Does Management Matter?
Recently Steve Jobs, one of the most iconic figures in American business, announced his resignation as CEO of Apple. Although it had been widely anticipated due to health issues, it still sent shock waves through the markets. However, after the initial impact was absorbed, Apple’s stock did not tumble as had been feared. Jobs has made sure that a strong leadership team is in place, and apparently investors still believe the company’s future is bright, even without Jobs calling the shots from day to day.
This got me thinking about other companies and their leaders. Many of my clients have been self-made entrepreneurs who started and grew their companies over a long period of time. While it’s true that few entrepreneurs have the impact of a Steve Jobs or a Bill Gates, nevertheless each has been the driving force behind the companies they have founded.
Like Steve Jobs, every business owner needs to consider what would happen to the company when he or she is no longer at the helm. Whether due to retirement, sale of the company, or death, every business owner will ultimately leave! So what can you do to ensure a smooth transition?
Plan Early and Often
The time to start thinking about a succession plan is long before you expect to exit the business. This will allow plenty of time to groom and train the next generation of leaders. Many owners bring a child or grandchild into to company, but just as many others will rely on non-family members to succeed them. It’s important to allow enough time to pass along valuable institutional knowledge and insights which have accumulated over years of experience. Plus, the unfortunate truth is that sometimes a transfer of leadership occurs due to unforeseen circumstances. We don’t always have the luxury of time on our side.
Start to Let Go
Far too often I see owners who can’t let go of control in order for the new leadership to begin taking the reins. Sometimes this is due to ego, but just as often it’s simply out of habit. As a result, when the time comes, the new leadership team may not be up to the task.
If you plan to ultimately sell your business, buyers will want to be sure that a capable management team is waiting in the wings. This is particularly true if the buyer is a private equity firm that may have limited expertise in your industry. The selling price of a business can be detrimentally impacted if the buyer has to bring in a new management team once the transaction is complete.
Even if you intend to keep the business in the family, you owe it to the next generation and to the company itself to make sure that a smooth transition takes place. Sure, your role as the founder and driving force behind the company’s success has gotten the business where it is today, but even a superstar like Steve Jobs can be replaced.