Eliciting Excellence

The Difference Between Exit Succession and Regular Succession

In regular corporate succession, leaders are groomed to assume greater responsibility and authority, and successors in closely-held companies need those same competencies as well.  In both cases, leaders need to become competent at influencing others, thinking strategically, and developing those around them.  They need to be capable communicators, service motivated, and have emotional self-control.  These, among a myriad of other competencies, help leaders become more effective and bring out the best in the people around them.

But in the case of a successor of a closely-held company, there are several additional dynamics that must be addressed.  When the owner of a closely-held company decides to retire and sell to a family member or key manager, the effectiveness of the successor is critical to the future of the company, its profits, and its ability to pay the owner for the full value of the company.

Three of the issues that the successor of a retiring business owner must address are 1) the need to shift from an employee mindset and adopt an Owner’s Mindset, 2) the need to make changes and decisions strategically rather than emotionally, and 3) the need to earn the trust and respect of the company rather than assume leadership as a matter of entitlement.

1) Adopt an Owner’s Mindset

Owners have a different perspective than employees.  Owners feel a responsibility to provide a livelihood to the company’s employees.  They understand that their decisions not only impact the bottom line, but impact the people who work for the company.  Owners appreciate that they will ultimately have to make decisions – sometimes hard decisions – that will affect the future of all involved, and that many times those decisions are made without certainty and without all the facts.  Additionally, owners understand that they no longer simply have a job.  They ultimately end up living and breathing their company 24/7.

2) Make Changes and Decisions Strategically

After years of being in the owner’s shadow, a successor who becomes an owner finally has complete autonomy.  They may do or say whatever they choose.  If the successor has felt stymied over the years, there may be a tendency to immediately attempt to imprint their personality on the organization.  A successor in this state of mind may tend to abandon the long-standing culture of the organization and/or shift direction as soon as possible.  Not only can this be disruptive and lead to high turnover, but can lead to changes made emotionally rather than for strategic reasons.  The results are almost always poor.

3) Earn Trust and Respect

Even though a successor may have many years of experience behind them, there exists a real possibility that they will be viewed as someone who has been placed in a position of authority out of entitlement.  A true leader understands that their power comes not from a title but from having earned the trust and respect of those around him or her.  Rather than attempt to demonstrate one’s leadership competence by exerting authority and adopting a “command and control” style of leadership, a new successor will be better served by demonstrating that they value and respect their people.  Utilizing a more collaborative approach will better serve a successor and establish him or her as a true leader.

In theory, the outgoing owner can help a successor master the needed leadership competencies and overcome/avoid the potential pitfalls that may exist.  But from a practical perspective, owners generally have neither the time nor the expertise to accomplish all this.  A smarter route is to employ a professional who specializes in successor development.

If you’d like help grooming a successor to take the reins of an organization, please give us a call.  A well-prepared successor will not only ensure business continuity, but will maximize future cash flow and profitability.  Michael Beck International – 503-928-7685