38 INVESTMENT ADVISOR OCTOBER 2019 | ThinkAdvisor.com
transfer power and authority, a clear
desire to create a good relationship with
the successor, and most importantly,
a commitment to the successor. The
owner can’t be exploring other options,
and/or entertaining offers to sell to outside buyers. If an owner isn’t committed
to the successor, the successor will never
be committed to the owner.
PASS THE TORCH
Once the owner has created a solid relationship with his/her successor, they
can focus on passing along the tools the
successor will need to be successful.
This begins with learning the ins and
outs of running the business, such as
decision making, communication, and
strategic planning. Of those, decision
making is by far the most important.
In their current jobs, most future successors usually don’t have to make decisions that greatly affect the business as
whole. Even though many employees
secretly — or not — believe they could
make better decisions than their bosses,
they really have no idea until they sit in
the big chair.
Responsibility changes everything.
Having an opinion is one thing. But taking responsibility for the consequences
of the outcome is something else. Thus,
an owner must give a successor some
experience in making big, or even not so
big, decisions. And, then, you are going
to have to help them evaluate the outcome, take responsibility for it and then
decide what to do next.
In decision making, it’s important to
give future leaders the experience of
failure. An owner may see that something is going to fail, but the successor
needs to learn it. This means owners
have to let their successor fail so they
learn it’s not the end of the world. Giving
them the confidence to try and fail is one
of the best things to do for them.
Of course, for most owners who are
working on an internal succession, their
financial future is partly dependent on
the success of the firm. Helping a succes-
sor to be the best they can be is in their
best interest, but there are times in this
process they have to give a little to get a
bigger result. Small financial failures can
go a long way in helping a successor learn.
An owner also has to leave their successor room to do the new job their
own way. Everyone is different. Forcing
successors to try to be like the owner is
simply setting them up for failure — not
only to be like the owner but unable to
their new job. Successors have to figure
out how to do their job in the way that
works for them, which means the owner
must let them learn.
Next, owners must help successors to
form good relationships with the other
employees. This can be very difficult for
many owners who have become quite
attached to “being the boss.” Not to be
overly harsh, if an owner wants their
protege to succeed with the business,
they have to let go of the reins — and,
when called upon, help the new owner
be the best boss they can be.
Helping a successor have good relation-
ships with the firm’s employees boils
down to being a good leader. This is not
learned in a classroom, but through great
leaders. To teach leadership, you need
to take an interest in a successor, be sure
they have what they need to succeed at
their jobs, be more concerned with fixing
problems rather than blame, and be quick
to take responsibility for bad outcomes of
your decisions and actions.
Further, when you take your leadership to the next level, the successor
becomes more committed to being at
your firm. That is, they can say unequivocally: “I don’t want to be anywhere
else.” Once you have that level of commitment and a willingness to learn how
to make decisions, the successor is truly
ready to “talk numbers.” When this happens, they become the player calling
the shots, and you become the parent
cheering from the sidelines, providing
guidance only when asked.
If done right, the rewards are exponential in growth, valuation and your
retirement savings. In all my years guiding clients through internal transfers,
the numbers take care of themselves
when you start the process with people
and their communication. All growth
begins with trust and commitment. If
you don’t have that, you don’t really have
anything to transfer.
Angie Herbers is Chief Executive at Herbers &
Company, an independent growth consultancy
for financial advisory firms. She can be
reached at www.HerbersCo.com.
With a successful transition, there must be a
willingness to transfer power and authority,
a clear desire to create a good relationship
with the successor, and most importantly, a
commitment to them as well.