September 9, 2011
In my last blog post (Lessons from the Trenches – Succession Gone Well) I shared the story of the founder who, upon generously offering stock in his highly profitable company to senior managers, was astonished by their utter refusal. For that business leader, and other owners contemplating exit strategies, the key messages for finding and preparing the “right” next leadership team are clear…
It’s no mistake that private investors and equity groups regard leadership as the most important factor in making investment decisions. For exiting owners, the most important “parting gift” that they can give their company and the new shareholders (whether family, managers buying stock, or “external” buyers) is to be proactive in assessing, selecting, integrating and preparing the next leader and their leadership team. Not only does this set up the company for continued success from a continuity perspective, but it also sends a strong message to employees, suppliers, and customers alike that the “ship” is being steered, and is ready and able to propel forward and weather any storms that may ensue.
Pick Builders not Caretakers
“A” Players in any company crave opportunity and growth. If they perceive that the new leadership will simply maintain what is, they’ll quickly move on…because there are always places for “A” players to go. Further, simply maintaining customers, markets and products creates vulnerability as buyers, markets, and competitors change. So, select new leadership based on their appetite and capability to drive growth – however that might be defined.
Give success a Chance
With more and more owners selling to management teams – with multiple shareholders – the need for clarity around vision, strategy, and roles is critical. While it may seem that everyone’s on the same page – make no mistake, skin in the game changes everything! Before exiting, ensure that plans and structure are in place which will assure harmony, preserve and enhance company brand, and provide “lift” under the new management team.
Any business founder who has successfully exited their company will tell you – it’s never the legal, tax or other “hard” factors that imperil the deal, but rather the “soft” people and leadership factors that make the difference between a transition that’s dodgy and a great exit!
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