No one ever said that building an advisory firm would be easy. After decades of toil, our industry has evolved. Many firms have created enduring businesses, a fortunate state of affairs that can represent a management challenge for dyed-in-the-wool entrepreneurs.
The ongoing success of an advisory firm hinges on the leader’s ability to adapt to changing circumstances. As an organization increases in size and complexity, leadership and management requirements grow apace — requiring skills that aging entrepreneurial founders often lack.
Small businesses, especially service businesses, closely align with the personality of the founder. All final decisions stop at the founder’s desk. So, too, does most of the income and the credit for success.
These leaders often predict famine and pestilence should they ever relinquish control. They must realize that, voluntarily or involuntarily, their role will end at some point.
While an entrepreneur may have surrounded herself with competent advisors, operations and service people, surrendering ultimate control hurts. Even so, an enduring enterprise requires an acceptance of mortality — or at least a recognition of declining energy and misapplied skills.
How does a leader find new talent to complement what he has created? Having worked with hundreds of businesses in different stages of transition, I have witnessed the difficulty of moving from emotion to logic in this process. Common objections include:
- They are not a cultural fit.
- They don’t know our industry.
- They don’t respect what I have created.
- Their communication style is too direct.
- Their communication style is too indirect.
- They are too young.
- They are too old.
You see the pattern. Fear of change inhibits critical thinking. Understanding your own mindset helps to initiate the evaluation process and move forward with a plan.
First, think of the transition process as the delegation of authority rather than a transfer of ownership. Succession is a confusing topic, often misinterpreted as a surrender of equity in the business. In reality, developing competency behind us ensures continuity when we leave or decide to shift responsibilities. Transfer of ownership might follow but need not lead the decision.
Professional management represents a growth strategy, not a succession strategy. My favorite example of this is Bill Gates. Many years ago he realized his passion and strength lay in innovation, not in administration. While his choice of successor may have not been the best, the shifting of management duties to an executive liberated Gates to make his greatest impact on the organization.
Spend time designing specific criteria for the role, including responsibilities and qualifications. Most advisory firms struggle with assigning a title of CEO, COO or CAO. Be clear about the expectations of the job, the level of authority and the reporting relationship to the Chair, assuming you wish to continue in that capacity. Avoid the mistake of appointing someone as CEO only to undermine his authority on critical decisions or denigrate him in front of other employees.
Key attributes for a professional manager role include:
Technical skills – This qualification seems obvious but can slip through the evaluation process. Depending on the role, the individual should show an aptitude for strategy, operating performance, financial management and human capital management.