It’s a scary thought for most business owners—the idea that the same people you rely on for the proper running of your business may be the same people who own your business in the future or leave your company to work for the competition. However, in planning for the ultimate succession of your business, these are the scenarios every business owner must play out. So the question is, how much does planning play a role in the succession of your business?
If you are like most owners, you know that some of your managers are fit for future leadership and possibly ownership, while some are not. Moreover, going from an employee to an owner is an interesting and tricky process that can be challenging, even for the most skilled manager. Therefore, we ask in this newsletter: How can you have ‘succession without experiencing succession or the splintering off of your managers?”
Succession vs. Succession
Throughout history, several powerful unions have had certain states within their union succeed. Wikipedia describes the succession of states:
Succession of states is a theory and practice in international relations regarding the recognition and acceptance of a newly created sovereign state by other states based on a perceived historical relationship the new state has with a prior state.
Looking down the road as you plan the succession of your business, will your management team create their own sovereign state apart from their historical relationship with you? Perhaps that is how you got into business as an owner-operator—you simply decided not to participate in your former employer’s tyrannical (or incompetent or any other adjective that describes your displeasure as a former employee) culture. Obviously, there is no crystal ball that will help you foresee what will happen to your management team as changes take place. The best business owners can do is to be aware of all the opportunities available to their key managers, encourage them to move in the same direction as their goals, and protect their business interests.
An Independent Mind Is a Double-Edged Sword
It is safe to assume that you initially ventured out on your own because you were independent-thinking and wanted to build and create something of your own. As you look to your management team for future owners, the challenge is determining who is independent enough to lead your company into the future but not so independent that they will want to leave and start their own competing company. To make this even more challenging, add to this the fact that these managers currently, in fact, work for you as employees. Therefore, in theory, if they were “truly” independent thinkers, they would most likely have ventured out on their own already. It is then your challenge to determine who you think could thrive as a new leader, given the right opportunity.
Non-Competes as Part of Your Compensation Packages
In today’s market, a growing number of employers are asking or requiring employees to sign non-compete agreements. As a business owner who will one day, possibly even in the near future, be handing your business to a successor, non-compete agreements should be considered vital. These agreements not only protect you from the possibility of your employees working for a direct competitor for a specified period of time after they leave the company, but they also protect your confidential business information. In this transition phase, a lot can happen when aligning employees and managers to prepare for succession. Having non-compete agreements in place with your key employees will give you peace of mind that your business is protected.
Closing Thoughts
So, how much planning is required for the succession of your business? The answer really depends on what you find when you take the time to assess your potential successors and determine how much work needs to be done before your planned exit. It will be your job to find the delicate balance between the levels of independence that you must rely upon when transferring operational control and, eventually, ownership to the next generation. Starting today gives you the best opportunity for success with your succession planning—without an actual succession today!!
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