Selecting a successor to take over your business is serious business. The future of the company rides on it. The livelihood of the people employed depends on it. And the ability to make buyout payments to you relies on it.
In order effectively choose a successor, six aspects of a person need to be considered and evaluated:
- Business Mechanics – their understanding of how the products and services get produced and delivered
- Leadership Competence – their interpersonal skills, influence abilities, and a vision for the future
- Strategic Thinking – their ability to distinguish between problems, symptoms, strategies and tactics
- Sound Judgment – their ability to make good decisions and to choose an appropriate level of risk
- Personality Traits – their drive, attitude, social skills and energy level
- Cultural Fit – their alignment with the values and behaviors that matter to the company
Of course, understanding all this and ensuring a successor has all of these traits and competencies are two different things. Here are some guidelines to help evaluate a potential successor:
Although understanding how the business works is important, it’s the easiest of the aspects to determine and/or develop. If they’ve worked for you for a while, you’ll have a pretty good idea of whether they understand the business. If they haven’t worked in the company, then have them spend time in each area of the business and see how well they do.
As an owner, a successor will (and should) spend much of their time leading rather than producing and delivering products and services. Therefore, leadership competence becomes critical for success. Fortunately, a 360 assessment will provide an objective picture of their leadership abilities and if needed, a professional executive coach can develop any areas needing improvement.
Reacting to a symptom instead of spending time understanding the underlying problem almost always leads to worse results. The best means of evaluating whether someone can think strategically is to allow them to develop strategies and present them to you. Not only will you be able to assess their abilities, but it will allow you to coach and mentor them if needed.
The only way to know if someone’s judgment is sound is to allow them to make decisions. Start with decisions that have a minimal impact on the on the business and/or can easily be corrected. As the decisions become more impactful, have them make their decisions in stages, checking in with you at each step so you can correct and mentor them before moving on to the next step.
Before you evaluate a potential successor’s personality, you first need to decide whether the company needs an owner with the same personality as you or, at this point in the growth of the business, it requires a different type of individual. Once you’ve defined the type of personality needed, it should become fairly clear whether the individual has the needed traits. Remember, however, that unlike the other needed competencies, personality is innate and can’t be “developed”. Either they have the personality traits or they don’t.
Culture is defined by the values and behaviors demonstrated by the leadership of a company. If your successor doesn’t embody the culture you’ve established over the years, a different culture will emerge and the company will change. Additionally, if a leader professes to the importance of certain values but acts in a manner at odds with those values, it demonstrates a lack of integrity. Make sure your successor is living your company’s culture.
If you’d like our help evaluating and/or developing your successor, please contact us to discuss your situation.
Contributed by Michael Beck