“Business, more than any other occupation, is a continual dealing with the future; it is a continual calculation, an instinctive exercise in foresight”

– Henry R. Luce

 

Steve Jobs death is certainly an incredible loss at many levels. However, there are important questions and lessons for founders and leaders of closely held businesses.

Most companies have been founded by a dynamic and willful individual whose resolve to develop and sell their product or service is unwavering; with the success coming usually at great personal sacrifice. Given the relatively low percentage of companies that successfully transition from one leader to another, one wonders how Apple will do. We have all heard and read that Steve Jobs spent a great amount of time and effort thinking about his successor. However it is certain that no one can replace Steve Jobs.  We can only hope that the primary mission and promise of Apple, as represented and driven by Jobs, has been properly infused into the culture of Apple and that there are others of like creativity, commitment to customer and strength of will to take Apple to even new heights. While Steve Jobs died young, the truth is that all business owners, leaders and founders will give up the helm of their company one day.  The only questions are when and how? Will it be a planned and orderly sale or transition or will it be chaotic and harmful to the remaining stakeholders; employees, family, customers, suppliers and community?

In fact, one of the things that we have been seeing regularly and increasingly is the degree of denial that many business owners and leaders have (as to) about their ultimate exit from their business. The majority of business owners we talk to, particularly baby boomers give little more than passing thought to their succession planning and exit. If you take a 55-year-old business owner, which seems young, the truth of the matter is that they are already likely to be getting a little bit tired. If their business has been successful and if they have adequate funds available outside of their business for their retirement, they’re probably suffering from what I like to call “full belly syndrome,” which is essentially complacency and an aversion to risk that is perfectly normal at this age (and in fact increases significantly for many people between the ages of about 58-65.  However, full-belly  syndrome does not promote the drive and resolve necessary to continue to serve at the helm of a growing and thriving business. It also sends a message to younger people that there may not be opportunities for them at this company (and that the business does not need a vibrant, energetic, forward thinking leader).  This is around the time when many solid employees begin to look elsewhere for opportunities.

The fact of the matter is the average mid-50-year-old person will be retiring, slowing down significantly or have health issues by the time they are 65.  And given that succession planning is usually a 7 to 10 year journey that is best done in a planful and methodical manner (think Steven Jobs) it is somewhat mystifying why these baby boom business owners are not looking deeply into the future and deeply into the bench strength of their companies. Denial is a powerful defense mechanism.

 A Case Study

 Sally is the founder and sole owner of a thriving business that employs around 35 people. She has been rather autocratic in her business dealings for many years and while she has had many loyal and capable employees, until recently she had not been building a team nor had she been operating her business from a plan. Rather as a benevolent dictator she had been using her experience and intuition to continue to drive her business. At age 57, for whatever reason, Sally began to ask the question:  “What will become of my business when I am no longer here?” She recognized that she did not have the energy and drive and the resolve that she had even five years earlier…  While she was still the hardest working person in the company, she knew that her bucket was getting emptier.  She also knew that she wanted her business to continue to serve her customers, employees and community beyond her tenure.

Sally reached out to our firm and began a journey.   First she took a long hard look at her own leadership and management style and her personality and how they affected the business.  Realizing that she did the best thinking in her company and was the sole driver of it, she came to understand that she was too essential to her business and that it could not continue without her in its current configuration.  Nor could it be sold to an outsider with its dependence upon her.

 By the way, did you know that only about 20% of all businesses for sale actually sell?

 She also did an audit of her most valuable employees.  We met with all key employees, looking at their ages, their strengths, their weaknesses and their future career goals.  We were looking for future leaders, and perhaps future owners.  The senior employees were actually thrilled that Sally was asking these questions, because, as with most employees of a business with an owner in their 50’s, they had been asking themselves about the future of the company and their careers and paychecks. Our open and candid conversations gave the senior employees hope for the future. Upon our recommendation, Sally also developed a team of her most senior and capable employees that met regularly and created a One Page Business Plan™ for the company and for each department. We strengthened the organizational structure, increased the focus, the planning and the execution of strategic goals. We collectively identified constraints and problem areas and attacked those with solutions that for the most part have proved to be very effective.  The team built and documented process and procedures customer and supplier lists, and fine-tuned their accounting and financial management systems.  In short, as a team they sought to make the business operate without Sally’s constant attention.  Sally now has a team of knowledgeable, engaged people that allows her to be reenergized in her company, work less, trust more and begin the process of her exit plan.

Sally’s company is becoming a “turnkey” business for a new owner.   It is unclear whether the owner will come from within or from without.  The journey is a work in progress with the team being actively engaged.

 What is the succession plan for your organization?