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How to Really Train a New Leader: Family-Owned Businesses in Transition

How to Really Train a New Leader: Family-Owned Businesses in Transition

December 21, 2016

I recently took an informal poll. I asked the Founders of multi-generational, family-owned businesses, "when is the ideal time to plan your 'next generation' exit strategy?"

Here were the replies:

  • When my new acquisition is complete.
  • When I've expanded the business to the next level.
  • When the economy picks up.
  • When I've built a more impressive legacy.
  • When the next generation is older and more experienced.
  • When I feel like I can trust the next group of leaders.
  • When I've put aside enough money to live forever (!)

Not surprisingly, no one answered "now!" Most founders are stuck in indecision and resistance.

The truth is that the best time to start planning for a Next Gen Transition IS NOW. There will never be "the perfect time" and putting the new leader in place is a process that take years to implement. However, if you begin that process now, you'll give yourself and the new leader enough time, training and coaching to gracefully make the shift.

Path of Ascension: Mapping Out the Way

A Path of Ascension maps out what it will take for the next generation to become the leader. In order to create a Path of Ascension for a next gen CEO, you will need to chart out what the CEO job responsibilities entail in your business. Think of it like any other job: a "how-to manual" or SOP (standard operating procedure) must be developed to train the next gen leader.

But it goes beyond knowing the technicalities of being a CEO. Your job is to teach both the art and science of the job. It's often difficult for leaders, especially founders, to teach the art of what they do: how they close the deal, manage a complex employee, develop strategic relationships, etc. Often the leader himself doesn't quite know how he does it! Take the time now to simplify, codify, and multiply how you do what you do to start training the next generation.

The next gen leader needs to be trained in:

  • Embodying and managing the MVP of the company (Mission, Values, Purpose)
  • Developing the Entrepreneurial Muscle: this includes visioning and risk management.
  • Developing strategic relationships within the company and within the industry.
  • Building a safe workplace: conflict management and how to have Courageous Conversations.
  • Negotiations.
  • Employee Accountability: milestone management.
  • Leadership and Stewardship.

Planet Tim

This mentoring does not need to be only done by you. In fact, it shouldn't be done just by you! The next gen leader needs a whole team to train and coach him. Imagine a planetary system that revolves around the next gen leader. Let's call him Tim. We'll surround Tim with mentors and support as if they were in orbit around Planet Tim.

[CLICK HERE to get a Planet Tim (next gen leader) Template and Example]

Tim needs:

  1. You, the current CEO, for the company history, MVP, current status of the company within the industry.
  2. A professional peer group.
  3. A strategic advisor.
  4. An accountability coach. (Sometimes this person is also the strategic advisor.)
  5. Based on Tim's particular weaknesses:
  6. Financial training
  7. Sales and/marketing training
  8. Industry expertise
  9. A mentor who will show Tim the ropes. This can be a high level manager from within the business, or it can be a professional manager hired from outside to run the business for a specific time (let's say 3 years). The professional manager will use these years to train the next gen leader on how to run the company.
  10. The Board of Directors (see more about this in last week's blog.)

Rather than "bequeathing" the business to the next gen leader, articulate milestones for him to reach along a pathway. The successor has to earn the experience, prove his ability to do the job (performance achievements), demonstrate a level of mastery, and generate the respect of the team. This will shore up confidence in the next gen leader, both within the company and within himself.

The milestones need to set up a shift in authority as well as responsibility. Often, the newcomer has responsibility, but not sufficient authority to complete his tasks. This doesn't enable him or his team to make the transition and often causes tremendous stress.

Let's talk about boundaries for a minute.

There are 3 separate entities involved in a family-owned business: Family, Business and Ownership. These 3 circles often overlap, which is the cause of most family-business related tension.

  1. Family is focused on: Nurturing, Personal Development, Support, Affection and Love, Communications, among other things. The Family is a permanent institution: "Family is where you go and they have to take you in".
  2. Business is focused on: Profits, Strategic Planning, Market Value Compensation, Cash Flow, Staff Management, Accountability, Marketing, Entrepreneurial Perspectives, among other things. Business relationships outside the family are usually friendly, but semi-personal and are assumed to be temporary or short-term.
  3. Ownership of the business is focused on: ROI, Equity Growth, Stewardship of Assets, Reputation of Owners, Responsible Board Selection, among other things. The Ownership circle of the business usually has the fewest members, but they hold the most legal and practical power.

How does a family owned business navigate these circles together? It's not simple, and full attention must be given to each circle. Each of these 3 circles must be managed so that none gets neglected or overly-emphasized. One of the biggest mistakes Founders make is that they only meet with their lawyers and accountants to set up a transition/ exit plan. But it's absolutely crucial to have a strategic advisor who will understand the human component as well.

[CLICK HERE to set up a free consultation about next generation transition planning.]

Look for more information on Next Generation Transition Strategies in the upcoming months ahead.

[CLICK HERE to get a Planet Tim (next gen leader) Template and Example]


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