Michael Beck

Common Shortfalls in Successor Development

When it comes to handing off their business to a successor, every business owner understands the importance of grooming their successor to take over. And most owners feel they’ve done a good job. But while most owners ensure a successor understands the business, many owners don’t do the leadership and ownership development required to help their successor succeed. In fact, studies show that over 2/3 of successions fail!

Here are three of the common mistakes owners make in developing a successor, along with suggestions on how to correct/overcome them.

BELIEVING THAT BUSINESS KNOWLEDGE IS SUFFICIENT
Most business owners know that a well-groomed successor should have at a working knowledge of operations, sales and marketing, customer service, administration, and finance. But this knowledge, although necessary, is not sufficient if a successor is to effectively lead a company into the future. In addition to having a firm grasp of the mechanics of the business, a successor must become an effective leader, have vision and foresight, think strategically, have good judgment, manage risk, and adopt an owner’s mindset. Each of these capabilities takes time to develop and requires regular coaching and mentoring by the owner and/or a professional executive coach.

In the absence of this development, a successor will be more likely to send the company in a poor direction, thereby jeopardizing future cash flow and profitability.

ALLOWING BLIND SPOTS TO RESTRICT THINKING
It’s very common for an owner (and in fact, an entire organization) to think and approach problem-solving in a certain way. The phenomenon is called “group think” and can even permeate an entire profession. “This is the way we do things around here…”

This pattern creates “blind spots” that prevent new, innovative solutions from being considered. In other words, these blind spots keep people from seeing what they’re missing. If an owner suffers from having too many blind spots (we all have them), he or she may very well pass them along to their successor. “After all, certain solutions have always worked in the past…”

The best way to reveal blind spots and enable creative thinking is to have a fresh pair of eyes and ears examining and challenging current beliefs. Almost always, an outside, unbiased and objective perspective is required.

FOCUSING ON SYMPTOMS RATHER THAN PROBLEMS
Typically, successors have become excellent managers – effectively allocating resources, driving productivity, and adroitly responding to day-to-day demands. However, the role of manager is often one of reacting to issues as they arise and then developing tactics to address them. Leaders, on the other hand, need to think strategically. They need to develop strategies that address problems, rather than to develop tactics that address symptoms.

The reality here is that “solving” a symptom (instead of the underlying problem) usually leads to the creation of more challenges. Additionally, addressing a symptom is simply a band-aid. The problem never goes away. The key to developing a great strategy is to spend time identifying the real problem. A successor needs to learn how to dig deep enough into a situation to uncover the problem. Only by accurately identifying a problem can an effective strategy be developed.

An owner (or a competent executive coach) needs to mentor a successor in how to uncover problems and create sound strategies. This process will help a successor develop critical thinking, sound judgment, and strategic thinking – all required to successfully take a company into the future.

By grooming a successor beyond the mechanics of a business, an owner will increase the likelihood of business continuity, and ensure future cash flow and profitability.

If you’d like help assessing and developing a successor, give us a call. We offer assessments and executive coaching – all designed to help successors succeed. In addition, we work with owners to strategize on how they can best mentor their successor.

3 Strategies to Reduce Your Successor’s Dependence on You

In order to succeed, a successor must possess a strong set of leadership competencies, he or she must stop certain behaviors and adopt other behaviors, and they must be able to function well without the oversight of you, the outgoing owner. Although most owners feel they’ve done a decent job preparing their successor to take over running the company, the truth is that about 70% of successions fail! It takes more than a knowledge of the business (production, service, sales, finances) to effectively lead a company into the future. Here are three of the strategies you can use to groom your successor to reduce or eliminate their dependence on you.

Allow them to make decisions and possibly fail

Two critical competencies a successful owner must possess are good business judgment and the ability to think strategically. While these competencies come naturally to some, most people need to develop their judgment and their ability to think strategically.

Good judgment comes from our ability to recognize when our emotions and biases cloud decision-making. When we allow emotions to cloud our judgment, we make decisions that are misguided. Having sound judgment – unbiased by emotions – allows an owner to make good business decisions. Strategic thinking comes from our ability to distinguish between symptoms and problems. Reacting to symptoms leads to using tactics that create new problems. Developing a strategy that addresses the real problem resolves the problem.

The most effective way to develop judgment and strategic thinking in your successor is to allow them to make decisions on their own with your guidance. And it’s OK to let them make mistakes (as long as they’re not critical mistakes). After all, we learn more from our mistakes than we do from our successes. Start allowing your successor to make decisions and make mistakes so you can help correct their thinking, improve their judgment, and boost their self-confidence.

Share your past mistakes and the lessons you’ve learned

Another good way to help someone succeed as an owner is by mentoring them. Mentoring is about helping someone appreciate the mistakes you’ve made so they don’t make those same mistakes. You can share why you made the decisions you did, help them understand the negative consequences of those decisions, and teach the lessons you took away from them. Not all the lessons learned are self-evident, so by sharing your stories, you’ll keep your successor from making those same mistakes.

Reinforce the culture

Culture is made up of the values and behaviors an organization is known for. A good deal of a company’s success relies on its culture. The results obtained from a good strategy will be directly related to the strength of a company’s culture.

A culture of mistrust, lack of respect and a lack of accountability will yield weak results. Alternatively, a culture of high integrity, good communication, mutual respect and strong follow-through will yield superior results. Culture is developed over time and is defined by the values and behaviors the leadership tolerates. A successful successor appreciates the existing culture and will work to strengthen it rather than to change or undermine it.

Don’t be lulled into a false sense of comfort because your successor “knows” the business. Help him or her develop a complete set of leadership competencies, help them develop the appropriate set of behaviors, and help them become more independent and self-confident. It’s in your interest and in theirs.

If you’d like help in preparing your successor to take over running the company, please give us a call. We offer leadership assessments and executive coaching, all designed to help your successor succeed.

How to Ensure a Smooth Succession

All leaders must be good at interpersonal and communication skills, along with good decision making and being highly productive. But the person at the helm – guiding the organization into the future – needs additional, essential competencies.

In order to be successful at running and growing a company, the head of a company needs to be able to develop a vision for the future, must be able to develop effective and meaningful strategies, and must have the ability to influence an organization.

Vision and Foresight
For a leader to guide a company, it is essential to possess the ability to develop a vision for the organization. A vision imagines a future which is better, different, and/or larger than the current state. Without vision, a leader will simply continue to execute the existing business model, often getting left behind as the economy shifts, customer/client preferences change, and competitors adapt. When a leader has and shares their vision, he or she helps others understand the organization’s direction and aspirations, and inspires the organization to improve.

The ability to develop vision can’t be learned from a book. It arises from within and it requires a leader to have passion and purpose for what they do. A passionless leader can only develop goals – which are uninspiring by their nature. If a leader wants to engage his or her organization, he or she must create a future that causes people to aspire to improve.

Strategic Thinking
The ability to think strategically is essential for leaders guiding an organization. Development of a proper strategy allows a leader to prepare an organization for faster growth and profitability. Without an understanding of what a strategy is and how to develop one, leaders will often focus on goals and tactics. In the absence of a true strategy, these goals and tactics are often misguided and usually result in new challenges arising. A misguided strategy can even cause a decline in growth and profitability.

A good strategy addresses an issue or problem and provides a direction for the company. By developing a true strategy, excellent results can be achieved and the desired financial goals realized. In order for leaders to develop a good strategy, they need to uncover what the underlying problem is and not react to the symptoms it causes. A strategy which addresses a symptom always creates more issues.

Influence and Persuasion
Influence is the ability to change people’s perspectives and beliefs. An influential leader has the ability to sell his or her ideas and get buy-in throughout the organization. Without buy-in, a leader simply gets compliance. But compliance is not the same as commitment. The results gained from the efforts of people who are only doing what is asked of them are very different from the results achieved by people who are enthused and committed.

The art of persuasion – our ability to persuade people to see our perspective – relies on our ability to understand the other person’s motivations and perspectives. Once we understand why they see things the way they do, we can then offer a new view of the situation – one which resonates with the other person.

A good place to start is with our free Successor Readiness Questionnaire. It can give you a sense of how ready your successor is to take over.

But the three essential leadership competencies discussed above don’t come naturally to most people. They need to be nurtured and honed. Blind Spots need to be revealed. Limiting beliefs need to be set aside and replaced with stronger, more expansive beliefs. Outside perspective and an unbiased sounding board are usually required.

An Executive Coach offers all that and more. Leadership skills aren’t trained – they’re developed over time. Utilizing the expertise of an experienced executive coach is the perfect solution for grooming an executive for the next level of leadership. Please let us know if we can help you reach your succession goals.