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2 Roadblocks to Successful Leadership Transitions

A solid succession plan and a few ground rules are essential when selling your business.

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According to, more than 7,800 were sold in 2016. That's up by nearly 9 percent from 2015. Good news, right? Unfortunately for many, it isn't always as smooth as walking off with a big check. Many owners will sell, but there will be contingencies for future earnings, requiring owners to continue working for up to five years to earn the full sales price. Why? Because they haven't been able to implement a good succession plan with a successor prepared to lead the forward.

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Related: 5 Mistakes to Avoid During Exit Planning

Several years ago, I was working with a small, rapidly growing professional services company where the owner was nearing 60. He decided to develop and implement a succession plan, which would allow him to spend more time with his family. So he turned to his high performing vice-president of sales and promoted him to company president.

Following the promotion, I was selected to help the new president with his leadership transition. And, what I quickly learned was that there were two things that impeded the success of the president -- which only the Founder could resolve. The founder needed to redefine and shift his close relationships within the company, and he needed to step aside for the new leader to truly operate as president.

In this situation, there was a long and very close relationship between the founder and controller. They were known to meet for drinks after work and go on weekend retreats together. The founder felt the controller was very loyal due to his longevity with the company, which led to a high level of trust. This existing relationship was creating a real challenge for the new president. He found himself being shut out of financial conversations and decisions that, as president, he should have been initiating. The relationship was negatively impacting his effectiveness in his new role.

Related: You Can't Lead Your Business Forever

The founder was also making requests of the controller on a regular basis that undermined the reporting relationship between the president and controller. In effect, the founder hadn't made the necessary transition to chairman and was still involved in the ongoing operations and decisions. Thus, the president felt like he had the title of president but none of the responsibilities.

In the end, the president left for an opportunity where he was empowered to be president. The new opportunity wasn't just a title. Sadly, the founder ultimately sold the company, but not without an earn-out requiring an additional three years of full-time work for him.

So if you are contemplating transitioning from the day-to-day operations and handing the baton off to someone else, ask yourself these questions before starting the transition process:

  1. What long-standing and existing relationships do you have within your company? Make a list.
  2. How should they change when you start your transition?
  3. How do you plan on making this change work for you and the person it impacts?
  4. What concerns you about the change in the relationship?
  5. How committed are you, on a scale of 1-10, to making this change?
  6. What do you need to give up? Make a list.
  7. How committed are you to giving up these activities, on a scale of 1-10?
  8. What do you need to be involved in?
  9. How often do you plan on physically being in the office?
  10. If you make all these changes, will employees believe that you have actually stepped away from the day-to-day?

Related: 9 Things That Make Good People Quit

And don't wait. As Patrick Ungashick, author of Dancing in The End Zone says "the fewer the years you have until your exit, the less control you have over the exit."

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