What Does Your Current Exit Strategy Look Like?

Having a Good Exit Strategy Many Times Implies that You Have a Good Succession Strategy—Or Does It?

Yet isn’t having a good succession strategy only for the big boys in business? And truth be told, there are few of them in our Quad State region. Is the Quad State Business Journal trying to appeal to a much wider audience?

Sometimes our pow-wows among QSBJ writers takes the above kinds of turns in discussion points. But in our striving to bring the majority of Quad State business owners solid evergreen content, this subject is becoming more vital each and every day in 2014.

Steve Lanning, QSBJ’s publisher, has a Baby Boomer friend who is undergoing a valuation exercise in his business right now, but is selling his business to his employees. There are many ways to get to a satisfied ending these days.

This Chart Applies to Family Business Succession As Well

Take a look at this chart. It is from a Stanford University study that I believe reflects family businesses as well—not only here in the Quad State region but nationwide.

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Of course the corporate trainers reading this will recognize the tried and tested methodology of the five-point grading survey technique.

It is an accurate technique and a skilled user can glean a lot of information from a target audience. Usually the survey admin will weight a 5 answer as absolutely great, always, or no need of improvement and a 1 answer means this is the worst, never, the pitts and so on.

Hence, if you, as a CEO ask a question statement such as “I get along well with my fellow employees” and you receive too many of less-than-three answers, you know you need to dig deeper. But I digress.

Take a Good Look at Your Executive Management Board

From the larger world of business, we know that Ford Motor Company is currently searching for a new CEO. It makes for breathless reporting on business channels. Yet your focus, as the owner, should be all along your C-Suite (CFO, CIO, etc.).

Whether you are looking for that selfless leader who will take charge for you as to calling the plays system-wide for your business or who will replace your ‘wonderful, marvelous’ bookkeeper who is now retiring, approximately the same effort should be brought to bear for each.

Amazing Things Can Happen When Management Gets Out of the Way

An amazing result takes place in an enterprise when systems are set up in such a way that requires little or no supervision—and employees are vested with the authority to do the right thing at the right time in the right way.

Steve tells us about his Boomer friend currently in the process of selling his business. He has known the individual for decades and in the past 10-15 years, Steve told us he used to apologize for asking to meet with him ‘during business hours.’

Steve’s friend always replied, “I could walk away from my business for a month and it would still be run the way I wanted it to—maybe much better!”

Successfully handing the reins to other team members requires a CEO to not only get out of the way, but to also push team members to take on projects so they can grow as leaders. While giving your employees more autonomy and leadership opportunities can be daunting, it’s absolutely critical for the growth and security of your company.

Here are four checklist items that you may want to look at in preparing for the sale or even the gifting of your family business. Remember, effective companies are built on every team member’s contributions.

Although it may seem risky to get out of the way as CEO, building an organization of leaders and a culture of professional development helps secure your company’s ability to succeed in the long run.

Once you’ve decided to step back, you’ll need to consider which of your employees have leadership potential. THIS IS OFTEN THE HARDEST THING IN THE WORLD FOR MANY FAMILY BUSINESS OWNERS. You want to pass the business on to your two sons, yet there is friction between them.

There is friction because one son maybe has gone to grad school, kept his nose clean, taken all the right courses, is friends with all your suppliers, tied into the local chamber of commerce, well-respected and prominent in community fund raising events and more. He is a great ‘face’ for your company within and outside your community.

The other son is an outright natural in business. Not just any business, but your business. Oh, in college he was a hell-raiser alright. And you have had to bail him out of tight spots in the past. Yet this son is an absolute hero with your employees—in all departments. He knows how to run every department. He can easily swing from pitching in for an absent delivery truck driver to explaining your business processes to an erudite customer on a sales call. Yet one has to be the leader. 

These four strategies can help you identify your company’s leaders and cultivate those skills whether or not your employees are related to you:

1. Communicate clearly your company’s image of a leader.

What did employees do well that fostered your company’s values and image? Consistently showcase employees who live up to your company’s values and tell the stories of those who have already made it to the top of your leadership team. How did they earn that VP title—or whatever title or position? What did they do right? This will make your expectations clear to your employees and increase their confidence in the opportunities to advance within your organization.

2. Regularly offer opportunities for growth and development.

This should be happening years before you make your exit decision or when a key employee wants to retire.  When finances are tight or a company is stretched for time, training sessions and education courses — the most important programs to employees — are often the first to be eliminated from the company calendar. CEOs must prove their commitment to overall employee engagement by making growth and development programs a priority.

There are three main ways to offer these programs. Choose the one that works best for your company.

Internal development programs taught by senior leaders: If your company doesn’t have the extra money to spend on formal development programs, consider implementing education sessions taught by internal senior leaders. We could be talking informal mentoring here. These sessions can take the form of a presentation, an interactive activity or even a book club.

Outside education: Encourage and praise employees who go to outside seminars or workshops to learn new skills. Attend trade shows in yours and related industries if it is in your budge. This will establish your company’s dedication to a culture of education and growth.

Job shadowing or formal mentorship programs: These types of internal, interactive programs will encourage open discussion throughout your company and ensure your employees are knowledgeable of other departments and roles within your organization.

3. Create and Have Visible a Plan for Employee Growth.

You can start by assigning certain senior leaders to mentor high-potential employees and created a growth plan for each mentor/mentee relationship. This process cascaded all the way to the front lines.

The key to this program’s success was not only its simplicity, but also its consistency. We made the mentor/mentoree program a formal part of our performance appraisal process and a continual topic of discussion during team meetings. The only way to gain consistency across an organization is to create processes that hold people accountable. Company culture is no exception.

4. Take Pains to Maintain a Careful Balance.

Whether in the family business at all levels—small to large—or in a non-related company, you must monitor your feelings for being overbearing on a ‘favorite’ employee. Yes, you can delegate too many responsibilities but I’m talking about favoritism—justified favoritism.

I’m familiar with the owner of a business who had a favorite employee—his sons did not want to take over the business and thus were doing other things.

This employee was like the owner’s adopted third son although there was just 15 years difference in their age. He had learned the complex business well, was very good on sales calls, terrific with suppliers and all-around good guy. The owner had big plans for him and a sweetheart of a purchase plan was brewing in the back of his mind.

Every company Christmas party when the bonuses were handed out from the lowest to highest amount, this ‘adopted son’ was always in the top tier of bonus money.

Then one day my owner friend and I met for lunch and I could tell something wasn’t right. He tried to put on a happy face, but his countenance was so down I asked him if he had received an IRS audit!

He said he wished it was that simple. It seems that his ‘adopted son’ and ‘heir to the throne’ of his business had just approached him and told him that it had been great working for him for the last 25 years, but now he was going out on his own. My friend was just devastated.

My friend’s exit and succession plans had to start all over just when he thought he should be out enjoying life in a rowboat somewhere.

A true leader realizes that stepping back allows others to further build on their strengths and shine. That sentiment alone can make a world of difference in an employee’s performance and morale.

If you have a succession story that the Quad State Business Journal could tell, let us know. All things will be kept confidential. You would be helping many of the 43,000+ businesses in our Quad State region who are currently in or soon will be thinking about the succession stage. The more information we can share, the better it will be for the next generation.

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Further information available from: http://www.ceo.com/entrepreneurial_ceo/

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About Jill Sommers

Jill is a trainer's trainer. In fact she has led several train-the-trainer sessions at national conferences in years past.

She has also enjoyed being both a keynote (plenary) and breakout session speaker. She enjoys leading small group discussions for start up entrepreneurs and those newly retired but wanting to keep busy.

Jill at times works with Steve Lanning in his education and awareness campaigns of elder fraud and elder financial exploitation program. Jill easily fits into many different audiences from business to seniors to hobbyists.

Reach Jill at Jill.QSBJ@gmail.com

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