In our work on firm successions, we’ve found that most, if not all, of these problems can be avoided, or at least minimized, by making owner-advisors aware of the issue, and preparing them to share ownership.
To do this, we have a series of conversations about what it means to have business partners, which eventually will include the new owners. Here are the items we find owner-advisors often haven’t considered:
- Allowing time for them to learn to be owners.
Very few people have even a vague idea about what it means to be a business owner before they’ve actually done it. We ask owner-advisors to think back to when they started their firms, and then to think about how much they’ve changed since then. This usually helps advisors to realize that they’ll need to cut their new partner(s) some slack for a while and that the owner is going to have “teach” his/her junior partners to be good owners. Once owner-advisors realize that this is gradual process, successions usually go a lot smoother.
- Sharing information.
Most owner-advisors don’t share a lot of “business” information with their employees. Although they are often surprised to lean how much their employees do know, it’s still not everything. While there are legal limits on what majority business owners have to share with minority owners, we’ve found that the more junior partners know about their firm, the better partners they can be, and the more they can help firm, and the majority owner.
- Sharing decisions.
Again, majority owners are not legally required to make many—if any—decisions with minority partners, but sharing most decisions can have many benefits and very few negatives. Probably most important, consulting them on decisions makes junior partners feel like owners. That’s a major step toward thinking like owners. You don’t necessarily have to come to a consensus, but getting buy-in on major decisions from all the owners, or at least a majority of them, can greatly increase enthusiasm for and commitment to those decisions.
Off loading some of an owner’s responsibilities not only frees him/her up to focus their most important jobs (client service, rainmaking, etc.), it also exposes junior partners to new areas of the business. Remember, they are going to have to run the whole business; giving them the opportunity to learn each of its parts, while they can still get help from the senior partner, is way better than leaving their education until they are on their own.
- Really listening.
One of the things that many owner-advisors have trouble with is taking their junior partners seriously. After all, did they start this business from nothing? And so on. Yet discounting people, especially younger owners, can be one of the most demotivating things older folks can do. Remember, if you didn’t need these junior partners, you wouldn’t be doing this. So treat them with respect, and you’ll all build a much more successful firm.
Often, to their surprise, many owner-advisors find that having a junior partner(s) makes their lives a lot better. These “employees” are suddenly acting like owners, they have someone to bounce ideas off, they have other “insiders” to talk about the business and, of course, they have a succession plan which will ensure the ongoing operation of their firm in the event something happens to them. They then can share that plan with their clients, spouse and their dependents.
To get the most out of junior partners, owner-advisors need to be prepared to share ownership, and getting expectations on both sides out on the table creates a much better foundation for a successful succession.