NFIB

Preparing a Successor for Your Business
03/ 12/ 2002

As your business has grown over the years, it's likely that you have been instrumental in every phase of development: sales and marketing, R&D, setting up accounting, hiring and training employees, obtaining and working with suppliers and distributors, or setting up and maintaining the physical office or plant. As the owner of a small business, you wear so many hats you probably need to look in a mirror just to see which one you have on. No other person in the company can function from your level of overall knowledge and experience.

But sooner or later, you're going to need to elevate someone to your position. For continuity of the business after you retire, or so you can start a second business, or just so you can cut back the number of hours you work, you inevitably will need to have someone in the organization that can do what you do, with the overall vision to coordinate and oversee all the company's activities. In today's Workshop, Jeffrey Moses discusses ways to achieve this, and points you in the direction of learning about this important task from experts in the field.

The most important issue in the finding, grooming and training of a successor for your business is to start early. Don't wait for the last minute. By the time you retire or cut back your hours (or have an unexpected illness that forces you to reduce your involvement), you'll have spent many years -- even decades -- running your operation. You can't expect someone to step in and begin functioning effectively in a matter of months.

The only way to begin preparing for succession is to work closely with at least one or two key individuals within the company over a period of time. The earlier you begin delegating important tasks to them, the more prepared they'll be to assume management responsibility. Delegating is the first step in preparing new management and, ultimately, a successor.

Training of new leadership requires on-the-job experience. No one can take over a company without having actually stood in the shoes of top management or ownership over a sufficient period of time. The ups and downs of a business, along with all the intricacies involved with keeping a company on track during these ups and downs, must be experienced first hand. And most important, during the gaining of this experience, a trainee for leadership must be given responsibility for success and failure of ventures undertaken. The old stock market adage says: "It's a lot different making imaginary investments on paper than putting real money into real stock purchases." The same is true with gaining business experience. There's no substitute for responsibility.

But be forewarned: when you give someone responsibility, mistakes will be made. Learning from these mistakes is an inevitable process, as painful as it may be to the existing management.

If your company is a family concern, your successor may already be working with you. The oldest child -- or the one most interested and capable -- will probably be the natural pick. But there are exceptions, and many times family politics come very strongly into play. Resolving all family tensions may become just as important, at least for awhile, as actually preparing selected family members to take over. Numerous books have been written on the topic of succession in family businesses, and they are highly recommended. Most contain numerous case studies, and probably address issues that you'll find within your family and business structure. Here are four of the best (visit Amazon.com or any of the large online booksellers to read a synopsis of topics included in each):

* Family Business Succession: The Final Test of Greatness, John L. Ward Craig E. Aronoff, about $17.

* Effective Succession Planning: Ensuring Leadership Continuity and Building Talent from Within, William J. Rothwell, about $60.

* The Family Business Leadership Handbook, Editor Stephen D. Solomon. Paperback, 1998, about $95.

* The Family Business Succession Handbook, Mark Fischetti(Editor). Paperback, 1997, about $95.

If you need to bring your successor in from outside the company, you face special challenges. These include not merely picking and training the right person. You'll encounter resentment and even subterfuge from existing employees who were not picked to succeed. These employees need to be soothed and motivated to work with your successor, or all your efforts will be for nothing. A good book on this subject:

* CEO Succession: A Window on How Boards Can Get It Right When Choosing a New Chief Executive, Dayton Ogden, et al. Hardcover, 2000, about $23.

Choosing and grooming a successor -- and working with the politics around your choice -- is an enormously complex subject. It's such an important issue for every successful business, however, that you should begin studying the topic as thoroughly as you can, and as early as you can.

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