The Family Business Leadership Development Program
Incredible Result: “Our leadership depth chart is as solid as the best professional sports team.”
Avoidable Train Wreck: Wrong successor, no successor, or great successor leaves (to go help your competition).
Main Play: The Leadership Development Program
What This Is: You have developed key members of your Leadership Team who could immediately (or who already) hold your Company’s top three executive positions today, who align with your culture, who can operate successfully without you and who have completed the shift to a pioneer leadership mindset.
A company’s results in all of your Four Quarters depends on the strength of several aspects of your leadership team. This is becoming even more critical for Family Business Pioneers as they look ahead to their Fourth Quarter.
Most importantly, to be successful in the future we are heading into, business leaders must have a Pioneer Mindset. This mindset is teachable if your leadership team is coachable. If they don’t learn this, don’t count on them to capably lead your Company into the future.
Active Board of Directors
A Company’s leadership team begins with its Board of Directors. Many companies do not take advantage of the strength and guidance provided by an active Board of Directors. We highly encourage this with the Family Business Pioneers we work with.
Most family companies should be utilizing an active Board of Directors which consists of certain key insiders and at least one outsider who can provide insight to your industry and business. This Board also helps provide leadership continuity and immediate oversight in the event of your unexpected death or disability.
Profit Strategy Team (aka Advisory Board)
Depending on the nature of your business, most owners should consider establishing a Profit Strategy Team (aka Advisory Board). The members of the Profit Strategy Team do not need to have management responsibility, which enables you to focus specifically on enlisting the assistance of capable persons outside your Company who do not want the responsibility or potential liability of being on the Board of Directors. A Profit Strategy Team can be tailored to help you address specific business needs such as business model strategy, executive performance, production efficiency, strategic planning, strategic sourcing, business acquisitions, cost containment, distribution network, customer engagement, employee engagement, brand management and product/service development.
Peer Group
Accomplished Family Business Pioneers throughout the world are achieving great success through the exchange of information and ideas in peer groups. As the authors state in The Power of Peers – How The Company You Keep Drives Leadership, Growth & Success, its “just not that easy to find individuals who know precisely what it’s like to sit in the CEO’s chair.”
CEOs, throughout their time in action, as well as their expected successors, are finding the true advantage of having a group of peers to watch your back and to provide valuable insights from a CEO’s perspective. Vistage International is a great example. It is the world’s leading peer group organization. It is designed to help CEOs and executives drive better decisions and better results. Its member companies grow 2.2 times faster than average U.S. businesses.
Management Recruiter Firms
Absent your own depth chart for the Company, you will want to be prepared to quickly access the depth chart which exists throughout your industry. If you have strong talent in your Company today, you would be naive to believe that they have not been in contact with, or been contacted by, executive or management recruitment firms to fill the gaps in leadership talent encountered by other companies throughout your industry. Whether your key employees have told you about these calls doesn’t mean the calls are not occurring. Many strong management personnel have themselves developed a management recruiter contact to keep them informed of opportunities which come up through the industry to provide them with better opportunities if they aren’t available with your Company. This is one of the reasons for developing a great culture and for deploying the key employee retention tools discussed elsewhere in our discussion.
Business owner’s should normally be no less aggressive and strategic in planning for the possible loss of any given key employee. If your inside depth chart is insufficient, we suggest you develop your own ongoing relationship with a management recruiter firm, particularly one which is familiar with your industry. To the extent that you incur an adverse financial impact from the loss of any key employee, this can be lessened by the speed with which you are able to replace that individual. An ongoing relationship with a management recruiting firm which is already familiar with your business will help this to occur.
Leadership Development
An Owner/CEO’s transition from a business is generally not immediate, but instead is often accomplished through a transition of both ownership and leadership responsibilities over a period of time, normally during your Fourth Quarter. According to a study by the Raymond Family Business Institute, about half of CEOs over age 60 who plan to retire within five years have chosen a successor. Leadership development becomes critical to transitioning your leadership responsibilities over the period of time you have chosen.
Jack Welch, former CEO of General Electric, speaking about succession planning in 1991 – nine years before his anticipated retirement, had the following to say:
“From now on, choosing my successor is the most important decision I’ll make. It occupies a considerable amount of thought almost every day.”
How do you select a successor who can keep the train on the tracks in today’s environment. Larry Bossidy and Ram Charan in Confronting Reality – Doing What Matters to Get Things Right have stressed the fact that businesses which want to last today need to raise the bar with regard to leadership. In addition to the leadership qualities which have always existed, they have pointed out that two leadership qualities that are indispensable today are business acumen and a constant need to know about what is new and different.
Are You A Family Business With A Nonfamily CEO
If your Company is a family business in which the CEO is a nonfamily member (or where you are a family member CEO who is considering a nonfamily CEO to succeed you), you will typically face unique challenges and the potential for disruptive disputes. To be successful, an effective nonfamily CEO needs to possess strong business skills, while at the same time be adept at navigating the variety of family dynamics and personal relationships that exist in a family business.
The presence of a sound corporate Board of Directors as well as a Family Council can be crucial to a successful nonfamily CEO’s efforts to sustain and grow the Company.
The Leadership Development Program
In his groundbreaking study and the best selling book “Good To Great: Why Some Companies Make the Leap and Others Don’t”, Jim Collins stressed the importance of getting the right people “on the bus”, getting the wrong people “off the bus”, and the right people in the right seats on the bus. This is a key to not just profitably operating and growing a successful business, but also key as you address your Fourth Quarter plans and contingencies.
The expected retirement of a key owner or other key employee, or the unexpected loss of a key owner or other key employee due to death or disability, can pose a significant financial hit to any company. Pre- planning to be prepared for this can reduce the adverse impact.
So, what should you do now? The immediate answer is not unlike that encountered every day by professional and college sports teams. They have a depth chart. In an ideal situation, there is always a back up player for whichever specialty position needs refilling due to the loss of a player, whether by death, injury or retirement. In the context of a business operation, the first line of defense is to have a Company depth chart. Those next on the list are ideally always close to ready to step in as needed.
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