With the dramatic growth of many independent advisory firms in the past decade, it’s a good idea to review why firms that reach $4 million or more in annual revenue need full-time managerial attention.
This means a full-time leader/CEO who can focus solely on the needs of the growing business — without the distractions of working with clients and/or attracting new clients.
The simplest solution, of course, is for owner advisors to reduce their client load and transition into a full-time CEO. But that’s not always the best solution for the business or the business owner.
Often, owner advisors don’t want to stop working with their clients, don’t have the business background or don’t have the inclination to successfully run a growing business. In these cases, the easiest solution is to elevate a current partner or high-level employee into the CEO position.
Of course, another solution is bringing in an outside executive. Although many firms have not been successful using this route, I’ve helped many owner advisors integrate new CEOs into their business, particularly next generation CEOs. And while choosing the right person — whether from inside or outside the business — for that role is important, it’s not the largest stumbling block.
Ironically, the most common problem for new CEOs is the owner advisor. It’s not that most owner advisors are bad or self-destructive people. In my experience, they aren’t either. But, when it comes to working with a new CEO, most firm owners seem to be unprepared for the changes that the addition of a CEO will create. Consequently, owner advisors tend to overreact, behave badly or both.
Like most of us, founders of advisory businesses tend to want things to be different (a bigger business, smoother operations, better team work among the staff, etc.), but they don’t really want to do things differently. Combine that mentality with the fact that the owner advisor started the business, made it what it is today and is most likely responsible for all the decisions.
In that context, introducing a new successor CEO, either from inside or outside the firm, can cause friction. Why? Because the new CEO likely will be younger than the firm owner and less experienced, but he or she probably will see some things that need to be done differently to improve the business.
There is a solution, and it involves both the firm owner and the new CEO.
Working Together The solution starts with the firm owner understanding — and accepting — that hiring and/or grooming a new CEO will create many changes for their firm. For example, the “pace” of a business is going to accelerate, people tend to work a bit harder, new ideas crop up more frequently, and new projects are initiated more often.
This faster pace can be unsettling to a firm owner — especially if they are unprepared for it. They often feel a loss of control and sense that change is happening much too quickly. While these feelings are perfectly normal, it’s important that owners don’t “use” them as excuses for defending their “old ways” of doing things or for preventing the successor from moving the business forward.
For the relationship between the firm owner and the new CEO to flourish, it’s crucial that the CEO have some understanding of the above — that is, where the owner is coming from. For instance, realizing that an owner can view proposed changes as personal criticisms, the CEO should be tactful about how he or she talks about the way things are vs. how they might be improved.
The new CEO also should give the owner time to adjust and not make too many changes too quickly or simultaneously. It’s important to keep in mind that the current state of the business reflects how the owner got the firm to this point. It’s the CEO’s job to build upon that foundation and make the business even better. Tactfulness will go a long way.