Why Entrepreneurs Sabotage the Succession Process
This week's question for Ask the Coach:
In your book, Succession: Are You Ready? you describe the challenge of succession for the CEOs of major corporations. What unique challenges do you see for succession in entrepreneurial family businesses?
My good friend and colleague, Dr. Steven Berglas, and I are currently writing a book that addresses this specific question. Given major demographic trends in the United States, this topic has become more critical today than at any time in our country's history.
Millions of aging Baby Boomers who have founded businesses are now past or approaching the age of sixty. In a related vein, more than half of all family businesses expect a leadership change by 2013.
Steven and I would like to answer this question in two different posts. This post will describe how entrepreneurial founders can unwittingly sabotage the succession process. Our second post provides suggestions that may help founders navigate succession in a positive way.
While it is often challenging for major corporate executives to pass the baton of leadership, Steven and I believe that the succession process can be even more difficult for entrepreneurial leaders — especially founders. Whereas corporate CEOs are taught to consider the care and feeding of a successor part of their job description, entrepreneurial founders often avoid even considering succession until those around them start clamoring for the process to begin.
Similarly, corporate leaders are accustomed to making career transitions. They typically start in operational roles or first-line management and work their way up the ladder to the top. By the time they become CEOs they have made many transitions. The same cannot be said for founders. After they start their companies they often remain exclusively committed to the CEO role for decades. On one hand, the extended tenure as "top dog" provides founders great benefits, both personally and professionally. On the other hand, after being in charge of a business for decades, when they contemplate passing the baton they react as anyone would to something very unfamiliar: with trepidation and avoidance.
How Sabotage Occurs
Successful entrepreneurial founders:
- Are usually driven people. They like to win. They are used to relying on themselves — and taking personal responsibility for decisions. It can be very difficult for a driven winner to let go and create an environment where others take the lead and do the winning. This hesitancy can inhibit successful transition — even in cases when the incumbent leader has every intention for the succession to work.
- Are a big deal in their communities. They often play important roles in local society. Leading a successful business brings social prestige and status. It can be hard to give up adoration and respect. While many founders claim to have little interest in social status — they are just as human as the rest of us. The prospect of facing a decline in status can make unconscious sabotage a real possibility.
- Are the go-to people in their world. They are not accustomed to asking for help, assistance, or directions while working their way out of a morass. Unlike corporate CEOs who have many advisors — both right- and left-hand men and women — assisting them. This may seem like a trivial concern — how hard is it to learn to ask for help — but if you have never said, "gimme a hand with this," doing so for the first time at age 60 may feel like an admission of weakness — or even worse — old age!
- Have usually focused on one market over a long period time. They are not jacks-of-all-trades. Corporate leaders generally have to deal with a wide range of products, markets and geographies and get exposed to a variety of jobs (or Boards) they can segue into should they wish to work after passing the baton. Not so for founders. Their specialization and focus on a restricted market niche can make it hard for them to transition to a new role in a different type of business. Facing the prospect of leaving — with no place to go — founders may feel their interests are better served by staying right where they are.
- Often have their name on the door of the business. Even if they don't literally have their name on the door, they are personally identified with the business. It is their business. For founders, leaving the business can feel like leaving an important part of their personal identity. It is hard to be replaced, especially when the replacement is not only doing what you did but becoming who you were.
- Are often parents, whose children may be involved in the succession process. While it can be difficult for corporate leaders to choose between two candidates who are equally respected, it can be much more difficult for founders to choose between two children who they equally love. This Sophie's Choice dilemma may make it harder to decide and easier to postpone the selection decision.
The good news for entrepreneurial business founders is that they are inherently less risk averse than "corporate types." In fact, we believe that there exists a direct correlation between the success of the business they must plan to cede control of and their ability to take, or at least tolerate, risks. Therefore, we are confident that once founders makes the decision to engage in succession planning, they can do so with the same passion and commitment that drove them to achieve success in the first place.
In our next post, Steve and I will present a few tips we believe will help any entrepreneur or family business-builder tackle the challenges inherent in the nuts-and-bolts aspects of ceding control of their other child — the business. After letting go, founders will usually need to prepare for encore careers, find novel ways of being constructive, and move on to create great new lives.