Succession is dependent upon success. Therefore, mediocrity is not a succession option. In order for you to have confidence your successors can survive the predictable distractions, issues and problems associated with the transfer of ownership and management control your business must perform above benchmark to assure that there is adequate margin for a dip in productivity.
A complication to achieving success is that we all define success differently. Therefore we commonly ask, what’s the purpose of your success? Those who believe success is all about the profits commonly respond with, “What planet are you from? Cash dude! And all the stores, houses, boats and things cash can buy.” Every business owner has their own motivators, but some describe success exclusively in terms of profitability. No doubt, if there are not enough bucks, business sucks and when business sucks, life’s a yuk. However, once I confirm a client’s success focuses exclusively on profitability or the things profits can buy, I encourage them to consider additional performance benchmarks.
As an example, I recently worked with the owner of an impressive group of dealerships who had four children working in his management company in various BS title-dependent jobs that really added no value to the operation. When we met with the kids and asked about their interests, none of them spoke in terms of working in a store, having happy customers, key manager success stories or perpetuating their father’s legacy. The reason was that their father’s legacy was money; being in the best clubs, having houses in the right places, a jet to get there, and the best positioning at football games and special events. In fact, the reason he called us was because his kids were beginning to argue about who was getting more money, more perks, and who would be making the decisions about money. My council to this gentleman was that the paint was dry; his priority and therefore his children’s priority was, is and will be money. He had not talked family or acted family in the development of his business and consequently there was little hope for The Rawls Group to develop a family business culture. Our suggestion was to play what he knew; business. Develop a business family culture to set the contractual policies and procedures to support civil governance between his children that may or may not decide to play family.
The fact is that succession planning is a tough gig. In forty- two years in this profession I have never seen money motivate family members to give one another the benefit of the doubt and provide sufficient drive to sustain family business success through the next generation of owners and managers. In the absence of passion and commitment to something beyond money, family successors and/or senior key managers predictably opt out when the going gets tough. If personal wealth is the only goal, they correctly conclude that they can cash in the chips and go elsewhere to avoid the distracting and inevitably stressful issues associated with family business succession. Too much focus on profits distracts successors from a sustainable purpose and sacrifices succession planning demands.
In contrast, others define success as time, family enablement, friends, hobbies, community, charities, etc., irrespective of profitability and the fulfillment of manufacturer’s expectations. As long as they have enough cash to satisfy debt service, payroll and capital improvements; profit is not the driving purpose of their business. “Kumbaya” is the theme song for these organizations that are committed to their involvement with employees, friends, community, church, etc. They are in a fog about achieving benchmark profitability, achieving confidence of lenders, taking advantage of market opportunities and fulfilling manufacturer expectations.
As an example we were recently engaged by a business owner who was under threat of termination from a manufacturer. As a byproduct of our assessment, we focused efforts towards amping up productivity and essentially trying to save the dealership. After a couple weeks of observation our Performance Team Lead came to me and the client with his action plan. His report was pretty simple; “Fire the pets and manage the people. You could be 200% more productive with 75% of your current personnel. It is commendable that you want to support the associate minister of your church, your disadvantaged siblings, and the staff of your Alcoholics Anonymous chapter, but this group is creating chaos among employees who are trying to be productive and sustain jobs that their families depend upon.” It’s nothing personal; you must respect your business or prepare to lose it. Your manufacturers have reason to be upset, and if you don’t modify your priorities they are rightfully going to remove the business distraction from your family obsession.
So what is the correct answer to: what’s the purpose of your success? What is the source of your passion for the succession of this business? The right purpose for performance is a balance between profits to meet both needs and desires, and the reasonable allocation of resources to personal, family, and community needs. The purpose of sustainable success, the purpose of succession planning must be balanced; based upon both generating and distributing sufficient profits to motivate those who are putting out the effort and enduring the stress associated with succession, as well as supporting the passions of the owners. Any significant imbalance breeds succession issues that can become serious impediments to the continuation of success.
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