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Re: Who’s Gonna Take Over?

Our Entrepreneurial shock troops - the folks who made the West the den of opportunity it is - are moving on.

So who's next in line? Who will make sure that business carries on and delivers on its hard won mandate?

This is the Succession question - and answering it is of increasing concern to the Freedom 55 people. Succession speaks to our ability to create enduring value in our enterprises.

Some companies we work with were always engineered to be long term. Others were started by people who seized a biz opportunity. Many years later owners have a success on their hands and no idea how they're going to get out.

In public companies, the development of successors is now – officially – a matter of concern for the Board. Why would that be regulated in? Because no investor and therefore, no company should leave itself obviously vulnerable from such a readily foreseeable cause.

Okay, so there might be an issue – maybe even an opportunity, if looked at the right way. Where do we go to address it?

Financial:

Succession in entrepreneurial biz brings up the owner's worst nightmare. He/She is confronted with having to hand over the precious creation of their business career. Either that or just keep going – like the old plow horse – until they expire in harness.

Unless there is a nice fat purchaser waiting in the wings, the other viable buyers are the capable employees who have stuck with it for long period of time AND who, typically, have no money! So the wizards of finance have various formulas - all of which involve deferred payment from people who have to earn out.

Suddenly, common entrepreneurial habits:

- retaining the right to chase whatever the leader says we’ll chase today – despite costly inconsistent direction

- keeping the core of the business close to the owner’s heart (and chest) and loose as far as structure goes

- enjoying superiority while others labor beneath them with less than complete autonomy or faith

come home to roost. The owner is relying on these same people for payout that have been kept in the (partial) dark up to now. Uh oh! Readers of Gerber’s E-Myth books will recognize the dilemma.

That leads us directly to the second question – one which concerns all companies:

Capability:

We have a cadre of folks stepping out of the work force soon. There are gaps down the line – often it is not clear who will step up to fill the shoes of leaders of the whole biz or key departments. Who will carry the freight? My colleague Walt Sutton says that every morning, the President puts on a backpack. That backpack is the burden of the business – the responsibility to drive it forward.

Soon – “As soon as I want to be on the tee on a regular basis – year ‘round – I will need people who can do what I’ve been doing!” Then, we want people throughout the company who can carry the backpack as a dependable reality. Identifying those required capabilities – who carries them now and who carry them – is requisite to building the foundation for a departure.

Development:

Satisfaction doesn’t come from sitting on top noting how others just can’t perform like the incumbent. Fulfillment comes from creating successors. Otherwise, the incumbent never gets to leave: the dray horse sentence becomes reality! Development – bringing people along, grooming them, getting them ready – is a preoccupation for exiting leaders.

We have found that people need to progress through roles and transitions to be able to truly deliver the goods.

When:

• an employee demonstrates success at as an individual contributor (sales results …)
• that’s different from delivering at a manager level (bringing each sales person along, watching stats …)
• as a manager of managers (coordinating several branches to create productivity …) the mandate changes, then
• running a unit (bringing a bunch of biz disciplines into line to build results in a complex business) brings a new list of performance requirements.

Each new level brings about a transition in Skills, Time Allocations and – most importantly – Values (what is really important at that level – not “honesty, integrity” but what puts the bread on the table!). What worked at one level does not carry the day at the next. Laying out your needs on a template helps you see the development challenge.

Targetting “high potentials” – people tabbed for the future – is part of any sound succession plan. Long haul companies identify, track and build the people who will continue their franchise. Their fortunes, like many of yours are tied – irrevocably – to a leadership pipeline supplying required candidates when and as needed. They found that frantic, last minute searches for stars worked infrequently. Stars fail because they don’t “get” the company, or earn the respect of people or learn the business fast enough.

Carefully identified, nurtured, and readied candidates who live the culture enable the company to carry on – and thrive as time rolls on and founders roll out – of the company.

Ultimately, the proof of value of those who led the company to this point changes from what they personally contribute to whether successors could continue success after they left. Hence, the Succession Question.

It’s not too late!

Very best for the Spring and Summer!

Doug Bouey

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