Successful ownership transition is difficult to achieve, and for it to happen, the first tier has to embrace the transformation brought on by the second tier.
Over the last two years, Zweig Group has supported more than 20 architecture, engineering, and planning firms in their pursuit of transitioning ownership from the founders to the second tier. We have assisted in moving them both financially and holistically to engage the new generation.
Passionately engaged in the work of the firm, these founders worked their entire professional careers to build their organizations. It is no wonder that most often ownership transition is not just a financial transaction, but a process of letting go. “Breaking up is hard to do,” but letting go is harder – and can create potential opportunity beyond anything they could imagine.
The fear is often the realization that they are turning over what they created, the very end game of their career, and placing their annuity in the hands of a younger generation that has to make good on its promise to safeguard the legacy.
The challenge of the founder is to not just sell stock to another tier of leaders, but most importantly, to let second- and third-tier leaders handle vision, business development, and day-to-day operations. We have helped those in their seventies realize and materialize their idea, and we have assisted those in their thirties with creating their end goal transition so that when they reach their 50s, they have a strategic succession plan.
When we finally get into the details of the leadership transition, we often find that the senior leaders have often not thought about “Who are the Whos?” – the most critical and often least thought about question.
Recently, we provided strategic planning to a highly dynamic firm that could not make the decision as to “Who are the Whos?” from a leadership transition perspective. Turning to wisdom that transcends even our rational thought, Dr. Seuss provided the answer to the conundrum. It was classic Dr. Seuss, in How the Grinch Stole Christmas. All of the Who's in Whoville were saved by Mary Lou Who, the Who who transformed the Grinch and saved Christmas. Without the courage to step up and challenge the Grinch, the Who's in Whoville would have been lost. Mary Lou Who saved them, just like identifying the Whos that will take over the leadership of a firm and propel it in a new direction.
We are often placed into challenging positions to force the leadership transition decision, to radically transform a founder’s thinking and to go out and recommend who we believe could provide significant change to the organization.
In the cult classic, The Matrix, Neo is faced with an extreme decision from the character Morpheus: Take the blue pill and nothing changes, or take the red pill and his world is radically transformed.
Without change, the status quo is maintained, the firm does not change and grow, and senior leadership runs the risk that without embracing the ideas and enthusiasm from the second tier, they compromise their annuity. By taking the risk, the status quo is radically shifted. Change is managed and mentored and the second tier takes the firm to places that the first tier never imagined.
In recent engagements, we have recommended that highly valued, highly competent staff members in their early thirties become, in one instance, the chief vision officer, and in another, president of the firm. In both cases, the staff members were women, offering a radical transformation to the firm’s previous leadership culture and organizational structure.
This change does not come without thought, exploration, and vetting of the second-tier ideas and ideology. Ultimately, it is their responsibility to prove to the first tier that they have what it takes to lead the firm.
Change, in any situation, is never easy. Simple as a concept, but the ramifications are usually sudden, short-lived and over, and everyone moves forward. In ownership transition, the dynamics create the opportunity for long-term change, to radically alter the way the firm moves and operates. That risk has to be assimilated and embraced by the senior first tier.
When change is fully accepted, and the second tier steps in, the first tier need only guide their successors. Their best approach is to gradually phase away from the day-to-day, allow the new team to engage the market, transform the firm, and successfully grow the organization into the future.
The blue pill or the red pill? An apparently simple choice, just not an easy one!
Ted Maziejka is a Zweig Group financial and management consultant. Contact him at tmaziejka@zweiggroup.com.
This article is from issue 1150 of The Zweig Letter. Interested in more management advice every week from Mark Zweig, the Zweig Group team, and a talented list of other guest writers? Click here for to get a free trial of The Zweig Letter.
Zweig Group is releasing a new book on ownership transition on August 5, 2016. See the Insider’s Guide to Ownership & Succession Planning for Architecture, Engineering & Environmental Consulting Firms