KMU Magazin, Succession Planning Interview with headhunter Wirz & Partners
Erik Wirz in an Interview with the KMU MAGAZIN
by: Erik Wirz
KMU Small and medium-sized enterprises (SMEs) are people's businesses. And if the owner or the boss, who is often also the owner, is thinking about retirement, he or she should do so well in advance. Five years is a minimum guideline. But planning ahead is just one of the many challenges that come with finding a successor and handing over the reins. Here are six common pitfalls - and how best to overcome them.
"It's too early to start thinking about the next CEO."
In most cases, practical experience shows that it's not too early. Consider the timeline: You start the project and define the desired profile of the successor. The search itself will take at least three months, preferably six, including rounds of interviews and assessments. With notice periods, a year can easily pass. A further one to two years should be allowed for onboarding and handover. In the case of a properly financed business transfer, the transition can take five to seven years - and often the same amount of time for the owner to exit.
"My successor can take over seamlessly."
A succession process, no matter how professionally organised, creates uncertainty for stakeholders such as partners, employees or shareholders. Additional structures within the organisation can help mitigate this uncertainty - for example, a succession committee, an extended management team, etc. As important as onboarding is, the 'transition' or exit of the current owner or CEO is equally important. Make sure that this step is planned well in advance. What roles will the parties play in the start-up, transition and final phases? How will knowledge be retained and in what form? Clear roles and discipline are essential - an external perspective and regular feedback sessions will help both parties stick to their agreements and avoid unnecessary strain on the organisation.
"My profile will be relevant in the future."
If you were to advertise your position today, what would you base it on? The job advert from 1983 when you applied? Or your CV and qualifications? While commendable, this approach doesn't benefit the company. After all, you're looking for someone who can lead into the future, understand the needs of future customers and bring current methods and know-how to the table. Has your industry changed little or a lot in the last ten years? How have communication tools, audiences and customer needs evolved? If there have been significant changes, it's likely that the future CEO will have different needs than you did. And while you're documenting, as an owner or CEO, there may not be a job description, or it may be from a bygone era. But it's an essential part of the search profile and helps recruiters or consultants find the right candidate.
"Confidentiality is paramount."
Gone are the days when decisions were made behind closed doors. The more transparent a CEO is about his or her succession plans, the more the organisation benefits. Of course, you shouldn't raise this point at your very first board meeting. But it shows forward thinking and action. Involve the organisation in the process - it's part of the strategy and part of the overarching organisational planning. This will benefit your successor as well as you. It's also perfectly acceptable not to have all the answers all the time. Most leaders go through this process only once in their lives, which makes it all the more important. Being open about the company's need for a successor will ideally attract support from within - or a candidate who wasn't on the radar before.
"We can do it ourselves."
You may fill in your own tax return in your private life, but you probably have someone to advise you on your business. But when it comes to succession, it is definitely better to call in specialists. Why is that? Because it's not just about finding candidates. You're not looking for a double, you're looking for someone who can meet your future needs. In addition, a succession process involves a considerable amount of advice, which can be better provided by a neutral external person or systematic coaching. In SMEs, the basis of the corporate culture often lies with the owner. The transition from one 'culture' to the next is therefore a challenging and crucial phase that shouldn't be taken lightly. External consultants also help to 'de-emotionalise' many of the issues associated with power shifts.
"Let's revamp our image too."
Tempting - the new CEO comes with special effects. A new logo, a sharpened purpose or repositioning of the company, changed structures... don't make the mistake of trying to turn too many screws at once. Give the new leader room to change. The succession process is challenging enough. It often leads to a certain professionalisation of the organisation - out of necessity. Governance structures, job descriptions and reporting lines become more visible and transparent. Clearly measurable objectives should apply to the new CEO and the rest of the team.
"We'll discuss the price later."
If someone wants to take over all or part of a company, or become a long-term shareholder through acquisitions, they should quickly agree a purchase price with the existing owner. Ideally, this price should be based on a clearly visible valuation method (e.g. the midpoint model) that both parties can identify with. Whether you're an owner or a buyer, it's important to seek professional advice. This is particularly important in service and consulting businesses, where much of the value is directly linked to the owner and is difficult to replicate. Another time dimension concerns the stage a business is at. A successor should be sought at the best of times, not the worst - when the business is in its prime.
How to succeed in succession:
Five tips from expert Erik Wirz
1. Plan: Start early and align with the organisation.
2. Prioritise: It's about nothing less than the continuity of the business.
3. Separate processes: Initiating additional processes at the same time as succession can quickly become a Herculean task.
4. Bring in professionals: An outside perspective is invaluable.
5. Communicate: Be open and transparent from the start - with your leadership team, all employees, potential successors and your coach. Transparent communication is the bedrock of success.
