In almost every growth business, the time comes when you either need to replace yourself or you want to step down. In the first case, you might be looking at an exit on the horizon for which you need to prove that the business can stand on its own feet or you might be keen to make the most of a new business opportunity, do something completely new, or even just take a breather from the all-consuming job of growing a business. Or in some cases you might simply have reached a stage where the business needs new leadership to take on its next challenge.
Planning – and preparing to let go
Letting go of control of a business that’s been built up over many years is a huge wrench for most people. I hear entrepreneurs talking about their business as their ‘other child’ all the time! So even when you know it’s for the best, making the decision to move on can be tough.
That can cloud your decision making. It’s rarely a replacement ‘you’ that’s best for the business, but instinctively, that’s often what people look for, rather than the skills that are necessary to take growth forward. An approach like this is bound to fail, not least because you’re simply not going to find another you!
Business leaders who’ve exited successfully always emphasise how important it is to take a step back and analyse the situation dispassionately.
What does the future of the business hold? What skills does the management team need to get there? If the next step is likely to be, for example, taking investment or an IPO, a CEO with the right experience and contacts for this is essential.
However, you do need a CEO who fits the culture of the business, or they can be more disruptive than beneficial. For example, a corporate CEO wouldn’t necessarily be the right fit for a growing business that still has an entrepreneurial feel.
Finding and choosing your CEO
There’s no short cut to success here and members regularly discuss whether it is better to promote from within or hire from outside. Internal hires can remove concerns about cultural fit and trust, but there may not be the right experience or skills amongst the existing team to take on the role. The key in either case is to plan far in advance, create a culture of progression and be clear on the skills that you are looking for.
One member recently told me how, when he stepped back from the sales side, one of his (previously) weakest sales people stepped up to the plate in a way he had never expected. He says his biggest problem now is fighting the temptation to meddle!
You never know how people will respond to opportunities, so it’s important to create opportunities in the business.
If you do find you need to look externally, use an NED or chairman to help you write the job spec and then manage the existing senior team to explain why they haven’t been put forward for the role, and avoid friction.
One popular approach to hiring externally is to bring in someone initially in a more functional role such as a COO or Ops Director with the understanding that he or she can grow into the CEO role after earning their spurs.
Otherwise, I’d recommend spending at least 12 months scouring the market to get a real feel for the type of person you want. One great sign when you’re speaking with candidates is if they’re really carrying out their due-diligence on your business. It shows they really want to understand the situation they are coming into and are serious about the role.
Getting the right fit
When looking to replace yourself in the business look for someone that won't disrupt the culture of your business. For example, a corporate CEO wouldn't necessarily be the right fit for a large business that still has an entrepreneurial feel
Don't assume people are like you; they have different strengths and weaknesses. Look for someone who can fill in the gaps where your weaknesses lie
Break your role down into number of different roles as you can'tnecessarily replicate your specific background in one person
Spend at least 12 months scouring the market to get a real feel for the type of person you want
Don'trush the recruitment process and spend some months planning t he handover
Have a 2-3-week intensive handover - this should be short so that t hey can start to get a real feel for the business and staff are going to them rather than you
Do shared appraisals with senior team so that they can see what each person has achieved in previous months as well as getting a feel for the future achievement aspirations
Make sure that you have an NED or chairman who can help you manage meetings with the senior team to explain why they haven'tbeen put forward for the role
Are each person's goals aligned at the top? Make sure the business owners are on the same page
It'sa good sign if a candidate is really carrying out their due-diligence on your business - he/she really needs to understand the situation they are com ing into
How to ‘land’ your new CEO
Setting your new CEO up for success is as much about removing yourself as anything else! The best situation is when you already have a new project or business ready to go which you can focus on (rather than interfering in the old one).
Alternatively, when the induction and hand-over’s complete, you could take yourself away on a long break. This makes it clear to everyone that you’re no longer in charge. This is probably the most common tip I hear from entrepreneurs who’ve successfully exited: how important it is to physically remove yourself from the office and the business.
You should prepare your team for the change well in advance.
You don’t just need buy-in from the management team, but the rest of the team as well. That’s especially important if you are prominent or a figurehead in the business as it can be a spur for people to leave. You should head this off by explaining what the reasons for the change are and allay any fears people may have over redundancy, etc.
When stepping away from the day to day it is very important leading up to this process to manage the handover of your key clients to other senior staff.
If your clients see you as their first point of contact this is not valuable to the business and de-values your staff's worth and more importantly the valuation of the business (work towards making yourself redundant). Give your employees job title a client will look for when reaching out to the business. This will reduce the number of clients making enquiries directly to you.
Don't disconnect completely from your key clients, call them up once and a while and have a catch up to re-enforce the relationships.
Don't ignore the business
- Make sure you still make an effort to go out and speak to your staff.
- Emotional detachment from work: Complete detachment is unrealistic, so understand what elements of the business you need to know about or be involved in. It's very easy to worry about everything
- A useful test when tempted by any tasks is to look at the time scale of the task. If it relates to any event or activity or development which will be implemented in the next 3 months, it may not be the ideal focus for the CEO
- Don't be predictable and don't let people settle when stepping away, e.g. turn up to the office unannounced just to see what people are up to
Replacing yourself as CEO with a minimum of disruption is easier said than done. But ultimately a successful transition is about empowering your new CEO to make decisions without interference from you (oversight by the board and clear governance can help with any concerns you might have). That means ensuring your team sees them as the boss, and not you. It’s only by removing yourself from the scene that such a transition can take place properly – but that’s perhaps the hardest part of the whole process!