Meet Your Replacement
by Don Moore
After 32 years of consulting, I don’t get surprised very often by a business owner’s request. But recently I have been surprised by the number of business owners who have asked us to help them hire a president to run their company: six in the past year + and two more in process right now.
There are advantages to hiring a President: if you own a business, it is probably the highest performing financial asset that you have. Why sell it and put the money into a lower performing asset when you know this business, its risks and its potential better than you’ll ever know the stock market? For an increasing number of business owners the answer is to hire a president. The advantages are obvious:
- You can keep the business and take it to new levels of financial performance by marrying the decades of experience of both you and the new president.
- You have the pride of ownership and sense of continuing to grow it.
- The business stays in the community, which is extremely important to most business owners.
- And, you get your life back.
All that said, it is a risk-filled proposition. The attributes that make you a successful business owner often make you a poor candidate to hire someone else to run the company that you’ve built, nurtured and spend most of your time running on a day-to-day basis. These include:
- The pride of having built it
- The freedom to make decisions
- The thrill of success
- The sense of “win” when strategies, investments and risks work out
- Not having to defer to someone else
- Satisfaction of contributing to livelihoods of employees and the community
- Having control of the engine that builds your wealth
- Knowing that, good or bad, the outcomes are all on you
- Something to do every day that gives you a sense of accomplishment…every day
The list is much longer than that, of course. So while you get your life back, you also have to hand off many of the very things that bring you satisfaction. This is why most business owners sell their business if they don’t have children to take it over.
The point is this: you can find a good president, there is a great pool of candidates who are looking to get away from the big company rat race. The bigger question is whether you are capable of letting someone else run your business.
Therefore, the most critical role Decision Associates plays in helping owners hire a president is to help you:
- Understand just how different life will become
- Understand how to own a company but not run it
- Construct a system to “govern it” as opposed to “lead it”
- Create the organizational structure, management systems, strategies, metrics, financial reporting systems and governance model (yes, you’ll need a Board of Directors) to govern from an arm’s length
- Establish the ground rules for resolving differences in interpretation and opinion on key strategic issues
- Know the difference between “that is a wrong direction” and “that is a different way than what I’d do…but, it really isn’t wrong”
- Find something to absorb your time and energy
We take these steps seriously. What’s more, we know that every owner is truly unique in how ready they are to take these steps. For that reason, we created a separate process to lead you through before the search even begins. The purpose of this is to help you “make a movie” of your new roles and model how your day-to-day will work in the future.
All that said, how are the six presidents we hired working out? Five of the six are home runs; the owners have exactly what they hoped for in terms of freedom from the day-to-day and have a great decision-making relationship with their president. The businesses are doing very well. Two of the owners tell us that the business had reached a “step change” and that they needed someone who had the type of experience that they didn’t have. These two owners feel that their businesses are growing faster and more profitably than they personally would have been able to achieve.
The sixth didn’t work out…at all. In the postmortem, the owners realized that they took their hands too far off the wheel too soon, without control systems and decision-making guidelines in place. When they reasserted control, it was a tug of war. The president left. Would they do it again and change the parameters? No, and I wouldn’t recommend it to them.
I’ll end the way I began: if you own a business, it is probably the highest performing financial asset that you have. Why sell it and put the money into a lower performing asset when you know this business, its risks and its potential better than you’ll ever know the stock market? For an increasing number of business owners the answer is to hire a president. You can keep the asset and take it to new levels by marrying the decades of experience of both you and the new president. And, keep it in the community. And, get your life back. A Win-Win-Win-Win.