How to transition successfully within your leadership role…

…and build a business that is less reliant on you was the focus of our discussions at the Business Improvement and Growth (BIG) Network session on 7 March 2014.

Few business owners have spent much time thinking about how they want to exit their business. And if you’ve not thought about how you want to exit, you’ll be unclear as to the leadership transitions you will need to make in your current role in order to achieve, in time, a successful exit. But what does a successful exit really look and feel like for you? How do you successfully transition in your role to ensure the business continues to create value beyond you? These were questions we began to ask ourselves as we explored this topic.

We continue to be told that the number of businesses that survive beyond their original founder is relatively small, but there are many who have achieved this feat. For instance, there’s the Weir Group Plc founded 1871 by George & James Weir, IMI Plc founded in 1862 by George Kynoch, Microsoft founded in 1975 by Bill Gates & Paul Allen, and Tesco founded in 1919 by Jack Cohen etc. These examples highlight that many businesses can successfully transition through period of wars and crisis, so a transition in leadership is possible, but needs to be thought about and managed.

As we began to explore the academic research on leadership transitions it became evident how little there was on the subject, especially in small firms. Despite its importance, few have studied this area. The research we found tended to bias a financial management perspective (i.e. the passing down of assets), or a family firm perspective (i.e. the father and son analogy). Whilst these findings highlight the particularly challenging nature of the leadership transition process in owner-managed firms, with ownership responsibilities becoming intertwined with management and family responsibilities, it raised some key questions for us:

  • what does a successful leadership/role transition look and feel like?
  • what are the transitions that founders/leaders make? And need to make?
  • how would you like to exit the business, and what actions would you need to take to make this a reality?

So, as part of the BIG Network session on 7 March, we set off to explore these questions, and this is what we uncovered…

1. Start with the exit in mind

Have you thought about how and when you would like to exit your business? If you haven’t, some would say you’re already behind the curve. In his seminal book “7 Habits of Highly Effective People” Steven R. Covey identifies a need to “Begin with the end in mind” as the second habit of highly effective people. And in order to create the exit you want you’ll need to work out what’s really important to you in your various roles and relationships, you’ll need to visualise what they look like in the future, and consider the actions you will need to take along the way to realise them. A simple activity that we suggest would be to write yourself a “Postcard from the Future”, 12 months after you’ve exited the business…where are you? what is it like? what are you doing? who are you with? what are they doing? what have you done along the way?

2. Be prepared to navigate the ‘exit obstacle course’

It was Shakespeare who said that “all the world’s a stage, and all the men and women are merely players”. Behaviour is often determined less by characteristics of the person and more by the part one is assigned to play. We all play a multitude of roles in life, whether these are roles in our personal lives or in our business lives. What we might overlook however is the way in which these roles are wrapped up a range of other issues. You’ve put your stamp on the organisation culturally, the way it is structured, to the systems you have implemented and the strategy you have created. Extracting yourself from this complex web creates an ‘exit obstacle course’ to be navigated, one that will ultimately define the organisation you will leave, and everyone working within it.

3. There’s many ways to pass a baton – and we can all learn from sport!

The transition from one role to another has been likened to the passing a baton in a relay race (Dyke et al., 2002). As such it requires a clear process to get the baton from one person to another whilst allowing the efficient functioning of the whole team. According to the Dyke et al. model doing so requires: a considered ‘Sequence’, the right ‘Timing’, a good ‘Technique’ and appropriate ‘Communication’. As we explored this model with our cohort of business owners the following issues emerged as challenges to be embraced and managed…

  • What does the business really need?

It is the business context and needs that determine the style of leadership that is required for the next stage of business development and growth. To take up this challenge of leadership the business owner has to find a way to delegate more of their functional roles, the day-to-day activity; but what do they let go of? What you hand over is entirely up to you, but it must be deliberate, well considered and clear. Letting go of stuff you simply don’t enjoy or understand is the equivalent of throwing the baton from 20m, hoping someone will catch it before it hits the floor!

  • Timing is everything, and it will take longer than you think!

Recognising when it is the right time to transition, within or out of the business, means accepting your limits of competence, and your own frailties. It is hard to accept and hard to do, but ensuring the timing is right is essential. Waiting until the year before you wish to hand over the leadership reins and/or retire is potentially a recipe for disaster. And, trying to do it with a failing business brings its own unique challenges. It’s also a process that takes time. A typical succession process for a founder-led business can take up to 3 years – a year to find someone, a year to see if they are any good and a year to really let go! The businesses owners we speak to say that if they had their time again they would have started conversations earlier. By starting conversations early on you can build a picture together with those around you of what the future looks like and you can align you expectations with others. Ask yourself: when do I intend on exiting the business? how will I know when I have transitioned successfully?

  • Mind the gap!

Who is best placed to run the next leg in the development and growth of your business? The business owners we work with often admit that they would have brought in the right skills earlier. But what are the right skills? You do a role that no one else does, and you probably don’t know it. It’s also not just about skills and capabilities, but also behaviour…How do you transfer your passion, commitment and ownership to someone else? These are all important questions to address to ensure continuity in leadership, and that the baton is not dropped into a leadership void. Ask yourself: what skills does the organisation require from its next leader? what are the selection process and criteria? And, what will the organisation miss when I’m not performing that particular role anymore?

  • Beware of ‘false starts’

Don’t make assumptions that the role or process for transition is understood by the other person. The context also changes and people’s priorities shift in time, what was important a year ago to someone, might not be the same now. If there is a gap in skills, or a lack of clarity around the process for transition, you might find you hand the baton over only to pick it back up again. Ask yourself: what am I doing to build trust with my successor? How am I encouraging communication on this matter?

4. Guidance is helpful

Finally, unlike a relay race, you will not have endless opportunities to practice a transition. So drawing on the experience of others to help increase your chances of a successful outcome will be important. Talk the challenges through with your peers or your business coach, clarify the wants and needs of those involved and create a roadmap for achieving the transitions that support the development and growth of your business.

Having read this blog we challenge you to…

…draw a picture to represent the change you will have experienced in 3 years’ time:

  • where are you? what is it like?
  • what are you doing? what is your role?
  • who else is with you, what are they doing and how do they relate to you?
  • where is organisation in its stage of development?

Using the learning you have developed from this blog, explore the transitions taking place over the next 3 years and record any actions that you will need to take to achieve a successful transition in your role.

Get in touch and share them with us and the other ambitious business owners on the programme; we’d love to hear about them.

Further reading for those keen ones amongst us!

Bolden, R. (2001) Leadership Development in Small to Medium-Sized Enterprises, Centre for Leadership Studies.

Cadieux, L. (2007) Succession in Small and Medium-Sized Family Businesses: Toward a Typology of Predecessor Roles During and After Instatement of the Successor, Family Business Review, 2.

Cope, J., Kempster, S. and Parry, K. (2011) Exploring Distributed leadership in the Small Business Context, International Journal of Small Business Reviews, 13: 270-285.

Dyck, B., Mauws, M., Starke, F.A. and Mischkea, G.A. (2002) Passing the baton: The importance of sequence, timing, technique and communication in executive succession, Journal of Business Venturing, 17: 143–162.

Handler, W.C. (1990) Succession in Family Firms: A Mutual Role Adjustment between Entrepreneur and Next-generation Family Members, Entrepreneurship Theory and Practice, Fall.

Handler, W.C. (1994) Succession in Family Business: A Review of the Research, Family Business Review, 7: 133.

Hannonen, T. (2013) Management Succession in Family-Owned SMEs: Learning from Failure, Master Thesis, Aalto University School of Business.

Ip, B. and Jacobs, G. (2006) Business Succession Planning: A Review of the Literature, Journal of Small Business and Enterprise Development, 13(3): 326-350.

Kempster, S. and Cope, J. (2010) Learning to Lead in the Entrepreneurial Context, International Journal of Entrepreneurial Behaviour and Research, 16 (1): 5-34.

Martin, C., Martin, L. and Mabbett, A. (2002) SME Ownership Succession – Business Support and Policy Implications, Knowledge Management Centre, Business School, University of Central England

Motwani, J., Levenburg, N.M., Schwarz, T. and Blankson, C. (2006) Succession Planning in SMEs: An Empirical Analysis, International Small Business Journal, 24(5): 471-495.

Sonnenfeld, J.A. and Spence, P.L (1989) The Parting Patriarch of a Family Firm, Family Business Review, 2(4): 355–375.

Venter, E., Boshoff C. and Maas, G. (2005) The Influence of Successor-Related Factors on the Succession Process in Small and Medium-Sized Family Business, Family Business Review, 18: 283.

Wang, Y., Watkins, D., Harris, N. and Spicer, K. (2004) The relationship between succession issues and business performance: Evidence from UK family SMEs, International Journal of Entrepreneurial Behaviour & Research, 10(1/2): 59-84.

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