By
Lea Strickland, CMA CFM CBM
President - F.O.C.U.S. Resources
A
business undergoes numerous changes throughout its lifetime. In
its earliest stages, a business will be searching for a clear
identity, a viable business model, and a paying audience for its
products or services.
As
the business grows and matures, it finds a need for more formal
structures, processes, and control systems. This is one of the
most challenging transitions for the founders and stakeholders.
Transitioning
from a primarily entrepreneurial perspective to professional
management, as it is often called, can be an extremely painful
phase. It frequently requires the existing leadership team to step
back or step out of roles they have fulfilled during the early
stages of forming and establishing the business. These people, as
individuals and as a team, may find themselves in a learning curve
so steep they cannot both do the business and run the business -
the scope of operations and activity has reached a level that
requires specific business functional expertise - finance,
accounting, human resources, business development, sales, and the
multitude of other business processes and systems that comprise
the infrastructure of most businesses.
Taking
a proactive approach to transitioning roles and responsibilities
enables business owners to address the issues objectively and
separate emotions from the process. When an organization
establishes decision criteria that are objective, address business
needs, and are independent of a specific individual fulfilling a
role - making it about the experience and expertise the role
requires - the organization is engaging in succession planning.
Having
a planned transition based upon business needs recognizes that
rarely can a single person fulfill the same role throughout the
life of a business. As a business grows it requires different and
additional skill sets, expertise, and experience. To meet those
needs, founders and early stage leaders need to be willing to step
up to strategic roles (CEO, Board, etc.), step over to technical
leadership roles (CSO, CTO, etc.), or step into advisory roles.
As
early stage leaders transition to other roles, they begin to
surround themselves with complementary, supplemental talent. It
typically requires a significant amount of time to identify,
select, and recruit new team members who have the right blend of
qualifications to meet the new requirements of the business. The
mix of skills, experiences, and personalities to be acquired,
integrated, and built upon must be managed. The transition for the
organization doesn't happen seamlessly or overnight... It requires
strategic planning and action. It must include clear communication
of intent and results. It should be supported by both the
incumbent and the new team member - demonstrating mutual respect
and true support.
Family
owned and operated businesses are something of an exception to the
previous discussion. With family-owned businesses "Mom &
Pop" often do everything and as the business grows they
remain integral to the business. They add new talent to expand
operations and gain expertise, but the core leadership is
"Mom & Pop".
With
family-owned businesses, transitions come from necessity as time
passes and a change in leadership is created by retirement or
death... It is even more critical for family-owned businesses to
make plans for the eventual transition to another operational
stage, another family member, or a planned sale of the business.
In
family-owned businesses, emotion can rarely be excluded from the
equation. The relationships and roles are defined by more than
business. If a family business is based strongly on the family
role - parent/child, spouses, siblings, etc. - then making
decisions regarding the who, when, and how of the transition must
be thought out as completely as possible BEFORE the need occurs.
The
transition of "Mom & Pop" from day-to-day activity
to advisors or full retirement from the business is a tough one.
The mixed signals the organization receives from an incomplete or
inconsistent transition can have long-term impact on the
organization’s operations. Management styles and strategic
direction may differ significantly. If "Mom & Pop"
can't or won't let go, then the new business leader can quickly
lose credibility and the ability to function effectively. The last
thing the company needs is two CEOs!
The
bottom-line is that succession or transition planning is one more
way to insure business continuity and provide for continued
business success and growth, whether for a family-owned or
non-family business. Every key position in an organization should
have a succession plan for the time when new skills are needed,
medical or other emergency occurs, or someone resigns or is fired.
Knowing what it takes and where to look keeps an organization
moving forward and functioning effectively.
