Three takes on planning for your exit

Until 2004 Ravi Maniktala ruled supreme at ME Group (Omaha, NE), a 60-person mechanical and electrical engineering, building simulation, and lighting design firm. At that time, however, Maniktala, still the firm’s president today, decided to implement a leadership succession plan, grooming three employees to take the reins. Result: the company has doubled in size, going from 35 people in 2004 to the current number and increasing revenues from $3.6 million to $8 million under the new management team. “They take so much pride in ownership that they are out there drumming up business and making the company grow,” Maniktala said during a session of The Zweig Letter 2010 Hot Firm Conference in Washington, D.C., in late October. “They have made the company grow.” Maniktala implemented a succession plan by establishing a stock ownership plan with a “golden handcuff” attached to it: the stock is distributed through bonuses. Maniktala also set up policies and procedures aimed at creating incentives for education, such as attaching raises to new certifications. Time passes That’s the kind of plan Harrison French may be looking into as he starts to consider a leadership succession strategy. French has built a successful Hot Firm— Bentonville, Arkansas-based Harrison French & Associates, a 150-person architecture and engineering firm— but he conceded, “We don’t have a firm plan in place.” “It is somewhat keeping our options open,” French said. “I’m confident that we have a senior team in place.” The firm is currently owned by three people, but they’re all aging. That’s a problem that Rod Christenson, CEO of Finley Engineering Inc. (Lamar, MO), a 320-person telecommunications and energy engineering firm, faced when he brought 35 managers to a training session. “My God, they were all like me,” Christenson said he remembers thinking. Read: gray-haired, over 55 men. That led Christenson to ask his leadership team: “What’s to happen in 10 years?” A leadership succession plan ensued. “I have a succession plan for myself,” Christenson said. All senior management has a succession plan in place too. “It’s feeling pretty good right now.” As part of the process, Christenson has identified three individuals who could become the next CEO as well. “What we are doing is assigning major projects and initiatives to each one,” he said, adding that all senior management does now is sit back and watch how they’re doing. As part of the plan, the firm has also signed up two individuals to run the firm temporarily should anything happen to Christenson. Fear of losing control Maniktala said the topic of leadership succession generated plenty of debate around 2004 because ME Group was a family-owned business and there was a fear of diluting ownership. Those fears have not materialized due to the growth the company has experienced, which, Maniktala said, is due to the strong culture of success he has developed. “My staff made me rich because of the culture we created,” he said. “We need to excel to the best of our ability.” The firm has been so successful after implementing its leadership succession plan that in 2009 it had to hire sub-consultants due to the volume of work. “Why? Because we were recognized in (the clients’) eyes as the number one firm,” Maniktala said. “I couldn’t do that if I didn’t have good second-tier managers.” A final warning from Christenson regarding the development of a strong second-tier management group: If you don’t do so, you could fall prey to others. Finley has completed a few small acquisitions because those firms didn’t have succession plans in place and then were forced to sell at bargain prices when the founding owners exited. For 12 weekly pages of content like this, subscribe to The Zweig Letter here