When it comes to succession planning, these are just some of the typical questions business owners face: “Am I getting too old to continue with my company?”; “Should I retire early and enjoy my success?”; “When is a good time to pass the business on to my children?”; “Can I take a chance on my kids continuing in my successful footsteps?”; and “Should I look outside my family for my successor?”
These are difficult questions to answer. Why do business owners need to consider succession planning? The most obvious reason is that no one lives forever. And even fewer of us want to work until the morning they put us in the ground! Most entrepreneurs know they’ve worked hard and struggled to succeed. Do you want the product of your efforts to dwindle or fall apart when you become too infirm to continue or when you die? Probably not. So the first consideration is your health.
A related factor in succession planning is that if plans for the business aren’t made before the owner voluntarily leaves, considerable and often acrimonious and destructive in-fighting can occur between the “heirs apparent”, whether they’re family or non-family members.
Planning ahead means you can select, train and coach your potential replacement.
That way, you can help ensure the viability and continuity of your company according to your preferred leadership style.
Despite the logic of these reasons, many entrepreneurs remain unwilling to plan for succession. The reasons they give are varied, but often include:
- A reluctance to give up control;
- An inability or unwillingness to see someone else in charge;
- The belief that “no one could possibly take over after me” and “if I give up control, the company will inevitably fail”; and
- The belief that no one in the family is prepared yet to take over from them.
Another major hurdle is to decide whether or not to keep control in the family. This is often a very sticky issue. It’s widely known that second-generation businesses are plagued with problems and don’t necessarily succeed. Often, the major factor here involves the poor selection of successors.
A parent who’s built a business, worked hard to make it a success, and believes that their offspring will be equally successful is often mistaken. The owner wants to see family taking over from them and often hopes, and may even believe, that choosing a family member will guarantee success. But business owners are often blind to their adult children’s lack of business skills.
Whether or not the candidates for the top job are family, the process for choosing your successor is basically the same: find the best person for the job. Although this can be difficult if you want family to take over, it’s even more difficult if the family member expects to be immediately appointed to the top spot. The situation is further complicated when sibling rivalry exists. At this point, issues such as “Mother/Father always favoured you over me” and other childish yet very painful realities start confusing the real issues.
Family or outsider: who will be chosen?
Be objective and honest in selecting, training and coaching a replacement.
- Firstly, identify just what the mission and goals of your company are. The current leader usually knows this down in their soul, but it needs to be objectively translated and written out since everything that occurs in corporate life is a function of vision and goals.
- Secondly, the business owner and a team of other key senior officers need to determine the exact role for the new replacement. Succession planning, as well as downsizing or expanding the business, all present unique opportunities to take a hard look at what the current leader will do in both the near and long term.
- Thirdly, given the responses to the first two factors, the task force of executives needs to clearly identify the exact knowledge bases, skills and abilities a successful replacement will have. They can start this process by examining just what factors have led to the success of the current chief executive. Having completed that analysis, the task force needs to objectively determine if the current set of traits, attitudes, skills, knowledge and abilities will be necessary and sufficient to carry the company into the future.
Armed with this critical data, these “factors for success”, the task force must next create specific questions, role plays and action scenarios to use during the interview process. And all candidates applying for the chief position must be interviewed by a series of current employees who have been trained to be objective in their questioning and evaluation.
After all candidates have gone through the interview process, the task force should then meet to evaluate the results of each round of interviews and select the candidate – whether family or not – who best embodies the qualifications needed to ensure the company’s future success.
Factors for Success
Selecting a successor who will drive your business forward is a difficult task. Use the following pointers to guide you in making the right decision:
- Create a document which clearly communicates the vision and goals of the company
- Determine the exact role of the new leader to fit with what is required to take the company forward
- Determine the abilities and skills sets required of the successor – start by evaluating factors that led to the success of the current chief executive
How To Build Better Employee Engagement
Here are my 10 tips for managers wishing to build real engagement.
Everything begins with values; with the top three highest priorities in an individual’s life. These are the source of that person’s primary purpose and the underlying determinants of their perceptions, decisions and behaviours.
In the context of managers wanting to help their teams to develop mindsets geared towards connection, conversation and experimentation, within a healthy environment, the process must begin with value determination.
Advice for managers
Here are my 10 tips for managers wishing to build real engagement:
- Write down the job duties that your people actually have: Their current, accurate, and most up-to-date daily action steps.
- Spend some time determining what their values are. You can use the free online tool on my website – www.drdemartini.com
- Once you have determined your highest values (the three things that are most important to you in your life, where you demonstrate your greatest discipline, reliability, focus and productivity), you’ll need to find the links between employees’ job duties (Step 1) and their highest values. This is a very specific and detailed step, unpacked below.
- The question to ask is, “How specifically will performing this particular job duty help me to fulfill my current top three values?”
Let’s say one of your team members is a payroll administrator. Her job duties might include: checking how many hours employees have worked; calculating and issuing pay; deducting tax and other benefits; processing leave and expenses; calculating overtime; answering staff queries; and giving advice.
Let’s presume one of her top three highest-order values is her children. The way to connect what she does with what she values is to ask questions like these, in order to make links and help her see them in context:
- Does working with numbers help you teach your children to pay attention to detail?
- Does making calculations help you help your children with homework?
- Does knowing the art of fair exchange give you a lesson to teach your children?
- By doing your work, are you earning the income you need to fund your children’s education?
- If it’s tedious work but you don’t give up, is that good role modelling for your children?
- Does knowing about money management, and sharing this with your colleagues, help them to help their own children?
- Does advising others make you better at giving your children counsel?
- The magic number to shoot for is 20 links, not seven. Once you get to 20, for some reason, it ‘clicks’ and people can see that what they do every day is (or can be) valuable and meaningful. Be aware that some links are harder to find than others. Some are obvious; some, more tenuous.
- Look for fluency. If the employee hesitates or can’t answer the question easily or at all, this is a sign that the job duty is incongruent with their highest values and they are not going to be inspired about that particular duty. (In this case, keep asking them how that specific duty would or could help them to fulfil their highest values, until they can see a connection.)
- This is a big job. Value determination and link creation can take a whole day or more, the first time you do it, depending on the size of your team.
- To create better connections between your people, use the same process to cross-link others’ three highest values with your three highest values. Go through the entire team, making a list of values across everyone you manage. Look at the common threads. This will help you achieve more equitable leadership, better management and healthier relationships.
- For better work conversations, remember that dialogue comes from equal values (or else you simply have alternating monologue). Employees must know each other’s values. You, the manager, must master the skill of communicating your high-priority intentions, expectations and delegations in terms of each employee’s top three values.
- Intrinsically, people love solving problems that align with their values, so fulfilling their values will give them the courage to experiment.
Remember: People go to work every day to fulfill themselves, not for the sake of a company. For this reason, managers must enable their people to explicitly connect their own values with their everyday, real-world job duties, so that they become engaged, feel grateful for their collegial support system, and are inspired to go beyond the call of duty and to innovate.
6 Ways To Break Bad News To Your Team
We asked six leaders: How did you handle sharing the hardest news of your career?
Being the bearer of bad news is never fun. But there comes a time in everyone’s lives, when they’ve got to step up to the plate. This is especially true in business. When you’re in a leadership position at a company, knowing how to deliver bad news is a crucial skill. To help you out, we asked six leaders for their advice on delivering bad news to teams.
Here’s what they had to say:
1. With a promise
“After the economic meltdown of 2008, we couldn’t afford to keep everyone on staff. Picking who stays and who goes is one of the most difficult decisions you have to make as CEO. I delivered the news with honesty and empathy at an all-hands meeting. We gave some severance, referral to an employment service and a personal reference. We also gave the option to rejoin our team once things were back on track, and some did! It was a homecoming of sorts, a healing moment.” – Ori Eisen, founder and CEO, Trusona
2. With support
“In 2016, our office manager passed away. She was only 26. We called a mandatory meeting, let everyone know, and brought in grief counselors. The hardest part was controlling my own emotions in front of the company. This was a crucial moment, and the team needed a leader. We organised a memorial service to celebrate her life. It took time for the business to return to a normal cadence, but her impact remains at the company today.” – Rahul Gandhi, co-founder and CEO, MakeSpace
3. With transparency
“In New York, construction delays are as common as yellow taxis. But when you’re working to open a new restaurant location and have promoted staff to run it, construction delays don’t impact just revenue but your team’s livelihood as well. Delaying promotions for people who have worked hard to earn them is tough news to deliver. But we invited the team to the construction site to see the space and ask questions, and it helped everyone get on the same page.” – Otto Cedeno, founder, Otto’s Tacos
4. With community
“The worst news my husband and I had to share with our employees, and kids, was that we’d decided to move our business from New York to Los Angeles. We gave employees the option to stay with us and relocate. Some came west, and others did not. We couldn’t guarantee that those who moved with us would love L.A., but we promised to figure it out together.” – Cortney Novogratz, co-founder, The Novogratz
5. With a plan
“One of my first experiences as an entrepreneur was running a restaurant, which I closed as a result of 2008’s downturn. I knew this was going to be life-changing for my team. We did everything we could to ease the disruption, and I leveraged my network to place laid-off employees in new positions – nearly 90 percent had jobs in just a few weeks. As a business owner, failure is hard, but it’s an opportunity to prove yourself as a leader.” – Michael Wystrach, co-founder and CEO, Freshly
6. With reason
“After I joined Interactions as CEO, my team and I identified significant roadblocks in our product development. We had been on an aggressive growth track, but it was clear we needed to right the ship. I told my board and team that we were shutting down sales to double down on R&D. Hitting pause was an incredibly hard decision, but it was necessary to ensure we were providing the best product and experience for our customers.” – Mike Iacobucci, CEO, Interactions
This article was originally posted here on Entrepreneur.com.
Why Small Businesses Are Unable To Pay Staff Salaries
Let’s look at it from a different angle and see if we’ll arrive at that same conclusion.
We’ve heard countless times the constant conflict between employers and employees over non-payment of salaries. Small business owners complain employees don’t understand what they have to go through to ensure the payment of staff salaries.
The moment they’re unable to meet up with the payment of staff salaries, workers accuse them of being wasteful when business was booming. So the age old story of members of staff not being understanding comes up again. The cost of running the business which includes maintenance of machinery, rents, paying off loans; all these and much more which sums up overhead cost.
While it’s true that overhead cost is usually the main challenge of small businesses, it’s true only in part. Let’s look at it from a different angle and see if we’ll arrive at that same conclusion.
Usually a lot of small business owners don’t save for the rainy day, neither do they invest income generated by the business for the benefit of the business. Personal savings and investment isn’t the same with that of the business. Small business owners tend to save and invest income generated by the business in their personal names.
Let’s look at this scenario:
Mr A. is the owner of a grocery shop. People are patronising the business. Business is booming, everything seems perfect. At this point there is usually no problem paying salaries and overhead. This is the tricky part, what the employer does with the income the business is generating at this point apart from ploughing the money back into the business will decide whether he’ll be able to pay salaries when business is slow.
One would expect the owner of the store to not only save but also invest some of the income made by the business.
This is usually not the case because it’s at this point of booming business and perceived excess cash that the owner remembers he’ll pay himself more than he usually does (and that is if he pays himself salary), needs to move to a bigger apartment or better still, buy a bigger car.
The moment there is downturn in sales as a result low patronage, the problem of payment of staff salary begins. Mr A. makes it clear to his employees that the business isn’t turning in a profit and he’s using his personal money to pay staff salary. Therefore, he can’t keep on doing it and he’ll have to owe salaries.
This could have been avoided.
Do diligent – don’t dilly dally
What happened to the excess profit of years before? It’s obvious the employer hadn’t been diligent with the funds. Instead of investing the money to ensure it generates further income for the benefit of the business for the rainy day, the employer would instead use the profit for his own personal benefit.
If Mr A. had saved the money and income generated by his grocery store in preparation for the rainy day, the company wouldn’t be caught up in the quagmire it was put in.
A business is a separate entity from the founder, whether it’s a small or a large corporation they should stay so; separate. I’m not talking about the technicalities of whether it’s a company or business name. We have to realise that in order for the business to not only survive but also succeed, it must be separate from the owner.
This is one aspect small businesses must learn from large corporations with sound financial plan. There are times these corporations declare losses, yet they’re able to pay salaries! Money made by the business should be for the business. It’s not the time to buy that new car. If employers work with the mindset of paying themselves salaries (not excessive), it would go a long way to ensure the business is afloat even during uncertain economic times.
In fairness, some employers who own small businesses have been exceptional in this regard. However, the fact is, majority of small business owners don’t function with this mindset. Businesses, just like it obtains in our personal lives, have their ups and downs. The things you do or don’t do during the ups are equally as important as what you do during the downs. Save, save and save. You can’t go wrong with this. Invest, invest and invest. You can’t go wrong with this either.
That profit isn’t for spending; at least not yet. Invest the money like you would do with yours. Invest it in the name of the business. Let your business own shares in other businesses. This is sound business practice.
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