There is a lot at stake in succession planning: family legacies, business value, financial security, and family harmony. The goal of succession planning is to create a seamless transition of ownership, leadership and management while avoiding the classic “new leader” shock and awe that diverts mission focus, erodes management enthusiasm and dissipates organizational momentum.
With the Penn State scandal that has recently surfaced, the legacy of Joe Paterno has stirred discussion as to what kind of legacy one leaves when their exit is less than ideal. Leaving a positive, lasting legacy and achieving Succession Success® are contingent upon the smooth transition of leadership and management responsibility, all of which depend upon the exit strategy for “El Jefe”, the controlling, dominating leader.
All business owners think about exiting their business, some more seriously than others. These exit considerations range from visions and plans to strategies. As these leaders are often addicted to work, an exit vision usually includes virtuous thoughts about withdrawal, and involves cryptic communication of intentions in various forms such as carrying golf clubs or a fishing rod in the trunk. However, this vision is neither an easy nor often-discussed subject.
An exit plan takes an exit vision one step further and would communicate verbally that the boss plans to take some time off. If this miracle occurred and the boss discovered and acknowledged that in contradiction to all prior assumptions, the business did not crash and burn in his absence, he may then consider making plans for retirement. However the presumption of the boss is that his return was just in time to save everything from falling apart. Exit plans are not easily discussed, and when they are, there is no commitment and a tendency to back up or change timelines.
In contrast, an exit strategy is a written and communicated policy that stipulates through agreements, memos and Board Resolutions that as of a specified day, a transition of responsibility will take place and as of another date, the boss will transition to an oversight role as Chairman of the Board. The leader takes time to pursue other interests, remains accessible for questions and guidance, and monitors performance from the Board level while providing the successor the opportunity to assume management and leadership responsibility. An exit strategy is a commitment without ambiguity but with room for refinement as circumstances evolve and successors mature. An exit strategy does not have to be perfect, but it does have to be framed with commitment.
In light of the high stakes involved in planning “an exit,” I have concluded the following planning absolutes that include:
- The transition from dreams and visions to the actual deployment of a kick-butt succession plan does not begin until the business owner makes a commitment to create room and opportunity for successors to begin assuming critical responsibilities and learning from mistakes.
- The probability for the continuation of success (succession) is directly dependent upon the time, effort and commitment applied to the development and deployment of an exit strategy.
- Not having a successor is a legitimate excuse for not deploying an exit strategy. However, there is no excuse for the profound loss of business value associated with not having a qualified successor.
- All effective exit strategies specify a time when the business owner steps back and the successor steps forward. An exit strategy without a timeline is just a dream.
- Management and leadership transition (the exit strategy process) must be led by the business owner. Without the business owner’s initiative and commitment, the transition will simply not happen.
- The “Joe Pa Syndrome” is always at play.
You think being a business owner is a young man’s game; what about football! Over the last 19 years; since Joe Paterno was 65 years of age, he has been putting off the development, communication and commitment to an exit strategy. How many aspiring high quality coaches (managers), did he frustrate and drive out of football during this period? In Joe Pa’s defense, his goal was virtuous. Evidently, he wanted to be the winningest coach in college football. However, is it reasonable to question if he put his personal needs and priorities above that of Penn State (the family business)? If Joe Pa had exited at age 70, 75, or even 80 and given his handpicked successor the reins, would Joe Pa still have been proclaimed “Mr. Penn State” for now and eternity? I submit likely so! However, what we see is a pitiful evolution of circumstances that forever tarnishes Joe Pa’s legacy and validates the Joe Pa Syndrome: The longer you put off an exit strategy, the greater the likelihood that something will go wrong.
There is a lot at stake with succession planning.
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