How to Select a Successor When Exit Planning

Jim was in a difficult position. After 42 years leading his family business through difficult decision after difficult decision, he couldn’t believe this might be the decision that would break him.

The decision? Who should run the family company when he retires.

It wasn’t supposed to be this way, Jim thought. After all, Tom, his oldest son is the natural choice. He’s been in the business for the last 15 years, knows it well, and knows the customers, too.

Still, there’s Amy, Jim’s youngest daughter. While she’s only been in the business nine years, she shows real promise – the fire of a real leader. In his heart, Jim knows Amy is the better choice. He’s seen the way she handles staff, and handles herself in sales meetings. But what would Tom say?

And let’s not forget Laura, Jim’s wife. She’s made it clear where her allegiances lie, and they’re with Tom. Surely Jim wouldn’t risk his own marriage. But then again, this is the future of the company we’re talking about.

Jim has even thought about sidestepping the entire issue by bringing in an outside manager. But no, that’s not his dream: he wants to see his kids run the business.

The process of exiting a business and transitioning to retirement is challenging enough without the stresses of family dynamics. When those dynamics come to play when choosing the successor for leadership, the process can become overwhelming.

It’s important to begin the process early and follow a few basic strategies to de-personalize the experience. Here are a few strategies we’ve found helpful.

  1. Adopt Core Operating Principles
    For example, get everyone on board with the concept that “What’s best for the business is best for the family.” By committing to separating business and family needs and taking care of business needs we better secure the family fortune and future, we can better make rational decisions.
  2. Define the New Leadership Position
    Don’t assume the way mom or dad has done the leadership position is the way it should be done moving forward. Take real time to redefine the position and the value it should provide to the company moving forward. What are its accountabilities and responsibilities? How is success in this position measured? What are the challenges this position will face in months and years ahead and how will they be overcome? What experience ought this person already have? Defining a forward-looking view of a position often changes the perspective of who should fill it.
  3. Benchmark the Position
    Here at Merit Harbor Group, we’ve had great success limiting the emotion in succession planning by using the TriMetrix HD Assessment process by Talent Training International. In that process, the position is “benchmarked.” In other words, a rational measurement is taken of all the skills, aptitudes, and abilities necessary for optimal success in the job. From this, a picture of the “ideal candidate” can be formed.
  4. Assess Your Candidates
    Now that you’ve got a picture of the ideal candidate, find out if any of your candidates are ideal! Take the time to measure your family members, key management, key stakeholders, and interested others against the benchmark you defined above. See who matches closely to the benchmark and who doesn’t. You may be surprised where you find a fit. More importantly, this process removes the emotion and helps prove to interested others (i.e. spouses, siblings, others) that the best fit really is being chosen for the position.
  5. Coach
    Remember that four things are required for optimal success in any position: 1) Attitude, 2) Skill, 3) Relationships, and 4) Experience. You hire for attitude, innate skill, and past experience. Your job in succession plan is to develop key skills, build critical relationships, and map out the experience that needs to be gained. Most short-timers focus on key skills at the expense of key relationships. In addition to transferring those core critical skills, be sure to spend abundant time making key introductions and transferring critical relationships from yourself to the new you. Businesses live and die because of it.

There are two keys to this process. The first is the step of getting everyone to buy in to how the business should be run. This step isn’t about the family, and it isn’t about the retirement. It’s about the business and what the business needs to be successful. It’s about talking about a position detached from any person. I find most businesses are pretty good at talking at that level.

The second key is to submit the people to some outside standard to see if they meet the needs of the business. This is the critical step. Without this information, any decision will be based on family history, personality, etc. With this information, the decision can be based on who is empirically a better fit.

For Jim it was like a new beginning.

He convened a meeting of senior management including Tom and Amy. Together, they charted a future course heavily devoted to channel development and partner relationships, right up Amy’s alley. By the end of the meeting, Tom was even expressing some concern about doing the job.

Still, they went the extra step of benchmarking the position and assessing top candidates. Tom, Amy, and two senior leaders were assessed. The results confirmed that Amy was the best candidate for the position and that Tom would make an excellent operations lead.

Best of all, Laura, Jim’s wife, was satisfied with the outcome.

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