With the average age of the dealer body continuing to rise, successor selection is a popular topic. Questions about successor selection are dominating my inbox, responses to articles, and 20 group presentations. Because of the volume of these questions received, Dr. Merlot and I thought it was time to share our thoughts on the topic.
Multiple Successors Provide Options
A business can have many successors made up of both family members and non-family members. Any family member or key manager who has demonstrated their ability to bring value to the business and a desire to serve as a senior manager/leader is a Successor Candidate. No doubt, multiple successors can be complex without expressed parameters for sibling/cousin/key manager interaction. However, assuming there is mutual respect among the group of next generation successors, the more the merrier. When effectively managed, multiple successors can create organizational strength, resilience, and leadership bench-strength.
Distinguish between Family Member Employee and a Successor
A common problem associated with multiple successors is overlooking the difference between a family member employee and a successor. A family member employee simply fulfills the criteria of the Family Member Employment Policy and Family Member Performance Expectations. A family member employee is not crazy about the business; it’s a job. On the other hand, a successor candidate—and ultimately a confirmed successor—seeks to exceed expectations in every aspect of their role. They are crazy about the business; driven to do whatever they can to promote the family business. They do not dwell on the jobs they like or make them happy, but have a “just put me in the game, coach” attitude. Whatever the opportunity, a successor wants to make ownership and leadership proud. A successor is overcome with the dream and vision of how they will be an integral part of the business legacy their parents, grandparents, bosses, etc. have built. Most sibling rivalry or family management issues are due to the confusion between a family member employee and a successor candidate. As a result, family member employees and successor are put in a position to compete against one another, which invariably creates frustration and ugly warfare behind the scenes.
How to Evaluate Successors
To help you evaluate your potential successor candidates, Dr. Merlot and I suggest you start with the following for criteria:
1. Community: Community minded means the candidate thinks as a steward for the welfare of the business community. More specifically, they don’t think, “What’s in it for me?” or “How do I maximize my benefits from this business?” As a “we thinker” they have the “it factor” of leadership.
2. Capability: Capability measures if the candidate has the raw talent needed for developing into a senior leader. Regardless of the candidate’s current position, they should demonstrate the ability to assume responsibility, build relationships and bring value to the business.
3. Competency: A candidate must have the basic intellectual knowledge of job assignments and an understanding of how serving beyond expectations can impact business performance. Opportunities should be given to successor candidates to allow leadership to not only evaluate their competence, but also give candidates confidence in their abilities.
4. Commitment: A candidate must have a passion for the business based upon pride that goes beyond a title or paycheck. Taking over the reins of a business is no easy task. Without commitment and passion for the business, the successor will quickly burn out.
A successor does not have to be rated an A+ in all 4Cs. A candidate just needs to show promise that, through the training, coaching and mentoring a Successor Development program provides they can achieve at least a B grade in each of the criteria.
However, there must be an “A” in each of the 4Cs represented at the leadership table. The successors and supporting key management should, as a team, exemplify excellence in all 4Cs. Otherwise, the pathway to succession will be an uphill, rocky road with sufficient hazards.
Successor Development Program and Family Member Policies
A Family Member Employment Policy and a Family Member Performance Expectations agreement are critical to the foundation of a succession plan. The capstone of succession planning is a Successor Development Program.
A Successor Development Program expresses:
- There are no “gimmes” on the way to the executive suite; if a candidate wants to be a leader of the company they are going to have to earn it.
- The specific steps, training, development, and experience needed to be considered as a candidate.
- How long a family member employee is expected to “just focus on their job” before they can be nominated and confirmed as a successor candidate.
- Mediocrity is just not an option; exceeding the performance and attitude expectations set forth by the Family Member Performance Expectations agreement is essential to becoming a successor.
- As a successor candidate, they will be asked to put in extra time and effort for leadership development and interaction with banks and manufacturers.
The most important aspects of a Successor Development Program are:
- The specific and communicated criteria by which family member employees are evaluated and acknowledged as a successor candidate;
- How the candidates, whether family or key managers, successfully matriculate into successors;
- And how the successor(s) will ultimately be chosen.
More is required of a successor candidate than a family member employee, so a compensation plan should be developed to recognize the additional effort. Additionally, a Successor Development Program should stipulate a five to ten year development period, recognizing some candidates take more time than others. Identify a mentor, who is not blood related and who does not act as a direct report to the candidate, and set the framework for semi-annual reviews and bi-annual 360° reviews. Critical to a Successor Development Program is creating custom curriculum for each potential candidate which recognizes their individual strengths. The curriculum should focus on the formal training and on-the-job experience needed to effectively develop the core competencies, talents and unique interests of each candidate.
As you have heard me express repeatedly, succession planning is not a fun sport; it is an ongoing process with a considerable price in terms of time, emotions and money. Most who travel this road agree that it is no fun to consider the fruit of your parenting skills, the truth about the potential of your aspiring family successors, figuring out your exit strategy, facing the facts of mortality, and dealing with family dynamics that take the fun out of dysfunctional. What a well organized Family Member Employment Policy, Family Member Performance Expectations agreement and Successor Development Program presents is the reality that it’s not only Mom and Dad who have to pay the price of succession. The highly admirable ambition of Seeking Succession also requires a successor candidate to get out of the wagon, put their shoulder to the wheel and push like hell while the horses are pulling. If you would like to see some samples of a Family Member Employment Policy, Family Member Performance Expectations and/or Successor Development Program drop me an email and I’ll ask Dr. Merlot to dispatch one to you immediately.