Business transitions have been occurring more frequently than ever with the aging of America. Some transitions are sales to outside interests while others are internal transactions with family or other key team members.
“An internal transition of leadership in a successful business is filled with opportunities and plenty of pitfalls,” says Stephen Christian, Director at Kreischer Miller. “Navigating this important time in an organization’s evolution requires not only careful planning, but focused execution.”
Smart Business spoke with Christian about factors that can impact a successful business transition that he has observed during his years of advising privately held, middle-market companies.
What groundwork should be laid before turning over the reins to someone else?
First and foremost, the successor to a business leader has to be the right candidate, not only technically and functionally, but also culturally for the organization. The world is changing quickly and the skills needed to run an organization are different today than they were 30 years ago. It’s important to focus on the critical traits that are required of a new leader.
Once this person has been identified, it is important that they get in-depth exposure to all facets of the business — suppliers, customers, professional service providers and all functional areas within the company. In addition, they should start the process of evaluating changes to shareholder agreements and other corporate documents, life insurance and business continuity plans.
What are some factors that provide for a successful transition?
The team members in the organization will be watching the transition closely. It is important to provide for open lines of communications so uncertainties can be resolved. It also is important for the team to understand the agenda and vision of the new leader.
There can be no doubt about the boundaries dictated by the change. Change creates opportunities and the successor should be encouraged to do things their way. There are many ways to succeed in business and everyone has their our own style. With this in mind, it is important for the new leader to build a team of allies and confidants who will provide them with the necessary support.
Describe some fatal flaws that get in the way of an effective transition?
One of the biggest problems is when a successor attempts to change too much too soon. Tread lightly and be aware of changes that may have an impact on embedded cultures within an organization. Focus more strategically than tactically in the early going.
Often overlooked is the need to openly and thoroughly communicate what is transpiring with all stakeholders — internal staff, supply chain, customers and others in the marketplace.
Another issue that arises from time to time is when the new leader does not effectively relinquish the responsibilities of their previous position. It is important to fully transition these responsibilities so that 100 percent of the focus is directed on their new role.
What if the person being replaced is still with the organization?
This situation can provide opportunities, but also problems if not handled properly. Often the predecessor is a founder or otherwise a significant presence in the company and casts a long shadow. The most important thing is to establish responsibilities and boundaries with the predecessor in a constructive fashion, and adhere to these ground rules.
Take advantage of the cumulative knowledge of the predecessor and value the role they have played in the company’s success. At the same time, the former leader needs to be supportive of all new initiatives and be careful not to second-guess decisions.
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