Situation: The CEO of a family business is anticipating retirement in the next two years. Currently, there is no succession plan. Other family members do not seem interested in running the company. What steps should the CEO be taking? How do you plan for retirement?
Advice from the CEOs:
To set the stage for your successor, make sure that you are being paid adequately for your job. If you are being paid less than some of your key employees, nobody else will want your job. Raise your salary to a point where it is appropriate for a CEO, and so it is attractive enough to entice a qualified successor. This will also help attract a buyer should you decide to sell or merge the business. Raising your salary will also help your bottom line if your company is an S Corporation.
Once you identify a potential successor, bring this individual into the business as soon as possible so they have an opportunity to understand the business fully and can receive on-the-job training from you.
Understand the numbers and red flags that give you the information and authority to run the company and the respect of your employees. Teach these to your successor so that this person has the same overview of the company that you command.
Look at what skills your successor needs to be CEO and start mentoring that person on those as soon as possible.
You may need to delay your planned retirement so that you have time to select a successor and prepare that individual to take on your responsibilities. Your current 2-year plan may not work, at least without compromises.
Without a management succession plan, the company may not bring in as much in a sale or merger as you expect. It is important that you improve the numbers to maximize the value of the firm if you choose to sell or merge the business.
Look at your current range of projects. Focus on those which are most profitable to you and emphasize these. You may be able to reduce staff and expenses by being more focused.
Situation: A company’s Sales Manager is likely to retire in the next two years, but has no strict timeline. This individual is the chief rain-maker and has been for many years. The subject of replacing this individual has been sensitive when mentioned in the past. How do you replace a Sales Manager and how do you manage the transition?
Advice from the CEOs:
Have a frank conversation with the current Sales Manager. For the company to thrive it is necessary to start selecting and training an individual to take his place when he retires. Have him help develop the recruitment and transition plan. Also involve your Customer Service Manager.
o Hire a person like the current Sales Manager and allow for up to two years for the new individual to get up to speed.
o Find someone who is currently associated with one of your key customers and who has contacts.
o Adjust your compensation scheme to focus on growth and customer diversification with enhanced commissions for bringing in these accounts.
To ease the transition, start to build a different customer relations structure – one where the CEO has more engagement with key customers.
An alternative to replacing the Sales Manager is to create a different organizational structure. For example, hire a COO who will eventually take over business development as well. Think longer term about to how you want the management structure to grow. Build your future vision of the company into this process.
Interview with Greg Hartwell, CEO and Managing Director, Homecare California, Inc.
Situation: Fast growing companies find it difficult to manage consistency and reliability of service as they scale to their next level of growth. They need to systematize what works and leverage technology to enjoy the benefits of scale. How do you build consistency and reliability as you scale up?
Advice from Greg Hartwell:
Invest time and effort to build an experienced management team. As a small company building a new service delivery model, it is helpful for the founders to know all roles so that you have a sense of what’s needed for each role.
Be open to hiring people from other industries. This brings a fresh perspective and broadens the pool of talent. There’s value in industry experience, but attitude and cultural fit are key.
The split between tactical and strategic skills is 80 / 20. Basic skills are necessary, but specialized knowledge can be learned.
Institutionalize how you recruit, screen, hire, train and retain. How do you do it like Disney – attracting and hiring the best of the best?
Know your market and the personality of those who will excel. This greatly simplifies the screening process.
Work hard on training. Our customer-focus starts with our employees. We complement natural talent with training that focuses on soft skills, and on consistency and reliability of service.
Find great advisors who can help build a training and retention system that works for you.
Minimize turnover by compensating people well, and treating them even better. Build a culture of recognition and shared experience that emphasizes the importance of the team and its members.
Embrace technology which enhances your ability to scale.
Don’t wait for something bad to happen and then rush to fix it. Anticipate and prevent mishaps.
Leverage communication technologies to tighten the bond between client and provider agency. Provide added services that are valuable and affordable.
Hand-held device technology is developing rapidly. Leverage this to increase consistency and reliability of service, enhance case reporting, reduce human error, reduce the ratio of supervisors to caregivers, and increase productivity. Be at the head of your industry class!