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Letting Go, Stepping Up: Leadership in Transition

 

By Christopher Eckrich, Ph.D.

Leadership transitions in a family business are influenced by and affect a lot of stakeholders. How each stakeholder perceives the process-and their role within it-will have an impact on outcomes. Perhaps the two stakeholders who often play the most central roles in this process are the incumbent, or controlling, CEO and his or her successor.

We have long written about the different perspectives that controlling owner CEOs and successor CEOs commonly hold that will have a bearing on their leadership transition. A quick summary of these differing views:
 

Controlling Owner CEOs

Successor CEOs

Seek stability through strategies proven effective by history.

Seek to strengthen the company through new strategies, even if unproven.

Build executive team strength through long-lasting relationships with loyal team members. Often a very patient approach in pursuing accountability.

Build executive team strength through relationships with team members who consistently produce results, demanding accountability.

Want to maintain authority to limit company risk and protect assets. Eventually may wish to delegate responsibilities and spend more time away from the office, while maintaining control.

Willing to accept more responsibility but are frustrated that authority is not granted. Become anxious for the company and their own future prospects when the controlling CEO comes back from time away and exercises authority, seeming to undermine the successor's role. May feel distrusted.

Worry that the successor generation is too impatient to ascend to greater authority. May question the judgment of those who push too hard and can't wait to get to the top spot.

Worry that the controlling generation is not serious about transitioning and do not want to spend prime years of career waiting for someone who may never let go. Believe that the organization is best served if they push towards greater authority.

See reducing risk as a way to protect the health of the business.

See increasing risk as a way to protect the long term health of the business.

 


Given this set of common generational perspectives, it is natural for there to be some tension around transition between controlling CEOs and successor CEOs. How they invest efforts to manage this process will impact the true health of the business.

How Controlling CEOs Support Successful Transition

Controlling owner CEOs contribute positively to the long-term health of the company when they prepare for their succession by building a strong executive team that makes and implements decisions quickly. What this means is the effective controlling CEO addresses leadership challenges during their tenure rather than burdening the next CEO with a dysfunctional or non-productive team. They trust and empower their executives to fulfill roles and responsibilities they are assigned and give them the authority to make appropriate decisions. Controlling CEOs who truly plan for continuity work to address performance matters directly rather than letting issues go unaddressed for long periods of time. Finally, they work in close collaboration with their successor, integrating the relevant ideas this future leader may have for improving the business.

As they approach the time when they will retire from their leadership role, effective controlling CEOs may spend more time away from the office, to give the next generation of leaders a chance to make key decisions on their own. The important caveat is that they do not come back from a trip only to second-guess all of the decisions made by those who lead in their absence. They realize that allowing successors to learn from mistakes is a valuable education and positions the organization for stronger health down the road when the successor CEO will need to rely on his or her own decision making based on experienced successes and failures.

Finally, controlling owner CEOs who spend time planning for their transition out of the CEO role position their successor CEO-and therefore the family enterprise-for greater health in the future. It is important that they, along with their spouses, explore what life will look like in this next stage and plan accordingly. If they are going to transition from CEO to board chair, they should spend their time building a very strong board, and research and develop the skills necessary to be an effective chair. In this way, even though the controlling CEO is stepping away from hours in the office, he or she is fully engaged in the transition process.

Key lessons for the successful retiring controlling CEO:

  1. Establish or reinforce standards of accountability across the leadership team to ensure the best systems and people are in place for the transition;
  2. Integrate new ideas or ways of working from the successor CEO while you are still at the reins to lend your support to the important changes that your successor will need to bring to their role as leader;
  3. Take time away from leadership to enable the next generation of leaders to make some decisions on their own and to learn from mistakes;
  4. Actively and intentionally plan for your post-retirement life and roles with your family and the business.

How CEO Successors Contribute to the Transition Process

Family firm CEO successors contribute positively to the future health of the enterprise when they spend their time achieving success in their current assigned roles, developing mastery in the role and creating consistent results. Rather than spending time trying to convince the controlling owner to trust them, they make it obvious that they have the skills needed to take on more responsibility and authority through their performance. Once they have mastered an area of responsibility, they begin to develop a knowledge base or experiences that may be particularly useful when they eventually assume more responsibility. This might include exposure to new areas in the business, education outside of the business, or even participation in executive groups that will challenge them to improve.

Effective successor CEOs also manage their reactions to the situation of having to wait on assuming more authority. They practice productive responses to their frustrations. For example, if the controlling CEO becomes defensive when a new strategy is proposed, rather than react with an angry outburst about how obstinate the CEO is being, the successor might simply begin engaging in research and create a presentation using hard data to demonstrate how the new strategy would impact the business. They might approach the CEO saying something like, "I have been thinking a lot about a concept and how it might impact our business. Would you like to review it?" Assuming openness, the successor has now positioned the new concept for consideration rather than outright rejection. It gives a chance for facts to speak rather than engaging in an emotional conflict that prevents a potential useful strategy from being considered.

Above all, successor CEOs spend their time developing productive relationships with all key stakeholders-from employees to suppliers to clients to other family members. These efforts position them to be viewed as respected and effective leaders when they have earned the leadership mantle and will be in the position of making the hard choices that come with that role.

Key Lessons for the Successful Successor CEO:

  1. Apply yourself to your current role to achieve full mastery and excellence;
  2. Demonstrate openness to the wisdom of experience.  Seek as many opportunities to learn as you can handle and be visibly open to constructive feedback;
  3. Manage your emotions to develop effective ways of advocating for important change even before you are in a position of leadership;
  4. Invest in your relationship with stakeholders in order to strengthen and facilitate your future leadership.

When both the controlling CEO and successor CEO spend their time working productively towards succession, the future health of the organization remains at the forefront of the continuity planning, as it should be. So, for all of you in the midst of transition-or who see it in your near-term future-how are you spending your time?

 

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