What Will They Do Without You?

Four men in their 40s started a business 10 years ago. They grew it fast and furious through mergers and acquisitions, and though countless consultants had urged them to consider succession planning, too many other priorities dominated their attention. But in a matter of 48 hours, one dropped dead from a heart attack, and one was caught embezzling – worst of all, both were the customer-facing leaders of the company.

We’ve all heard those kinds of stories, and yet the call of the moment is a powerful distraction. The Sirens singing mesmerizing melodies of profits and growth, tests and triumphs, lure owners to procrastinate just one more year.

“The big mistake is not making it a priority – not thinking that of all the things you have to do, succession planning is the most important,” Meridith Powell told me earlier this year. This business consultant and author of Who Comes Next, added, “The biggest danger is not realizing what a priority it is. People think that they’re bulletproof . . . If you are a CEO who cares about your customers, who cares about your employees, you owe it to them to do it. Quite frankly, if you care about your family, you owe it to them to do it.”

For about 15 years, I’ve had a great interest in business succession planning and have conversed with some very wise experts on this important yet touchy subject – so I was naturally pleased that our cover story on ARG Industrial this issue serendipitously afforded the opportunity to examine some of the succession/ exit avenues available to owners. In the case of ARG, when the two aging sibling owners decided to exit the business by forming an employee stock ownership plan (ESOP), it was like Jack’s proverbial magic beans, sprouting tremendous growth that’s still climbing 17 years later. Along the way, says President and CEO Mike Mortensen, numerous acquisitions have taught a lot of lessons, and Mike offers some interesting perspective for both buyers and sellers.

As you know, family business succession in distribution is not uncommon, but, sadly, neither is the turmoil associated with the transfer of reins. “You can’t go far in this business without hearing a tragic story of sibling love and partnership that turned into war, litigation and bankruptcy,” says Dana Telford, principal consultant at The Family Business Consulting Group. He told me a few years ago there are two parts of a strong foundation for conducting even the most basic transition conversations. (1) They must set a code of conduct. This has to do with how they will treat each other, he said. The words they will and won’t use. It has to do with respect, listening without interrupting, not taking things personally but taking personal responsibility, and acting like grownups with the people you grew up with. (2) They must all agree and adhere to a set of guiding principles and core values. This might be integrity, honesty, kindness, service. By agreeing, family members commit to living by the values – and also subject themselves to accountability and confrontation if their behavior doesn’t conform.

Whichever route you choose, the takeaway message Dana and Meridith would both tell you is: It’s never too early to start planning.