How does a company successfully transition from one generation to the next? For many teams, just the term “succession planning” can be overwhelming. All the details of buying/selling and ownership transition are daunting, but beyond all that is one question plaguing business owners: “Even if we had all the legal details worked out, how does my business practically transition to the new ownership so that I can step away?”
Here’s the story of one team that successfully transitioned to new ownership within the EOS Process™.
Designing a Smooth Succession Plan
My client was an engineering firm with three owner-partners. Two of them were in their late 40s and one was in his 60s. During Vision Building™ Day 2 of the EOS Process, we established the company’s 3-Year Picture™. At the end of the exercise, the team envisioned their role in the company three years out. The eldest partner said his role was “retired.” This was the first time his retirement had been mentioned with the team, or even among the partners. Here’s how they handled it.
First, we added a new Issue to the Issues List: “Succession Planning.” The succession plan became a Company Goal for the Year, as well as a series of 90-day Rocks, for example, “Develop and present ownership transition plan to leadership team.”
The team created a future state accountability chart to match the 3-Year Picture. The Integrator of the company began having a Quarterly Conversation™ (5-5-5™) with each member of the leadership team to determine what role they would be accountable for in the future state accountability chart. More importantly, the conversations discussed whether they would GWC™ that seat. Did they have a clear picture of what the seat would look like in three years and did they WANT it?
One of the Integrator’s Rocks was to develop an operational succession plan for technical and professional development to prepare the existing team for their future seats. This Rock revealed that some existing leadership team members did not GWC a seat in the future accountability chart. As a result, they identified early on which gaps they would need to fill by hiring from outside the company.
The Rewards of a Solid Succession Plan
Fast-forward five years. The eldest partner has been retired for two years and his replacement was recruited and hired. The next generation of owners on the leadership team GWC their seats, and their ownership structure is firmly in place. The other two partners have scaled back their roles in the business as they are nearing their exit point as well. Transitions were so seamless that the organization continued running without missing a beat. The company has even doubled in size over the past five years.
The leadership team executed their succession plan to a new set of owners, and a new set of leaders – all in the midst of rapid growth. The key to their success was to willingly discuss the succession openly and to tackle some tough realities they discovered along the way.
That willingness to have the tough conversations isn’t easy, but it is critical on the journey of becoming your best. This is how companies go from good to great.