Are You Developing the Next Leader / Your Successor for Your Business Now?

by Anita Sherman, CPA | Managing Partner

“Developing” successors is an important matter that often does not get addressed until it is over ripe, because, while it is important, it is not urgent. Very few businesses have successfully transitioned in the past from one leader to another, so many CEOs don’t have a road map to follow. This process often isn’t well thought out, if it is viewed as a process at all. “Hey, nobody taught me how to be the President. I learned it all by myself”, we frequently hear. There are a number of reasons why approaching your transition early and on a proactive and deliberate basis might be a better idea than leaving the process to chance: a) the complexity of business today requires strong skill sets, b) you want to leverage your knowledge and talent, c) you want to ensure that your financial future is more secure (assuming that the value of your business, or a future income stream from it, is important to you), d) to identify the skills needed and work on development of those in your identified next leader. Even if your exit strategy is to sell to an outside buyer rather than internal one (i.e. children, other family members or existing key personnel), having a strong management team in place is a real plus. Continual assessment, promotion, and development and retention of your key performer’s are critical to a successful plan.

Some of the elements that should be considered in creating a development plan include:

Nurturing and Development of –

1. Trust
2. Shared values and vision
3. Commitment to the organization and it’s culture

Technical Competencies –

4. Relevant education and experience
5. Required critical skills (deep understanding of your Products/Services and Customer needs)
6. Track record of profitable management of operations
7. Sufficient finance and accounting knowledge to manage the organization
8. Knowledge of the trends in your specific industry
9. An understanding of how your business makes money and how entrepreneurs think (vs. an
employee mentality)

Leadership Competencies –

10. Good communication skills
11. Good connections with customers, vendors, employees, service providers
(bank, attorney, CPA) and ability to build relationships
12. Strong motivational, mentoring and accountability skills
13. Creativity to take the business to the next level.

Each business/organization is different, but if any of the above elements are lacking, a supportive development process should be created to build skills and groom the next leaders. The inclusion of younger team members in meetings with your bankers, accountants, insurance agents and attorneys, and in important internal meetings is essential. The next generation leaders learn a great deal from observing more experienced leaders in action, especially if it is followed by a debriefing session to address questions or provide additional background on the reason for the positions taken.

40% of the workforce in our country will be poised for retirement in 2020. If you, as the leader of your organization, are one of them, it’s time to get started on your plan now!

Most potential business leaders tend to come up from the operational side, and frequently their knowledge and ability to read and understand financial statements, understand the importance of key financial ratios, and how to use them to manage a profitable operation may be lacking. They may or may not have been involved in industry trade associations or know all of the key customers, etc. We would be happy to help you develop a succession strategy for your organization.
In our next newsletter, we’ll discuss reasons why it is not easy to pass a company to the next generation of leaders.