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Business Litigation Alert: "When It's Time for the Next Generation to Take Over - Lessons from Viacom, Inc."

What happens when a company's strong, charismatic leader can no longer run the day-to-day operations due to failing health, personal issues, or the like?  If the business has a transition plan in place, the company has been grooming the next generation of leaders who are, hopefully, ready to step in.  If not, disruptive and expensive turmoil can ensue. 

That is what has happened to Viacom, Inc. as different factions jostled for control of the company in the wake of Sumner Redstone's failing health.  See articles here and here.  The battle for control has been very long and very public, with Redstone's daughter finally emerging as the one who will take control of the organization. 

Even though Viacom is a large corporation, the situation is a cautionary tale for smaller businesses.  It highlights the need for proper planning in terms of how a business transitions from one generation of leadership to the next and how failure to do so can be distracting and expensive. 

So, what can business owners do up front to ensure they don't end up in a courtroom should they choose to part ways?

  1. Have a transition plan.  There is no substitute for having a clear, thought-out transition plan in place.  With a transition plan, the business can be pro-active in taking steps to train and prepare the next generation of leaders, as opposed to being reactionary to events as they unfold.
  2. Execute the transition plan.  A transition plan is of no use if it is not implemented.  Identify the next generation of leaders and give them the training and experience they will need to (someday) run the business. 
  3. Plan for the worst; hope for the best.  The more you plan for the worst case scenario from the beginning, the better prepared your business will be if things go south.  Make sure to consider all likely scenarios: What happens if the business fails?  What happens if, in a family business, there is a death or illness?  Again, taking the time to consider these issues before they strike will make dealing with them easier and ensure smooth continuity in business operations.

While every business leader hopes to be able to stay on forever, that is not realistic.  People part ways and tragedy happens, but the more you prepare in advance, the better chance you have to avoid the courtroom and a messy business dispute over who will be in control when it's time for the next generation to take over.

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