Entrepreneurs looking to transition their business – whether to the next generation, non-family management, or via sale to an outside party – need to consider what is needed to successfully lead going forward. Chances are, the old adage about “what got you here won’t get you there” applies, and it is unlikely the recipe for success in the next 10 years will look the same as the past 10 years.
This can be challenging to do. However, it is vital that the leaders of today determine what it will take for the next leader(s) to successfully take the company to the next level. In many cases, the value built up in the company is needed to fund the retirement of the current leader. If the next company leader or leaders are not equipped to handle the challenges coming at them, the value of the company can plummet, with serious implications for the exiting leader and their “happy ever after.”
Even if the risk to the business value is manageable, there can also be risks to company reputation, employees, and family harmony. One family I worked with planned to place the business in the hands of 2 brothers who did not get along well, and whose skill sets had some serious gaps for facing the challenges in the market they faced. The parents cared deeply about both young men, and wanted them to succeed and be happy. However well-intentioned they may have been as parents, the handing over of the business to the sons without addressing the question about capability created deep risks to the family and the enterprise. This is far more common than most people imagine.
Evaluating the readiness of the next generation can be hard for parents. Sometimes the desire to see children succeed overrides the scrutiny that would be (appropriately) applied to any other candidate for succession. Other times, old wounds and family history impact decisions in an unfair way. And far too often, assumptions are made about “what the other person is thinking” which may have little bearing on reality. In every case, finding a way to increase transparency, reduce conflict and have healthy conversations which bring about a shared and common understanding of where things stand is vital.
Here are three ways to increase the probability of successfully determining the needs for the next phase of leadership:
- Start Early. Years before transition, create a working list of what is needed in the next leader(s).
- Be Transparent. Involve the next generation/senior company leaders in developing the needed profile, and the “why”. Help people understand and contribute to the process of building the leadership profile.
- Be rigorous. Treat the family like a family, and the business like a business. If the business goal is determine what the next leadership of the business must be, do not cloud that with family affiliations or past issues. Create a clear separation in everyone’s mind about what is needed to help the business succeed, and how that is different from how we care for family members. The standards required for success should not be adjusted to accommodate family, as doing so can set people up for failure, and do far more harm than good.