Senior leadership and ownership successions are two of the toughest challenges that business leaders need to prepare for in advance. These leaders have generally spent years working in the business and are comfortable leading change inside the business – but preparation for transitioning to the next top leader (or new ownership) often brings new challenges unlike those they have faced before. Naturally, these challenges come up while the usual operational headwinds are still blowing, making it hard to devote the time and energy that transitions of this magnitude require. Given the lack of time and unfamiliarity with the issues, is it any wonder leaders procrastinate on preparing for transitions of these types?
It can also be a lonely time for leaders. In the case of family-based businesses, their families are enmeshed in the challenge. Talking about it with internal teams can be fraught with difficulty, as the changes often affect the staff directly. Even raising the topic brings some risk. External advisors, such as lawyers and accountants – while excellent sources of technical advice in their respective areas – usually do not have deep operational or transition experience themselves. So, what are some key steps in the process of how to transition well; and, how can business leaders get started?
Strategy first. Deciding how to proceed with succession should be based on the goals for the transition. Like deciding to drive to Calgary, both the destination and goals for the trip need to be clear before choosing the road. Selling a company seems straightforward but much depends on the intent of the sale. Is it an internal sale or external? Should the business stay in the family and is that feasible? Is the payment from the sale expected over time, or is a compressed payout important? Building a strategy first allows the execution plan to be more efficient and increases the likelihood that the main goals will be achieved. Use a good planning framework to design a vision for the transition and then set out the key strategies to achieve that vision.
Start early. Leadership and ownership transitions take time. Crashing them through often has predictable results in underperforming new leadership, sub-optimal value achieved in a sale (or no sale) as well as conflict with the team and other owners. Allowing time to work through the process well and engaging the right people at the right time are key ingredients in successful transition.
Follow an established process. Figuring it out it for yourself is great for something you can find on YouTube. Transitioning leadership or ownership is a lot more involved and not the core skill set of most business leaders. “You don’t know what you don’t know” is a reality that too many business owners encounter through the process. Using a process that is tested and proven to get results is critical. Understanding in advance where the “icebergs” lie in charting the course forward reduces risk and increases the likelihood of maximizing value, as well as smooth transitioning of leadership and ownership. So, find a well-established process with a good track record to follow in designing the tactical steps of the transition.
Businesses can successfully change leadership and can be transitioned to new ownership. Doing it right is not an impossible task. While the challenges are real, tackling them is immensely rewarding for leaders when they move the company forward, positioning it for the next leg of the journey.
