The management transition process isn’t just about the successor assuming the duties of the current CEO, but also the process of other family members and key employees adjusting to a new leader.
It’s important for the current CEO to support this transition process, as it allows the successor to make changes without them being perceived as an indictment of the past or as criticism of the predecessor.
In addition to learning how to manage the day-to-day operations of the farm business, successful transitions require passing on “strategic thinking skills” to the successor.
To be successful as a CEO, the successor has to learn to become a leader, not just a manager. Leadership revolves around vision, ideas and direction and has more to do with inspiring people than with day-to-day implementation. Top managers recognize their ability to attract and motivate people will largely determine their success, as well as the success of the business. A leader is great not because of his power, but because of his ability to empower those around him.
Leaders must be able to judge the strengths and weaknesses of the business, assess the opportunities and threats in their environments, and most importantly, identify which issues are most important and deserve their closest attention.
Strategic management is largely a matter of anticipating the future. That involves recognizing emerging problems before they occur and taking corrective action while the window of opportunity for effective response is still open. In fact, the definition of strategic management is the leader’s ability to anticipate, adapt to, drive and capitalize on change.
The top managers spend more time thinking about “what if” scenarios and developing contingency plans. They don’t dwell on the negative but consider what could go wrong and how they’ll react if it does. It’s no different than what coaches or generals do as they develop game strategies or battle plans.
Successful managers spend a great deal of time monitoring and analyzing performance. By doing so, they are much more likely to spot problems and opportunities before it’s too late. They are more likely to be treating the cause and not just the symptom of a problem. In addition, they always use two analytical skills to solve problems.
It’s important to recognize it’s the planning process—not the resulting document—that matters most. The strategic planning process involves both internal and external environmental scanning. This is often described as a S.W.O.T analysis, which identifies strengths, weaknesses, opportunities and threats.
The process can be threatening and frustrating to action-oriented managers, who primarily view the necessary brainstorming as a waste of time. However, it’s only through the S.W.O.T analysis that a clear vision can be hammered out to direct the future of the business and what it will take to get there (which includes implementation and exit strategies).
Over the long term, the success of a family business requires not only a shared vision but also a strong set of common values. As families continue to grow and age, these goals and values will inevitably become more diverse. This is particularly true when the family members involved in the business also include multiple generations of cousins or in-laws who grew up under different family influences and not just siblings who grew up in the same family.
10 Keys to Transition Success
To increase the odds of successfully transitioning the management of your family farm, consider these steps:
1. Evaluate the needs of your business—both now and in the future. This includes determining the management skills and attributes that will be needed.
2. Assess the strengths and weaknesses of the current CEO, including his or her ability to teach and mentor the successor in the areas of need identified in the business assessment.
3. Perform an objective assessment of the strengths and weaknesses of the successor.
4. Build an environment for open, honest and mature two-way communication.
5. Create a management development plan to address the successor’s strengths and weaknesses, experience, responsibility, training needs and evaluation/feedback process.
6. Plan experience, exposure and networking opportunities for the successor, not just outside the business but also outside the industry.
7. Develop a common vision for the business.
8. Map out an ongoing delegation of responsibility and authority, with a specific timeline.
9. Involve the successor in the strategic development of the business plan.
10. Implement a plan for what the current CEO is going to do next.
Develop a Common Vision
A common vision for the business includes addressing and working through personal and family issues. In part, this is because people, even when they are from the same family, often have different goals, priorities and vested interests.
This is even truer when some of the owners are actively working in the business and some are
essentially outside investors. Everyone might agree on the costs and benefits of a decision but still disagree on what to do when sharing the risks and rewards. Those working in the business tend to be more focused on reinvesting in the operation and future growth, while those outside the business see it as an asset on their balance sheet, which isn’t generating much of a return. Even within the business, the current CEO and successor might differ because of their stage in life. The current CEO often has more equity at risk and is focused on long-term security.
Some of those reading this will see it as too academic or touchy-feely, but the leaders of some of the most successful family businesses have gone through the exercise and learned a great deal from it.
I encourage both the CEO and the successor to independently write out their thoughts in response to the questions in the following seven areas at right, and then discuss their ideas.
- What is important to me?
- What is acceptable?
- What is not acceptable?
- What does my future for the business look like?
- What do I want from the business?
- What do I hope will happen?
- What am I afraid might happen?
- What is the purpose of the business?
- Why am I here?
- What do I want the business to accomplish?
- What do I want to do or achieve personally?
- What sacrifices am I willing to make in order to make it happen?
- How will I measure both the business’ and my own performance and progress?
- What is my plan or approach for accomplishing the goals I have set out?
- How should I propose to implement these new business strategies?