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Five Ways to Make Handing Over the Reins Easier

It's tough for a business' founder to relinquish control, but the process can go smoothly.

One of the most difficult things for a founder to do is find a successor and hand over the reins of the business.

Some founders set their companies up for failure by picking weak replacements because they don't want their successors to appear to outshine them. I have seen this happen many times. Other founders pick people who have been loyal to them but who lack the right skills to oversee the organization and take it to the next level. Some want their kids to take charge, even when the children either don't want the job or are ill-suited for it.

Founders of companies come in all shapes and sizes and with all manner of psychological baggage. A few common categories are:

Unwilling departure

: There are horror stories, such as the sons of the founder of

U-Haul

having their father escorted out the building by security.

Reluctant departure

: I recently met with the founder of major snack food company whose transition to his sons was smooth, but he misses running the business. I don't think he would have left unless his sons told him that unless he did, they wouldn't stay. In his 80s, he felt he still had a lot to contribute. Now he is relegated to running his foundation.

Backseat driver

: There are founders who bring in successors and stay on as chairman, but in some cases, when the successor tries to make a change that conflicts with the founder's views of how things have been and should be done, the founder undercuts him.

That happened to me at a company that I ran. The founder said he was perfectly willing to cede control, but I found out he was meeting with key executives off-site and asking them to report to him with changes they disagreed with. This confused the executives about who was in charge, and it undercut my effectiveness to the point that I resigned.

Chief inventor

: I once visited a software company that went from zero to $75 million. The founder had 12 computers in his lab, and he was the sole developer of every product. He had a group of developers to finish his products before sales sold them to distributors.

Unfortunately, the odds of a successful transition are not great. The United States Small Business Administration reports the odds of surviving a transition from the founding generation to the next are a mere 30 percent. Often, the founder is the top salesman, inventor and creative brain of the company.

It can be done, though. Here are five steps to building a successful succession plan in which the founder is satisfied, a quality replacement is found and employees and shareholders can feel good about the transition.

1

.

Develop a profile

. You need to develop criteria that outline the type of person that would be a good successor, including, but not limited to, the following:

  • years of business experience
  • years of experience in the actual business
  • managerial skills
  • strategic skills
  • sales skills
  • marketing skills

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2

.

Define the founder's role

. The founder's role has to be clearly defined. That could be:

  • stepping down over a period of time;
  • staying on with a defined role, such as working with his or her successor on strategic planning, product development or sales; or
  • staying on the board as chairman emeritus.

3

.

Develop a search committee

. A smart founder will develop a search committee and provide the committee with a list of attributes, skills and experiences she believes is needed to take over. The search committee should be comprised of:

  • founder
  • one or more independent board members
  • member of the senior management team
  • outside search professional

The search committee should do background checks that go all the way back to confirming the candidates' college graduation.

4

.

Watch the candidates' presentations

. The candidates should make a presentation that includes the following:

  • Management philosophy: A description of their management style.
  • Transition plan: How they plan to work with the founder to transition power.
  • Personnel development: Their process for developing management
  • Product development: Their process for developing products and services.
  • Personal shortcomings: Candid discussion of things they are not good at. In my case, I don't always communicate what I am thinking, because I assume people know what I am thinking.
  • Communication style: How they communicate with all levels of a company. Are they open-door or chain-of-command?

5

.

Meet the team

. Candidates should be brought in to meet and speak with the management team and employees so the existing workforce is invested in the process. The atmosphere should be relaxed and open. I went through this personally four times at my own instigation, and I found it worked very well in that I didn't have to prove myself to the employees. They felt that they were part of the process and that I wasn't shoved down their throats.

Everyone in a transition must be sensitive to the founder's feelings and the employees' concerns for their future. A founder, regardless of how much of the company he owns, is doing himself a disservice by not involving a variety of people in the search and selection process. Smart founders take the emotion out of the selection and are objective, which will lead to a great outcome for all involved.

Marc Kramer, a serial entrepreneur, is the author of five books and is an instructor at the University of Pennsylvania's Wharton's Global Consulting Practicum, where he serves as Country Manager for Chile.