or service, created their company, formed their succession plan, and created their governing board. The board is now free to work within the structure and culture they have created to provide the best product or service for their target market. The next step for these prudent founders, as directed by the governing board to the firm’s top management, is to create a strategic plan. Many ways are available for creating a strategic plan, but the most important part of the plan is the discipline of the planning process itself.

Companies that have a consistent and disciplined planning process consistently perform better than those that do not (Wheelen & Hunger, 1987). Strategic planning sometimes is an annual event in which the organization changes the plan every year, or sometimes is a multiyear event in which the organization reviews the plans annually. In the latter, firms have the option of either modifying their plans each year within a fixed number of years, or they may have a rolling plan in which the organization automatically extends a multiyear plan each year after the current year ends. Organizations typically form a strategic planning committee to ensure it follows the strategic planning process year-over-year.

Although this committee is usually created by the CEO, it may report directly to one of the CEO designees from executive management. This committee is an important top management activity whose output is carefully screened and reviewed, up to and including the governing board level. The strategic planning committee is usually made up of middle and functional managers who provide training and advice to those operative areas under their guidance. This ensures a level of consistency across the firm and at all levels. An advantage of this arrangement is that once the firm creates and approves the plan, many of the same people who were responsible for its creation can implement it.

Another benefit the strategic planning process holds for the firm is that it provides a basis for continuous improvement. Continuous improvement simply means making improvements based upon the systematically gathered information from the year before to use as the basis for making improvements in those same areas for the subsequent year. Becoming proficient within the area of continuous improvement can enable a firm to create a valuable distinctive competency, making it a more formidable competitor. Throughout the year, the strategic planning process continues. Ideally, the company can operationalize the strategic plan daily, while at the same time use the strategic plan as a basis for future planning. To master this important series of activities can take many planning cycles in order for the whole company to work in unison within this process. Companies who master this typically have strong, focused leadership to create the required discipline of adhering to the strategic planning process year over year. As part of this leadership strategy, the company demonstrates its support by adequately resourcing this important effort.

Paper For Above instruction

When founders establish a new company, their initial focus is primarily on creating a compelling product or service and gaining a loyal customer base. They are driven by shared vision, enthusiasm, and a common goal of growth and success. However, a crucial aspect that frequently receives insufficient attention during the formation phase is succession planning—specifically, preparing for unforeseen events such as the death of a founder. This oversight can lead to significant disruptions in the company's strategic direction and governance structure if not properly addressed in advance.

Succession planning is a proactive process aimed at ensuring the continuity and stability of a firm through clear, pre-established procedures for leadership transition in times of crisis. In the context of startups or small businesses founded by a team, it involves creating legal agreements, defining management roles, and establishing governance structures that clearly delineate how leadership and decision-making responsibilities will be managed if a founder passes away or is otherwise incapacitated. Implementing such plans early on ensures that the company maintains alignment with its mission while minimizing the potential for internal conflict or disruption caused by unplanned leadership changes.

For instance, in a typical scenario, two co-founders dedicate themselves to a shared mission and culture, actively engaging their target market. If one unexpectedly dies, the surviving partner might soon find themselves working alongside the deceased's heirs, such as their teenage children. These heirs may not share the original founders’ values, vision, or strategic intent, which can threaten the company's cohesion and future trajectory. This situation underscores the importance of formal succession planning and governance frameworks that clearly specify who assumes control and how that transition occurs to preserve the company's integrity.

Effective succession planning begins early in a company's life cycle, preferably during the initial stages of formation when relationships and plans are still fresh and positive. It involves crafting legal documents like shareholder agreements, buy-sell agreements, and establishing ownership structures that address multiple contingencies, including death, disability, or departure of key founders. Such documents often stipulate how ownership interests are transferred, how management roles are allocated or retained, and provide mechanisms for conflict resolution if disagreements emerge among successors.

Beyond legal structures, establishing a strong governance model is essential. Creating a board of directors, for example, provides oversight, strategic guidance, and a formal decision-making process that is essential during leadership transitions. The board's primary responsibility is hiring and evaluating the CEO, overseeing strategic direction, and ensuring the company adheres to its mission and values. During succession scenarios, the board plays a critical role in selecting appropriate leaders, including heirs, or in guiding external leadership appointment when necessary.

In developing a governance framework, companies should also form specialized committees, such as audit, compensation, or nomination committees, which oversee key strategic decisions, management performance, and leadership succession. These committees meet regularly, evaluate progress, and review strategic plans, ensuring continuity and minimizing disruption during transitions. Their function is to provide consistent oversight and align leadership changes with the company's long-term vision and goals.

Strategic planning, closely linked with governance, is also integral to ensuring organizational resilience. The process involves setting clear objectives, analyzing internal and external environments, and formulating actionable strategies to achieve sustainable growth. Companies that follow a disciplined, cyclical strategic planning process tend to outperform less organized competitors. Regular reviews, updates, and performance evaluations are critical for adapting to changing market conditions and internal dynamics.

For example, companies typically establish a strategic planning committee composed of senior managers and executives. This committee ensures the planning process is systematic, transparent, and aligned with overall goals. The committee develops multiyear strategic plans, which are periodically reviewed and, if necessary, revised based on performance metrics and market developments. This disciplined approach facilitates continuous improvement, allowing organizations to adjust strategies dynamically and maintain their competitive edge.

Furthermore, companies must embed the principles of continuous improvement into their strategic planning and management routines. Continuous improvement involves regularly analyzing operational data, seeking efficiencies, and refining processes to enhance performance. This philosophy supports the development of distinctive competencies—unique capabilities that provide a competitive advantage—which is vital for long-term success.

In conclusion, while a strong product focus and customer engagement are essential during the initial stages of company formation, prudent founders recognize that establishing robust governance and succession plans is equally vital. These strategies ensure that the company can withstand unexpected leadership changes, preserve its mission, and continue its growth trajectory. A disciplined, ongoing strategic planning process further enhances the firm's resilience by enabling it to adapt and improve continually. Organizations that integrate governance, succession planning, and disciplined strategic management lay a solid foundation for long-term sustainability and success, safeguarding their vision across generations.

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