Grooming The Next Generation

As you’ve built your business over the years or decades, your fondest dream has been that your children will one day take over to continue your legacy. Now you are ready to retire, but they’re far from ready to lead. Uh oh.

Is this really the right fit for your son or daughter? Do they really want to do it? Do you really want them to?

Without open and honest conversations, many families fall into the obligation game; children think they are expected to run the business when they grow up, whether they want to or not, and parents think they owe it to their children to pass it on.

But as you would expect, some adult children’s passion is anywhere but the family business. Those successors aren’t going to be ready to lead for a long time – their hearts just aren’t in it – or they aren’t a right fit.

And some parents realize deep down that their children would be better served over time in a different career than their own.

Assuming the children want to run it badly enough and you want them to run it badly enough, it’s time for another important conversation: the right role for the adult child, based on their strengths and experiences, and the complements that need to exist within the leadership team.

In some companies, the son or daughter is a great visionary and strategic thinker but doesn’t really have the skill sets to manage at a high level (cue the executive team). Or perhaps the adult child is a tremendous manager, but their ability to set the vision and strategy isn’t as strong.

You must figure out the right leadership role for this individual and the development they need to get there. This may include skill gaps that need to be filled in or experiences to put on their plates over the next few years to make sure they are ready.

Likewise, you will want to develop the rest of your management team for their ultimate roles so that the company will be profitable and sustained over time.

You may find that some highly driven and successful employees resent a succession plan that puts a family member they may perceive as less qualified in charge. Talk with them. Acknowledge that you realize they have strong skills and important experience to contribute, and there is a key role for them at the management team level, and you want them to be a part of the ongoing success of the business.

By acknowledging the critical role these employees play in the company’s success, and putting together a compensation package and meaningful work package that shows them they are valued, they are more likely to want to be a part of creating the future. If you create a set of expectations of how employees will work together and build the relationships across the team, you can create a powerful integrated team.

This won’t always work, and high performers may not stay. If your son or daughter is smart, they will replace them with team members who are even smarter than themselves.

It really gets complicated when you have multiple adult children in the business. Even if they all want to be part of the business, you still have the difficult job of discerning who is the right one (if any) to run the business and what roles the others should play. How can they be complementary to each other? How can you structure the ownership model to be fair, whether or not they are at the top?

A fatal flaw in family businesses can be their tendency to approach business decisions first in terms of what’s best for the family. Sacrificing the business’ success to appease complicated family dynamics isn’t good for your family members and it’s not good for business. If the company shuts down, everyone’s out of work, including non-family employees. That’s a lose-lose-lose.

When you can’t figure out how to pass on your company without harming your family or the business, it may be best to sell it to a strategic third party and allocate the return to your adult children. You may even be able to write a provision into the sale documents that allows them to continue to work there, as long as they perform against a set of expectations.

Have the courage to look through the dual lenses of doing right by your business and doing right by your family. It may take require fierce conversations. You may have to make very difficult decisions, and you may ruffle family member or employee feathers – but if you approach it with a long term view of what is truly best for all concerned, in most cases you can create a viable win-win path forward.

"Retirement is Terrific!" — Fact or Fiction?

More often than not, it’s fiction. A couple of years ago, I crossed paths with a gentleman who looked more and more haggard each time I saw him.

Formerly the president of an organization, he was forced into retirement several years earlier than he planned. Suddenly cast adrift, he was struggling with how to fill his free time productively. As I probed further, I found he was having difficulty sleeping, and his health was suffering.

He was flashing the neon signs of depression, and he wasn’t alone. According to a 2013 report released by the Institute of Economic Affairs (IEA), following an initial boost in health, retirement increases the risk of clinical depression by 40 percent.

The Harvard School of Public Health also concludes that alcoholism, depression and obesity increase significantly post-retirement for business owners when they do not have a plan for what will bring them meaning.

What about women? This transition typically isn’t as hard for women. They generally take on many personal and professional roles during their lives, and as a result, don’t define themselves as business owners the way many successful men do.

The role of CEO is lonely in general, but as these leaders move toward retirement, it’s particularly hard for them to talk about the uncertainty around the coming changes.

After retirement, social and professional networks take a back seat and retired owners find themselves more isolated, and without other interests or relationships drawing them forward. For some, this could show up as depression masking as escapist behavior, such as spending a lot of time working out or on sports; or alcohol or substance abuse; irritability or inappropriate anger; even reckless driving. For others it can look like withdrawal from family and friends and other activities that used to be enjoyable.

Yet many resist seeking help, viewing both depression and its treatment as signs of weakness. Therapy can be a great help but many baby boomer owners are not willing to consider it, preferring to try to work through it on their own. This CEO decided to speak to a pastor at his church, someone he had great respect for and deeply trusted. Through that relationship, he felt heard and supported and was guided toward a volunteer opportunity that was very compelling to him. It gave him a goal for getting healthy, a purpose for his life, and a way to contribute to the church. He looks and feels 20 years younger.

If you think that you or someone you know may be depressed, learn more at the National Institute of Mental Health or the National Alliance on Mental Illness.

Make Retirement Terrific by defining what will bring meaning and joy in your next phase of life. Contact us to learn more about our Executive Transition Process and create a Retirement that’s ‘Terrific’ for you!

Who Can Replace You?

How do you decide who to groom for your role? How do you find out if they are even interested?The truth is that you can be replaced. Yikes!

It happens all the time. Employees quit, they get sick, they have new priorities. But it’s easier to replace you if you invest in preparing a right fit candidate.

Who is right fit? It’s probably someone with a mix of skills and competencies that are important for the next phase of growth in your business. It’s also someone who can lead, manage and work well with others. Most CEO’s have a mix of responsibilities, including these three focus areas: Defining strategy and vision, developing your people, and representing the external face of the company – including key sales, strategic alliances, mergers, lobbying, etc…

While these responsibilities are key for most CEO’s, it’s your job to build a profile of what you need to lead your business into the next lifecycle and then seek out candidates who can be groomed to fill that role.

If you have more than one solid contender for the top position, develop them both for strong leadership roles. Eventually you will need to assess which will be the best fit for the strategic, cultural, and systemic priorities facing your company in the time frame you expect to exit. Ideally, there is room on the team for all of your strong performers, where they will make a meaningful contribution, be compensated well and be satisfied to play that role.

You must be sensitive to the needs of the runner(s) up. Open communications are critical. Not closing the loop and letting them know that you have moved on with your search or found a better fit can be devastating. Not only does it leave the individual frustrated, disappointed or disenfranchised, but it can have ripple effects throughout the organization.

Succession planning is hard work and it’s emotional. As owner, you must have the courage to have the tough conversations. Communicating decisions, sharing progress, setting expectations, holding your managers accountable – doing those things well can go a long way toward preparing your people for succession -- and set an example for your successors to follow.

Now that’s leadership development.