Exiting Requires More Than a Thought
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MANAGEMENTSOLUTIONS Exiting Requires More than a Thought By Preston Ingalls “Life is a succession of lessons which must be lived to HOW SUCCESSION PLAYS OUT IN BUSINESS be understood. All is riddle, and the key to a riddle is Business owners will go to great lengths to put policies another riddle.” Ralph Waldo Emerson and procedures in place to ensure day-to-day operations run smoothly. They see the value of having standardized n June 1968, General William Westmoreland was processes to prevent variation in methods. These same relieved of his command in Vietnam when his new owners will develop 3- to 5-year plans to prepare and I boss, Richard Nixon, lost confidence in his approach. sustain growth in their businesses. His second in command, General Creighton Abrams, was However, many procrastinate developing an exit strategy. suddenly thrust in command. Abrams was a WWII hero at As key players, owners and stakeholders, we all want to Bastogne and was well respected by the rank and file. believe we are somewhat indispensable and a critical Abrams immediately switched from Westmoreland’s failed lifeline to the enterprise. But that dependency can create “Search and Destroy” strategy, put in place in the early a weakness and vulnerability. After all, we are all mortal. 60’s, and moved to the more successful counterinsurgency. We plan to retire someday. As we age, we are subject to General Fred Weyand said, “The tactics changed prolonged illness. Despite these possibilities, we prefer within 15 minutes of Abrams’s taking command.” The not to consider the eventual exodus from the business, unassuming Abrams was in sharp contrast to the flamboyant retirement, disability, passing on, or some other cause. Westmoreland who loved briefings and the press. It takes great bravery to think about what’s next … how Abrams focused on developing the South Vietnamese do I prepare for such a transition? But failing to do so could military (ARVN), which had been fairly neglected to that be considered selfish with negative implications to clients, point and enacted numerous efforts to change the war’s employees, and families. direction to include focusing on hamlet security. The results After 46 years in industry, I believe everyone in were phenomenal … but too late. The US population had my situation should have a transition plan to exit the grown weary of the war by the Tet Offensive in 1968, organization. An exit strategy ensures continuity of care for several months before Abrams took over. He no longer had the customer, employees, and the owners’ family. support. All military experts stated his approach, had it been Rather than sharing the conceptual elements as to how it implemented earlier, could have turned the tide of the war. should be done, I will explain how I set mine up. Even Abrams called the war winnable. Sir Robert Thompson, a British counterinsurgency expert MY SUCCESSION PLAN TEMPLATE who observed General Abrams closely during the Vietnam First, I had attempted to engage several family members War, pronounced him America’s greatest general since as a possible successor years ago without luck. Hiring a Ulysses Grant. Lewis Sorley, Abrams biographer who stated family member strictly as a favor is not a good reason to in his book Thunderbolt: General Creighton Abrams and the give someone a job. The intent was to make them part of Army of His Times that Abrams was the “most influential the succession plan for a variety of reasons, which is pretty general since George C Marshall.” common, but nepotism doesn’t guarantee competence Then why wasn’t he allowed to enact those policies or loyalty. as Westmoreland’s second-in-command? Westmoreland Besides, in a study of 1,600 family-run businesses was strong-willed and believed his own strategy was the conducted by the consultancy PriceWaterhouseCoopers, right one. He wasn’t prepared to listen to the advice of a only 36 percent of the family businesses surveyed survived subordinate. There was no succession plan for someone passage into the second generation. But it got worse from else to take over. One day Westmoreland was in charge and there with only 20 percent of businesses surviving into the next day he was out. There was no real transition plan. the third generation and a mere 7 percent continuing Westmoreland had a failed strategy with enormous public into the fourth generation. That’s pretty poor generational and presidential support while Abrams had a successful succession odds. strategy with no support. Abrams was set up to fail in his I decided to “grow my own” and focus on developing succession efforts. and grooming those with potential talent. In the leadership ABOUT THE Preston Ingalls is president and CEO of TBR Strategies, LLC, a Raleigh, North Carolina-based maintenance and reliability firm specializing in the construction and oil and gas industries. Preston can AUTHOR be reached at [email protected], or visit www.tbr-strategies.com. 18 | NOVEMBER2018 www.mcsmag.com courses I teach, I always say, the debrief at the end (what did precarious decision I may point it “leader’s job is to identify and develop you like, what would you have out and simply warn of the risk, then the next generation of leaders” so done different) and then I would recommend he come up with various that is what I did. I spent years and provide coaching and guidance. options. He may ask me for options, considerable investment (even when • We look for the things that which I will freely offer, but only if the money wasn’t there) to train were repeatable and those asked. I wanted him to understand several of my most promising folks to that needed changes as well the reasoning versus relying on me. form a partnership. as lessons learned as part of a I encourage him and the other process of constant evaluation future partner to discuss business DETAILING THE and coaching, which helps the matters routinely during the week. SUCCESSION PROCESS learning process and growth. They stay in touch frequently, even I explained to each a process how daily. I freely share financials (P&L, they could become owners via a I also developed various Balance Statement, Cash Flows). This partnership through a buyout process instruments that captured my includes how to interpret and make over a period of years. They were knowledge and experience by compensation decisions. excited to gain some equity in the illustrating how I make decisions I have handed off all estimating, enterprise. This gave me an exit through the use of a database and bidding, and pricing over the last process in the years to come. The spreadsheet to reduce the reliance year. The intent is to be prepared to process consists of the following: on recall or memory. We would have leave at a very specific date versus sessions where we would collaborate an estimated or rolling date as some • I used a Job Task Analysis (JTA) for hours how we would reach a folks do. I will reduce the time I to identify several hundred tasks decision together on the phone or on am here to about 20 percent for the they would need to be able to conference calls. Time consuming, changeover but I am confident the perform in their roles and I had yes—worth it, of course. They years of transitioning will have paid them assess their abilities to needed to understand the logic, not off and the exit plan will have bred perform those tasks to identify just the steps. the confidence and competence training needs. I soon began transitioning the needed to continue the business. • We used every opportunity to decision-making to my operations Eight years of grooming both, with 3 work together and would brief manager to avoid second guessing. years of direct preparation, will help prior to the assignment and If I saw he was possibly making a me to rest easy at night. ■ www.mcsmag.com NOVEMBER2018 | 19 .