Most business owners know that a well-groomed successor should have at a working knowledge of operations, sales and marketing, customer service, administration, and finance. But this knowledge, although necessary, is not sufficient if a successor is to effectively lead a company into the future. In addition to having a firm grasp of the mechanics of the business, a successor must become an effective leader, think strategically and have good judgment, have vision, and adopt an owner’s mindset.
Mistake #1: Not Developing Effective Leadership Skills
The effectiveness of a person’s leadership is determined by how they are viewed by the people they lead. A leader who is not respected or trusted can’t be very effective. In contrast, a leader who people trust and respect will always get better results.
People decide how much they trust and respect a leader based on how that leader acts and how they interact with others. When a leader demonstrates that they do what they say they’re going to do (acts with integrity) and demonstrates that they are the kind of person they claim to be (acts in integrity), people learn they can trust him or her.
When a leader interacts with people in a manner that shows they respect and value them, the leader will earn the respect of those around him or her. Leaders accomplish this by treating people like people (rather than like things) and by treating adults like adults (rather than like children).
Mistake #2: Lack of Strategic Thinking
The ability to think strategically is essential for a leader guiding an organization. Without an understanding of what a strategy is and how to develop one, leaders will often focus on goals and tactics. In the absence of a true strategy, these goals and tactics are often misguided and usually result in new challenges.
A goal is not a strategy. It’s just a metric to measure progress in the execution of a strategy. Plus, it has no emotional or inspirational component. Tactics are not strategies either. Tactics are the means by which a strategic initiative can be achieved. Tactics – like goals – also have no emotion or energy behind them. They are simply the mechanics of how things will get done.
A good strategy (in contrast to platitudes, goals or tactics) addresses a problem or takes advantage of an opportunity and provides direction for the company. Additionally, a good strategy inspires people to achieve it. By developing a true strategy, excellent results can be achieved, and the desired financial goals realized.
But an effective strategy also needs buy-in from the team. Without buy-in, a leader simply gets compliance, and compliance is not the same as commitment.
Mistake #3: Lack of Vision
For a leader to guide a company, it is essential to develop a vision for the future of the organization. A vision imagines a future which is better, different, and/or larger than the current state. Without vision, a leader will simply continue to execute the existing business model, often getting left behind as the economy shifts, customer/client preferences change, and competitors adapt.
The ability to develop vision can’t be learned from a book. It arises from within and it requires a leader to have passion and purpose for what they do. A passionless leader can only develop goals – which are uninspiring by their nature. If a leader wants to engage his or her organization, he or she must create a future that inspires people.
Mistake #4: Not Developing Good Judgment
A successor needs to develop sound judgment and become business savvy in order to make good decisions. Good judgment comes from our ability to recognize when our emotions and biases cloud our decision-making. When we allow emotions to cloud our judgment, we make decisions that are misguided. Having sound judgment – unbiased by emotions – allows an owner to make good business decisions.
Business savvy is developed by thinking broadly about all aspects of the business, by being aware of what’s going on within the company, within the economy, with customers, and with the competition. (It also helps to develop an understanding of human nature.)
Mistake #5: Not Developing an Owner’s Mindset
Up until a successor takes over as an owner, they have typically only ever been an employee. There are several differences between the way an employee thinks and the way an owner thinks, and if this shift doesn’t take place, problems will arise.
Employees tend to think narrowly. They usually focus on the task at hand and/or on their specific domain of responsibility (operations, finance, engineering, etc.). In contrast, an owner needs to consider the bigger picture and how his or her decisions impact each aspect of the business.
Employees tend to think short-term. Their focus tends to be on current matters, current revenues, current expenses, and current profits. On the other hand, an owner needs to consider both the short-term and the long-term success of the business.
Employees tend to focus on doing good work while at work but generally don’t take their work home with them. On the other hand, owners learn that the business becomes their lives, and they think about it all the time.
And finally, employees know that if they make poor decisions, the business doesn’t do well, they become dissatisfied, or they lose their job, they can always find a new job elsewhere. Owners understand that failure is not an option. Generally, there is no “Plan B.” They understand that the business is their only future, and this understanding colors their decisions and actions.
One Final Issue…
There’s one more issue that needs to be considered:
It’s nearly impossible for an owner to effectively develop their own successor!
Interpersonal Dynamics – In order for meaningful improvement to occur, open and honest conversations with the successor must take place. But it’s virtually impossible for a successor to be completely open, honest, and vulnerable when those conversations are with the owner.
Blind Spots – Regardless of the number of years of experience we have, our level of intelligence, and the amount of education we’ve had, we all have blind spots. We can’t see what we’re missing. Owners have blind spots.
Objectivity – Virtually everyone around a successor has an agenda – their co-workers, their spouse and especially the owner. They either want things to change or they want things to stay the same. In order for a successor to hone their thinking and judgment, they need an unbiased sounding board. An owner can’t be unbiased.
Time Constraints – There’s a reason it’s called successor development and not successor training. The growth that needs to occur happens over time. It won’t take place simply by attending a workshop or reading a book. And most owners simply don’t have the time.
Skill Set – Successful owners are expert at the business of their business, but the skills that got them where they are aren’t the same skills required to effectively coach and mentor a successor.
It’s critical for a successor to be properly developed so that the business thrives after the owner leaves and all purchase payments get paid. The risk of handing your company over to a poorly prepared successor is too great to leave their development incomplete.