Succession within Rapidly Growing Businesses

One would think that succession is easier in rapidly growing businesses because increased gross revenue provides opportunities to create new positions.  Plus rapidly growing companies present constant challenge which hopefully translates into improved retention as key people assume there will be opportunity for advancement. However, rapid growth adds its own twists and turns to the succession puzzle.

Succession decisions are impacted by an organization’s stage of development.  The start up phase often requires a higher percentage of flexible “doers” who can juggle multiple tasks and think on their feet. A later phase of development may require increased emphasis on specialists and procedures. Often key people have not had enough time to get up to speed in their current positions and aren’t ready to be promoted when the growing business needs additional leaders.  Plus, people who were brought in to make things happen during the start up phase of a business are often not interested in or trained for management positions that emphasize things like policies and procedures, internal systems, and organizational development, instead of product/service and customer related tasks.

The turnover rates in many rapidly growing companies are much higher than one might expect.  Especially during periods of low unemployment, competitors can be very aggressive in their recruitment methods.  Several firms employ recruiters who spend their time traveling so they can sit next to your employees and discuss their career opportunities.  Leaders of high tech companies find that their Generation X employees are more oriented to projects and career building than long term loyalty.  When a project it completed, it goes on the resume that in turn goes out on the Internet.  If the timing of advancement opportunities or more challenging projects coincide with the completion of a project, the company has a better chance of retaining its Generation X employee.

The organizational structure of your company can impact your succession-related choices.  For example, if you have a centralized model with the corporate offices providing services (administrative, marketing, accounting, etc), you may need to very intentionally convey that you are open to considering promotion and/or transfer to corporate service positions for employees who currently fill field operations roles.  Field experience can often translate into improved results in corporate service positions.

If you are have a decentralized model with self-sustaining profit centers (usually along product lines), you will probably need “generalist” leaders over each profit center. However, day-to-day operations encourage managers within a single profit center to focus/specialize.  This decreases a company’s chances of promoting from within when the lead role position of a profit center becomes available.  A management development program with availability of work experience across different product lines can go a long way in a company’s quest to promote from within.

Companies that have geographic expansion and decentralization as two of their growth strategies often struggle with succession decisions regarding remote offices.  Should the leader be a person from the home office who is familiar with how the company operates or should the leader be familiar with the market to be served?  When the field office is primarily a sales-led operation, it is usually a good idea to emphasize familiarity with the surrounding market.  This can help the leader recruit employees as well as attract customers.  If the company’s approach to doing business is radically different, it can pay off to ask an experienced employee to set up the new field operation with the expectation that he/she will replace him/herself before returning to the corporate headquarters.

Succession decisions are influenced by the purpose (mission) of the business.  For example, when the over riding purpose of a family owned and operated business is to provide a living wage for each family member, there is increased risk that some people will not be qualified to actually do the jobs they are paid to do now, let alone be ready for or worthy of advancement.  Often these companies remain fairly small because there is insufficient incentive for family members to learn, change, and grow as long as they are being paid.

Some family-owned and operated firms have sustained legacy as an over-riding priority, which leads to the assumption that a family member(s) must ascend to the key leadership role(s).  A great deal of time and effort can be invested in trying to prepare an heir apparent, and it can be very frustrating for first generation founders of businesses when their offspring don’t rise to the occasion.

The primary growth style of a business has an impact on succession-related decisions. For example, the growth of some companies is led by sales.  It’s likely that the president will have a sales orientation.  In businesses that are deal led, a more financially oriented President will be at the helm.  Both of these people emphasize negotiations, however one focuses on customer-oriented negotiations while the other focuses on vendors and competitors.

Many of today’s fastest growing companies are driven by product development or technological innovation.  Their founders may have been “techies”, but the successful businesses have either transformed their founders into more business-oriented leaders or the founders have been replaced.

Succession decisions are impacted by the personalities of existing members of a team for which a new member is being considered.  If the group dynamics already feel too competitive, non supportive, or unfriendly, the addition of a very arrogant person is probably not a good idea.

Whatever you do in succession-related decisions, expect little surprises.  It’s difficult for some people to visualize their future.  When my consulting firm first opened its European operation, we transferred six people from ourNew England operation.  The three people who had sworn up and down that they would never return toNew England each requested transfers back to the States within 18 months.  And the three who had expressed concern about leaving “home” are still inEurope several years later.

Some pointers:

  • Consider the impact of organizational structure.  Open channels of communication about the availability of transfers from field to corporate positions.  Create management development programs that provide cross department training and work experience opportunities.
  • Keep track of the timing of major projects.  If a position opening does not coincide with the completion date of a major project and a key employee does not get promoted, make a special effort to assure that employee that he/she is being considered for other positions.
  • Resist the assumption that key players in the entrepreneurial stage will want or be ready for more administrative positions that are available during later stages of the company’s development.
  • When expanding geographically, consider the primary function of the leader.  If it is sales-related, familiarity with the market to be served may outweigh experience with your company.
  • Be realistic about the organization’s stage of development.  It may be necessary to face some tough decisions about bringing in some new talent and outside perspective rather than expect a long time employee to make major changes in his/her identity.
  • Try to be flexible when making succession-related decisions since a new position may not offer the panacea imagined by he person who has just been hired or promoted.
  • Reconsider old assumptions about compensation.  An employee who delivers excellent service to customers, improves the product, or keeps a system up and running is worth as much or more to a company’s bottom line as a general manager or a financial analyst. In progressive companies, advancement of an individual’s career does not necessarily mean that the person must become an “executive.”
  • Remember that major succession decisions must serve (be compatible with) the primary mission (purpose) and growth style of the organization.
  • It’s important not to ignore personalities, team dynamics, and personal preferences, but it’s also important to remember that things can change, people can grow, and timing is everything.

 

Aldonna R. Ambler, CMC, CSP has earned the right to be called The Growth Strategist®. She has won over two dozen national and statewide “entrepreneur of the year” awards for the resilient growth of her international businesses across four recessions.  Her midsized B-to-B service, technology and distribution clients get on and then stay on the published lists of the fastest growing privately held companies. All of her own service businesses (strategic planning, executive advisory, growth financing, radio show, speaking, search, etc.) help midsized companies in Achieving Accelerated Growth With Sustained Profitability®. Ambler hosts a weekly peer-to-peer-to-peer-to-peer online radio program at www.GrowthStrategistRadioShow.com that features interviews with CEOs/Presidents of midsized companies (typically between $20 and 200 Mil/yr) sharing success tips about the growth strategy-of-the-week. She can be reached toll free at 1-888-Aldonna or at Aldonna@AMBLER.com.

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