The other day I was invited by a friend to meet a business owner who was leaving town and closing his construction business. He had found a home for his few employees and remaining staff. He and his partner were closing the doors and discontinuing all business operations.
As we swapped business war stories, it became clear to me that he had never planned to pass the torch. Passing the torch implies passing the torch to someone. None of his children or his partners’ children were interested in the business. There was no middle management interested in the business, and any planning for a sale had never happened.
A lifetime of hard work and goodwill was not monetized. One hundred percent of top global companies and 72 percent of all companies develop a roadmap for owner/management transitions.
Before you start your retirement process and open engagement with your team, you and any partners will need to decide whether you are selling to a management team, partner, next generation, new buyer or an ESOP. In our case we decided on the next generation. Some of the basic steps taken in my own passing of the torch are as follows:
- Communicate with your partners, your team, board members and employees often and early. It is important that everyone understand the reasons behind the upcoming transition and ensuring they feel confident in the company’s future. Put a retirement date on your horizon that everyone knows about. Be open to, and be willing to discuss, the suggestions of your team. Succession planning is not only about filling a leadership vacuum but also about ensuring the smooth continuity of the organization’s mission, vision and values. It allows for the identification and development of potential future leaders while mitigating risks associated with leadership transitions.
- Start early; it cannot be emphasized enough. Depending on the size of your organization and the number of hats (job responsibilities) you wear, there will be a lot of transitioning and training that will need to happen. I announced my retirement plans three years in advance. A successful transition involves more than just changing titles. It requires the transfer of institutional knowledge and mentorship from the outgoing leader to the successor(s). I encourage a period of overlap where both individuals working together can facilitate a smoother transfer of responsibilities and ensure a continuation of organizational culture.
- Create a clear, written transition plan. This should include a timeline with periodic meetings to review and plan progress. This will also include an organization chart of the firm before and after you leave. This will enable management and the team to plan for promotions, changing job descriptions and the need for potential new hires. Effective succession planning begins with identifying potential candidates within the organization who possess the necessary skills, knowledge and leadership qualities. Providing them with opportunities for growth, mentoring and training ensures a pool of capable successors. In some cases, you may need to consider external candidates for leadership positions. This requires a careful evaluation process, including thorough assessments of skills, experience, cultural fit and alignment with the organization’s values. Balancing internal and external candidates can bring fresh perspectives while maintaining continuity.
- Consultants: The first consultant you might need is one who can help you lock in your C suite (COO, CFO and CEO). The tools here are salary, profit-sharing and an insurance product that vests and will pay out at the end of a specified number of years with a guaranteed dollar amount. The next consultant might very well be a management consultant with a specialty in transition planning, who can coach those in their new roles along with testing selected team members for their strengths and weaknesses. Depending on the type of sale or transition planned, you will need differing consultants or a consulting firm with a host of skill sets, i.e., ESOPs, generational transition, partnerships and improving a company for a sale.
- Figure out your post-work life plans!
- Don’t hang on when it’s time to go.
Succession planning is a continuous process that requires long-term vision and careful execution. By investing in identifying and developing talent, creating a clear roadmap, fostering open communication, and providing support during transitions, your company can ensure a smooth succession process. Effective succession planning not only safeguards an organization’s future but also builds a foundation for sustainable growth and continued success. QR
Christopher K. Landis, AIA, owns Landis Architects/Builders with his brother Ethan in Washington, D.C. He brings 43 years of remodeling design, construction and management experience to this series of columns for the magazine. You can reach him at firstname.lastname@example.org.