A 52-year-old businessman has sole ownership of a business and his wife takes care of their home. They have three children, ages pre-teen through early college. One or two of the kids have voiced an interest in working in the business, but the businessman realizes his children won’t be ready to take his place, even the oldest, as talented as she is, for a while.

So, what does he do over the next 10 or 15 years? Does he need to stay until they are ready to take over? What if something takes him out of work for a year, such as an illness or injury?

“Having a long-term plan is always important, but you’ve got to think of the contingency. What if something unexpected happens?” says Ricci M. Victorio, CSP, CPCC, ACC, managing partner at Mosaic Family Business Center. “And if you don’t want to close the doors, then you have to start thinking: ‘What’s my backup plan?’”

Smart Business spoke with Victorio about creating a leadership team to bridge the gap between your leadership and when your successor can start running the company.

What’s the first step to creating a backup succession plan?

First, establish a path for your children so they know what’s expected of them — if, of course, they are even interested in joining the company. What kind of education and experience do they need to be a qualified applicant?

If you have more than one child interested in working for the company, you’d be wise to understand how they can best contribute without stepping on each other’s toes. Don’t set them up to compete with each other. Let them know that there are no elevators to the top. Once they come to work, it is important to you that they learn the business from the ground up, earning their promotions and respect of their co-workers.

Then, if there is a gap, you need to think about how to protect your company.

How can you ensure the company stays successful, no matter the situation?

Generally, small businesses are run in a hub and spoke management style. Lots of people have responsibilities, but the business owner makes the decisions.

Some of these owners are partners with a family member, which can provide a built-in succession fail-safe. However, many may need to establish a leadership team comprising trusted key managers capable of running the business in their absence to bridge the succession gap.

Rather than relying on one person who could, despite all good intentions, fail miserably or leave for a better offer, a management advisory team with executives and managers from various departments is the perfect leadership contingency platform. Then, if you go down, for whatever reason, you have people who can run your business as if you were there. And this leadership team can mentor your children when, or if, they join the business.

In order to get them to think beyond their regular management duties, incentivize them for stepping into a leadership role. For example, put a percentage of profits into a deferred compensation retirement plan. If you make it a 15-year vested policy, it ensures they stay interested in the company’s performance long term.

The team will need to meet on a regular basis to learn how to work together, share resources and be able to have a round-table discussion where everybody isn’t looking at the boss like a deer in the headlights. It’s like bringing an MBA training program to your conference room, tailored to fit your business and group.

You will also need to create a charter agreement that identifies your vision for the advisory board, along with specific objectives, expectations, benchmarks and incentives. Create a five- to 10-year strategic plan that will guide the team in decision-making. Begin transferring authority to make decisions as you become comfortable with this team.

Over a period of time, usually three to five years, there will be a gradual transition as trust develops between the owner and managers. Managers will respond to your trust and feel respected as they step up in responsibility to make operational decisions. You will have passed on the core values and decision-making criteria that made your business so successful in the first place to a team of people who can protect your legacy to survive and thrive into the next generation.

Ricci M. Victorio, CSP, CPCC, ACC, is managing partner at Mosaic Family Business Center. Reach her at (415) 788-1952 or ricci@mosaicfbc.com.

Insights Wealth Management & Finance is brought to you by Mosaic Financial Partners Inc.

Published in Northern California

If you have three qualified job candidates with equal experience who interviewed well, how do you choose? Ask yourself how the new hire will fit in — will they enhance or disrupt your current team? The culture is critical anytime there is a personnel change, whether hiring, promoting or planning for succession.

“If you put a tiger in a group of lambs, what’s going to happen?” says Ricci M. Victorio, CSP, CPCC, ACC, managing partner at Mosaic Family Business Center. “Tigers need to prowl on their own. They aren’t usually good team players.”

Smart Business spoke with Victorio about the importance of “casting” people in the right roles to magnify their strengths.

What’s key to know about personality traits?

There are five basic traits most personality assessment tools use to define how people naturally perform. Each trait has two opposite styles with a midline where people are more flexible or adaptable. They are:

  • Dominance. Is the person more control-oriented, competitive and ambitious; or a team player who prefers collaboration?
  • Communication. Is the person more persuasive and energized by people; or reserved, preferring one-on-one conversation?
  • Procedural. Is the person more process-driven, organized and a good listener who needs time to make decisions; or flexible, creative and enjoys spontaneity?
  • Organization. Is the person more detail-oriented, wanting things done correctly; or strategic, big picture and concept-oriented?
  • Logic. Is the person more analytical, or intuitive when making decisions?

It’s interesting to note that leadership styles are determined by whichever trait is the highest. Many corporations recast CEOs depending on the stage of growth. A start-up could need an innovative, confident leader to make swift decisions and take calculated risks, while a more mature company might need a road builder or process-oriented leader to maintain the business.

How useful are personality assessments?

The surveys measure self-perception — how people see themselves and how they perceive the expectations of others. When hiring, you can’t rely solely on this feedback; it’s just one part of your vetting process. Also, results are dynamic and change as people evolve and their environment changes.

Personality assessments help create a baseline for understanding who we are and what we are experiencing. For example, in a demanding sales environment, you can increase success by looking for high communicators who are energized by personal interaction and adaptable. They need to be go-getters who can think on their feet and close the deal. Most assessments provide questions that offer greater insight during the interview.

What are signs your workforce isn’t gelling?

If you hire a high-dominant, low-extrovert manager to lead a collaborative team that is accustomed to brainstorming, the indirect ‘teller’ style of the new manager will be perceived as unfriendly and bossy. Team members will feel less valued, become disenfranchised and frustrated, leading to increased tension, absences or resignations. It is important to consider the desired behavioral attributes each position requires for optimum results, such as having outgoing, creative problem-solvers in people-oriented positions, and detail and process-orientated caretakers for more analytical roles.

How can you better understand your own behavior and management style?

Self-awareness is the first step in self-management. If you know you tend to make decisions hastily, never make an important decision without sleeping on it.

You also might struggle without knowing why you are feeling drained, stressed or anxious. In one case, an executive was proud of her open-door policy, but was feeling unsatisfied. She learned that it was causing her significant energy drain. She discovered that as a process-oriented, reserved communicator, it was more energizing to limit open-door interruptions to certain times.

Every personality is valuable and dynamic. It’s a matter of finding the right role that suits who you are and being able to adapt successfully to the world around you.

Ricci M. Victorio, CSP, CPCC, ACC, is a managing partner at Mosaic Family Business Center. Reach her at (415) 788-1952 or ricci@mosaicfbc.com.

Insights Wealth Management & Finance is brought to you by Mosaic Financial Partners Inc.

Published in Northern California

Franchise owners have some particular obstacles to overcome when thinking about succession. Each one has a manufacturer or headquarters that has conditions for ownership and succession, so it’s critical to plan ahead.

“You can’t forget about dealing with developing bench strength, even when facing an uncertain future,” says Ricci M. Victorio, CSP, CPCC, ACC, managing partner at Mosaic Family Business Center. “It’s your bench strength — the pipeline of multigenerational talent — that drives you into success, even if businesses performance is transforming.”

Smart Business spoke with Victorio, who has helped automobile dealerships strategically plan for 15 years, about how franchise owners can fit the puzzle pieces together to pass their business on to the next generation.

What situation do franchise businesses face today?

Many franchises, such as auto dealers, have gone through massive restructuring to survive. But businesses had to watch for the tipping point — cutting the fat and not the muscle.

As we start to come through the recession, these franchises are carefully picking up the pieces and looking to hire the right people. They also are waking up to the fact that time is passing — no matter what the economy is doing — and strategic planning, team training and succession planning cannot be ignored long-term.

This is important for any business, whether a franchise or not, because even in tough times it’s necessary to keep a strategic eye on how you’re going to navigate the future.

How is franchise succession planning unique?

Any franchise that sells a product has to answer to headquarters or its manufacturer. It’s not like a typical family business, because if you’re holding a franchise there is someone above you dictating what the rules are to own that franchise. And if you don’t have business success or an approved successor, they can take it all away. You can’t even sell your franchise without approval.

In addition, you shouldn’t just focus on the development of the next generation. It’s not just talent. If you don’t have enough market share, if your customer service doesn’t meet standards or even if your building isn’t up to specifications, that may stop you from passing the mantle. Not having these in order upon the death or inability of a dealer to continue running his or her store would give the manufacturer a wedge.

How can franchise owners meet these challenges?

You have to present your succession in a pretty package with a bow on it. The strategic plan, the bench strength of your managers, your service, your sales, customers’ reaction to your culture and environment, and the education of your chosen successor all get scored.

Various manufacturers also have required successor development programs. For example, the National Automobile Dealers Association has an 11-month dealer’s academy where developing successors spend six weeks in training sessions and then have homework back at their dealerships for six weeks before returning for another week at the academy.

It can take five to 10 years to get everything in order. You have to think far out, so you may need to start working with an adviser as soon as your children come into the business. Remember, it’s not about being old and thinking about retiring, it’s about having a plan so you don’t lose the business.

Additionally, in a succession plan, you need a short-term contingency plan — what if you don’t come home tomorrow — as well as a long-term plan, such as your kids growing into the business. In the short-term, maybe ensure your general manager has been approved and certified by the manufacturer as a dealer-operator to protect your long-term legacy for the next generation. However, this may come at a price; if someone has qualified to be a dealer, they will want some ownership. An adviser can help you devise creative ways of bridging this succession gap.

Ricci M. Victorio, CSP, CPCC, ACC, is a managing partner at Mosaic Family Business Center. Reach her at (415) 788-1952 or ricci@mosaicfbc.com.

Insights Wealth Management & Finance is brought to you by Mosaic Financial Partners Inc.

Published in Northern California