By Loyd Rawls, Chairman, The Rawls Group
I was traveling with Dr. Merlot while visiting a new client, and I witnessed one of his famous tirades that is worth sharing. Our client was a gentleman in his late 60s and the personification of “old school.” He had been in the same 20 Group for the last 35 years, he did not use email, and he believed everything the factory told him. The net working capital of his five dealerships was over four times guideline. His daughter Sarah, age 35, had contacted us after a visit at NADA and all but forced her dad to engage us. Her issue was that her father should have retired three years earlier when she joined the family business from a marketing job in the big city. There were no other children active in the business, and there were a host of key managers, notably GMs, who “Dad” considered part of his family. We had completed our Phase I assessment, we had connected well with Dad, and he was confident we could help him restrain his daughter.
Sitting in the conference room with him and Sarah, we were endeavoring to confirm the priority of the succession plan deployment action items.
“We are honored and delighted to facilitate deployment of your succession plan. Thank you for your confidence and the opportunity to demonstrate our passion for your succession and ability to help you achieve your goals.” With Doc on my right, I continued with the introduction. “Here is our draft Update Action Agenda. We want to discuss and refine these action items to confirm a compatible strategy for the achievement of your goals.”
Dad was drinking his coffee and not paying too much attention to the five-page document we were reviewing, that confirmed this was a target-rich environment for succession planning. In contrast, Sarah was searching through the pages, giving me concern that we had omitted something important. Then she stopped, folded the pages back, and pointed at the document. “Why is ‘Exit Strategy’ number 26 on your list? That’s our number one priority!” she proclaimed in her typical dogmatic manner.
“Thanks for pointing that out,” I responded. “We get it; exit strategy is one of your highest concerns, but we believe a few other items may take precedence. Confirmation of priority is precisely why we are having this discussion.”
Her Dad quipped, “I don’t plan to go anywhere. Where would I go? Until death do us part does not mean that your mom and I should share lunch every day,” he offered in his typical jovial tone. “We are making more money than I ever dreamed of. The last eight years or so have been the most fun in my entire career. I no longer worry about survival,” he broadcasted proudly.
Doc and I watched as Sarah sat up to the table to defend her point. “Dad, as we have talked repeatedly, this industry is changing fast. We are stuck in the 90s which does jeopardize our survival. You and your cronies, including your 100-year-old accountant, do not want to change anything; DMS, vendors, you name it. I am so frustrated arguing over every little change that I suggest. My twenty group laughs at me. Your exit strategy has got to be our top priority, or I am done!”
The girl’s face had turned red as she sat back in her chair with arms crossed, as though the verdict had been read. To keep the dialogue rolling, I jumped back in, “Sarah, we hear you, and we also agree Exit Strategy should be a high priority. However, we want you to consider some competing priorities such as your dad’s personal financial planning.”
“I will not argue there’s a lot to do here,” responded Sarah reflexively, “but nothing is more important than Dad’s exit strategy!” I was preparing to respond when I was distracted by humming from my right. I looked over to find Dr. Merlot tapping a catchy beat on the conference table. I looked back to Sarah and her dad in wonderment, and then we all looked back at Doc as he was grinding out a seat-boogie, humming the words of what sounded like a Motown tune.
“Evolution, revolution, doo, da, doo, doo. Evolution, revolution, doo, da doo, doo; and the beat goes on!”
Doc noticed that we were watching and poorly tried to look surprised. No doubt, he had been planning this performance. “Oh, sorry,” he offered with an impish smile. “While I was listening to Sarah, a song came to mind that just absorbed me. I’m sure you know the tune, ‘Evolution, Revolution, doo, da, doo, doo.”
“For heaves sakes, Doc,” I responded in frustration as Sarah’s dad chuckled. “Would you stop these shenanigans and…”
Doc raised his finger to stop me mid-sentence and make an apparently, well-rehearsed point. “Coincidentally, the tune I was humming supports some thoughts that Sarah may want to consider.” Having our attention, he gathered his thoughts to support his next point. “Sarah, after an impressive 10 years with a tech start-up, you’ve been here three years, during which time you have made some astute observations, including it’s time for your dad to retire; you need a new DMS, a BDC, social marketing geeks; and deployment of excess working capital to purchase more rooftops.”
“Yes!” Sarah responded in frustration. “I have heard from everyone that we must change, or our dealerships are going to become roadkill on the high-tech highway.”
“Yes, Sarah,” responded Doc with an affirming smirk, “adapting to change is important. However, I contend that the change you are proposing amounts to a cultural revolution whereas I believe your best opportunity for succession is evolution. Otherwise, roadkill may appear merciful compared to the firestorm you could encounter if some of the competing priorities surfaced while dealing with the fallout of your revolution.”
Her face softened, and it was now apparent that Doc had her attention. She sat back into her chair as he continued. “Would you agree that your dad is the accepted leader at the moment?” Sarah reluctantly shrugged her shoulders encouraging Doc to continue. “Revolution removes leadership but does not necessarily create a new leader. Your implied concept of asserting new leadership is an oxymoron. You can dictate action through control but cannot make people follow you. The fundamental requirement of leadership is trust, which must be earned over the test of time. And nobody here trusts you, Sarah, because you are a self-professed agent of change, which scares your managers mindless. Even if your dad declared you the new dealer and walked out, few if any would follow. Your managers would go into DEFCON 3, assuming they were on the bubble. They would start playing ‘look out for me,’ and those who felt they had horsepower would jump to another less volatile job. If during the turmoil of your revolution, another hot issue surfaced, you would find yourself in a hot mess.
“So, what other hot issues are you talking about?” challenged Sarah with continuing resistance to being schooled by an old fart.
Doc jumped back to some quick seat-buggy visibly celebrating the stage he had achieved. He pointed at Sarah and with a big smile continued. “I am glad you asked what we could be doing, while you were evolving into the next generation leader of this terrific organization.” Doc paused a moment to smile at her dad, who was getting the jest of what was coming down and flashed a big grin in return. “So, what if your dad was unable to work, and Charlie, the CFO and approved successor on all these franchises, became your boss? These manufacturers are as serious as a heart attack when they say they will only deal with the approved successor. The only title the manufacturers care about is dealer principal.”
A visible grimace came to Sarah’s face, who was about to respond when Doc continued. “And Miss Princess-of-Change, what if your dad dropped dead, and his will directed two-thirds control of these franchises to your two older sisters who love Charlie because he’s the one who sends them those stupid checks every month?”
“What the?!” shouted Sarah in disbelief looking at her dad. “You told me you had addressed that issue.”
“Sweetie, since your Mom died, I haven’t had the mental energy to figure out how to remain fair to everyone,” responded her dad in defense of what was obviously a very delicate point.
“And here’s a news flash Sarah,” continued Doc. “Your best two GMs are beyond frustration about stock ownership. They are talking to head-hunters. If you continue kicking that can down the road, they will be exiting stage left.”
Sarah closed her eyes, and leaned her head back in her chair, murmuring words under her breath that were best not said. I felt Doc had made his point, and we needed to give her a moment to adjust. Wrong assumption as I heard the tapping again. “Revolution, evolution, what’s it going to be? Revolution, evolution, what’s it going to be?”
“Would you shut up down there?” Sarah jabbed in submission, with her eyes still closed. “Your grasp of the obvious is very unimpressive.” “Just trying to figure out what we are doing here,” responded Doc impishly. “Because if it’s revolution, we are going to need another five pages of action items.”
Moral of this story: It’s easy for Nextgen leaders to get over their ski’s. The path to change can appear so clear, but many potholes are lurking in the shadows. To avoid a revolution, work to find ways to partner with existing ownership and key leaders while building your Nextgen team.
About the Author
Loyd H. Rawls, Chairman of The Rawls Group, has specialized in succession planning for closely-held, family-owned businesses since 1973. Well respected in his field, Mr. Rawls is a highly requested speaker and has published numerous articles and publications on this subject.