Tony Schroeder’s last day at Choice One Engineering was going to be January 1, 2021. As the succession planning process began, that date started to move, as he describes in this video. Thanks in part to the company’s transparent culture, Tony was able to transition five years before he originally planned on leaving the business.
Here we share 4 must-know lessons for small business owners who, like Tony, want to gracefully transition their businesses one day.
1. Utilize Your Board
Whether family-owned or not, an outside board provides invaluable advice and guidance for a CEO/business owner. Arguably, CEO succession is one of the top ways a board can help to serve a business owner.
“Entrepreneurial organizations sometimes have the business plan, and/or the succession plan, in the entrepreneur’s head—but not on paper,” adds Tom Hubler, of Hubler for Business Families, who has decades of experience in helping businesses with succession planning.
An outside board can ensure your business plan and succession plan are visible to the CEO and eventually to others. A board can also help an owner develop plans to grow and develop internal candidates; find suitable successor(s) external to the company; refine the succession timetable; and/or hold the owner accountable for creating a contingency plan in case of emergency.
2. Write Down & Share Your Succession Plans
“Being a transparent company, everybody knows what’s going on,” says Tony in the video above. “There’s really no secrecy at Choice One Engineering,” he explains, which was a critical component of his ability to transition away from the business over time.
The structure and formality of putting succession plans on paper—and sharing them—encourages greater transparency with employees. More transparency means less ambiguity for employees. It’s a leaders role to avoid ambiguity with their employees because it can lead to frustration and stress. CEOs can provide clarity through communicating the succession plan.
For small businesses, there are many stakeholders that can be involved when an owner exits the business, and that includes employees, explains Tom. A general rule of thumb is that the earlier a team of internal and external stakeholders can be pulled together for succession planning purposes, the better.
“What I call a ‘succession planning task force’ can come together to deal with such issues openly, honestly, and with transparency,” says Tom, who explains that this kind of team is typically made up of a board and the entire leadership team, current and pending.
When people have a chance to express their concerns openly and directly, they are more likely to be aligned and committed to the end result. The task force empowers leaders to express emotions and expectations they have throughout the process, adds Tom.
4. Take Steps to Create the Legacy You Want
Especially for owner-founders, the emotional factors that affect succession are powerful, and the idea of “letting go” can be extremely challenging. There is the fear of letting go, but also the need to be appreciated, and the desire to own one’s legacy—factors Tom calls the “last challenges of entrepreneurship.”
While the idea of legacy varies from person to person, it can be thought of as non-financial and financial. Business owners looking ahead and thinking about their legacy can examine 5 factors: wealth, business legacy, heritage, family and self, and community. “Fine-tuning a legacy requires implementing all five aspects of the model,” adds Tom.
One of Tom’s clients is a third-generation owner-entrepreneur, whose company has been in business for just over 100 years. In acknowledgment of these aspects that help to build legacy, the owner regularly brings his family together to honor past generations, while developing the younger generations.
“The owner, as someone in his mid 80s, decided to take the whole family [on an out-of-state trip. There are six adult children and the oldest son is the only one who works in the business.” During the trip, there was shareholder development activities for the younger generations, including time where family values were discussed. There was also time set aside where the younger generations asked about the heritage and history of the company.
The trip helped to establish legacy and it works to build family connectedness, whether or not family members become involved in the business one day. It’s one example of an owner who’s cognizant of how he’s intentionally creating a lasting, powerful legacy.
Use An Outside Board For Support With Your Succession Planning
It’s never “too soon” to start succession planning. An outside board can give you the advice and experience you’re after to help you reach your personal and professional goals. Attend the Leading a High Performing Board workshop to learn how an outside board can offer you eye-opening, incredibly helpful advice. You’ll practice using the tools to create or become a high performing board with your peers, and you’ll have time for Q&A with business owners who currently use a board.
Who the program is for: Business owners who are considering creating a board and those who have a board and want to get more out of it. Learn more below.