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Questions and Answers
Provided by Dr. BilL Anton.
Topic: Why Business Owners are Reluctant to Discuss their Succession/Transition/Exit from their Business
(Q1) Why do so few business owners have a prepared exit/transition plan? (Data suggest less than a third of privately held businesses have a plan)
(A1) A couple of reasons:
1. Many business owners find themselves stretched in meeting multiple expectations and see long term planning as a distraction from the business cycle.
2. At a more profound level, the brain interprets ambiguity as danger and change involves much that is unknown.
- Do the harder thing
- Take a longer-term perspective
(Q2) Does having an exit/succession/transition plan really make the transition easier?
(A2) Having a plan does reduce ambiguity although execution usually presents some unexpected issues. Nevertheless, the plan serves as a structure against which to contain some of the ambiguity and hence fear associated with change. A plan also allows you to make revisions as you revisit it based on new economic, social, and business information.
- Initiating purposeful action reduces ambiguity and creates steps that can make change easier.
- Having a plan can be viewed as a work in progress that can be improved as planned execution is approached.
(Q3) Why are business owners reluctant to take the appropriate steps toward their exit?
(A3) This is a very open question because there are many reasons why people don’t comfortably address change. At the most basic level, as one’s level of personal mastery moves from emotional intelligence to self-knowledge change becomes easier and change is often embraced. A high level of personal mastery assesses risk/reward objectively and often leads to actions aligned with ones’ vision and goals.
- Learn about personal mastery and mental models. A good resource is The Fifth Discipline by Peter Senge.
- Spend five to ten minutes per day on attention focusing or meditation. A good source is Jeff Warren on the Calm app.
(Q4) What prompts business owners to continue to work in their business longer than they’d like?
(A4) One reason for this is that their business life is part of the eco-system that makes use of their long-standing habits. Changing any part of a system changes the whole eco-system and often there is nothing to replace it. Unless change is embraced enough to override the brains tendency to interpret change (ambiguity) as danger we can stay stuck in old patterns. For example, many top executives that we have worked with at CEOE still fear that they are one decision away from losing what they have achieved. On the surface this presents itself as “taking care of my family and workers” and “I won’t know what to do with myself since my business has consumed so much of my life and time.”
- Talk with business associates and friends who have gone through successful transitions about their experience before and after exit.
- Don’t regard your internal reactions to potential change as permanent. This is an old trick that our brain plays on us. It prefers the status quo because in many ways the brain is lazy. We can override this tendency by engaging the frontal lobes. Two great ways to do this are maintaining a long-term perspective and regular meditation. All things change when you do!
(Q5) Why are so many business owners afraid to let go of their business?
(A5) Many business owners have relied on their business success as evidence of their value and individual worth. While their achievements are often impressive and genuine pride is called for, no amount of external achievement can substitute for your loving acceptance of yourself. If your self-worth is not in your own pocket, then you may hold on to external evidence of your worth too long and avoid the next stage of personal mastery in your life.
- Try sharing vulnerabilities with trusted friends, especially those you have kept inside to preserve an image of competence with others.
- Remind yourself daily that you are much more than your accomplishments and much of what you have achieved has been despite not because of your fears.
(Q6) If you are unwilling to let go of your role or your business, are you an effective leader?
(A6) Task based knowledge, skills and abilities are threshold competencies for leadership. Leadership is much more. Leadership is the ability of achieving results through others. Ironically, the upper limit on this is the leader’s commitment to personal mastery. A leader’s commitment to personal growth parallels their commitment to their company’s future. In many ways what happens in the company is linked to what happens inside the leader. An effective leaders must be able to change roles as the company requires it. If their role as “leader” becomes their main identity, then their ability to lead effectively is compromised.
- Try to separate who you are from what you have accomplished. This is not easy in western society but often liberates you to be more effective.
- An important ingredient in mountain climbing is taking care of your base camp. You need a place to go when things get scary. You are the base camp stocked by a replenishment of personal mastery. This is the best way to equip for survival and mastery under all conditions.
(Q7) What does the perfect exit from a business look like for an owner?
(A7) A company that exceeds the owner’s expectations of what was possible because he or she has built a system that is capable of learning. If successors co-created the company’s vision and understand the relationship between personal mastery, team learning and mental models then they will be part of a self-correcting learning system that will reflect on the owner’s wisdom in evolving the ever-growing capacity of his or her company.
- Prepare your company for exit from the beginning. Create a system that endures because it learns from experience.
- Since the consequences of our actions are often experienced remotely in time, it is important that actions in the present be influenced by long-term objectives. This also engages the frontal lobes of the brain where the very best decision making occurs.
(Q8) How can a business owner ensure their desired legacy lives on once they exit from their business?
(A7) By ensuring that the legacy is not fixed but dynamic. It is impossible to know the future but if we build in adaptability as part of our legacy then the spirit of what we leave behind is likely to endure. The more we create a living system that address the impact of future change in all constituencies the more we create alignment between the company, workers, and customers in changing circumstances.
- Creating a company of leaders that encourages a diversity of ideas who are empowered to address change, and then letting go is likely to ensure a desired living legacy.
- Build and strengthen processes that will live on beyond your tenure. Outcomes will validate the effectiveness of the processes.
(Q9) What makes it possible for a business owner to achieve results through others to facilitate a smooth transition and exit?
(A9) In a word, humility, which is simply knowing yourself as you truly are. Institutional power is based on position and is relatively easy to acquire. Personal power is based on respect. When the two are combined leadership is at its best. Although we are called upon to play different roles as business owners, the danger comes when we confuse our role with our value as a person. This is experienced by others as inauthenticity and generally leads to distrust and disengagement. The reverse is also true. A history of mutual respect and a willingness to listen to and hear communication from persons who are closet to the processes in the work environment energizes others and enhances their engagement with their work. Leaders with high levels of emotional intelligence and self-knowledge are likely to have these qualities.
- Our relationship with ourselves is the upper limit on the quality of relationship we can have with others. If you are self-depreciating in any way, you are depriving others in the same manner. You may want to learn more about your mental models.
- Helping others grow and become more effective increases their commitment to the leader and the organization.
(Q10) What is the most important leadership quality to address during the succession planning, transition, exit process?
To be a stable force that is confident moving forward in the absence of complete information. Serving as a calming and realistic change agent that understands and supports all constituencies in the organization during the process of change. Both qualities are products of high levels of emotional intelligence and self-knowledge.
- Commit to greater self-knowledge. If we don’t know who we are, it is not possible to know others and much more difficult to inspire followership.
- Pursuing excellence requires that you commit to reducing the gap between tacit mental models established early in life and your unrealized potential.