The Right Ways to Pass the Torch

Pass the Torch

Once the owner has created a solid relationship with his/her successor, they can focus on passing along the tools the successor will need to be successful. This begins with learning the ins and outs of running the business, such as decision making, communication, and strategic planning. Of those, decision making is by far the most important.

In their current jobs, most future successors usually don’t have to make decisions that greatly affect the business as whole. Even though many employees secretly — or not — believe they could make better decisions than their bosses, they really have no idea until they sit in the big chair.

Responsibility changes everything. Having an opinion is one thing. But taking responsibility for the consequences of the outcome is something else. Thus, an owner must give a successor some experience in making big, or even not so big, decisions. And, then, you are going to have to help them evaluate the outcome, take responsibility for it and then decide what to do next.

In decision making, it’s important to give future leaders the experience of failure. An owner may see that something is going to fail, but the successor needs to learn it. This means owners have to let their successor fail so they learn it’s not the end of the world. Giving them the confidence to try and fail is one of the best things to do for them.

Of course, for most owners who are working on an internal succession, their financial future is partly dependent on the success of the firm. Helping a successor to be the best they can be is in their best interest, but there are times in this process they have to give a little to get a bigger result. Small financial failures can go a long way in helping a successor learn.

An owner also has to leave their successor room to do the new job their own way. Everyone is different. Forcing successors to try to be like the owner is simply setting them up for failure — not only to be like the owner but unable to their new job. Successors have to figure out how to do their job in the way that works for them, which means the owner must let them learn.

Next, owners must help successors to form good relationships with the other employees. This can be very difficult for many owners who have become quite attached to “being the boss.” Not to be overly harsh, if an owner wants their protege to succeed with the business, they have to let go of the reins — and, when called upon, help the new owner be the best boss they can be.

Teach Leadership

Helping a successor have good relationships with the firm’s employees boils down to being a good leader. This is not learned in a classroom, but through great leaders. To teach leadership, you need to take an interest in a successor, be sure they have what they need to succeed at their jobs, be more concerned with fixing problems rather than blame, and be quick to take responsibility for bad outcomes of your decisions and actions.

Further, when you take your leadership to the next level, the successor becomes more committed to being at your firm. That is, they can say unequivocally: “I don’t want to be anywhere else.” Once you have that level of commitment and a willingness to learn how to make decisions, the successor is truly ready to “talk numbers.” When this happens, they become the player calling the shots, and you become the parent cheering from the sidelines, providing guidance only when asked.

If done right, the rewards are exponential in growth, valuation and your retirement savings. In all my years guiding clients through internal transfers, the numbers take care of themselves when you start the process with people and their communication. All growth begins with trust and commitment. If you don’t have that, you don’t really have anything to transfer.

Angie Herbers is chief executive at Herbers & Company, an independent growth consultancy for financial advisory firms. She can be reached at www.HerbersCo.com.