can be trained or placed in another business to acquire the needed
expertise. If not, the owner might have to look elsewhere or sell
the business.
“Sometimes the apparent successor is not the right person to
take over the business, so sometimes that’s a very hard conversation that needs to be had,” he says.
John Szold, chief executive officer of Planning for Succession in
Toronto, a company that works with companies and family businesses to develop effective succession plans, says the biggest challenge facing business owners—large and small—is identifying
the right successors.
It’s a tricky prospect for both.
Small businesses often don’t have a big pool of talent from which
to choose a successor, he says, in which case the owner might have to
bring somebody in with a view to developing
them, as opposed to waiting and being forced
to sell or have someone take over.
Owners of larger businesses, meanwhile,
may alienate some workers by identifying
a successor.
“The risk is that you initiate a horse
race, which suggests winners and losers.
You may do a great job of picking someone
but you may lose two or three people who
didn’t get selected.”
A mistake business owners often make is
assuming their top employees will make the
best successors, Szold says.
“The challenge is that the people who
are the top performers in terms of their pro-
fessional skills aren’t necessarily the people
who are going to be the best leaders, or who
are even interested in leadership,” he ex-
plains. “The tendency is to say this person
is the best at what they do, therefore they’ll
be the best at something they currently
don’t do.”
To avoid that problem, Szold says busi-
ness owners need to understand what’s re-
ally needed to be an effective leader, and
then choose people with those skills.
For starters, he says, above-average
communication skills and the ability to
motivate others are more important leadership traits than charisma or personality.
The best successors, Szold says, are often competitive people
who don’t like to lose and can persuade others. “They have
above-average skills at communicating with others and they get
a great deal of satisfaction from bringing others around to their
point of view.”
Before identifying a possible successor, Szold says business own-
ers must first identify where they want to take the company, as
that will enable them to choose a successor with the right abilities
for the job.
“Are we going to grow organically, which suggests certain
types of leadership behaviour in terms of developing people and
developing business? Or are we going to go and acquire other
firms, which suggests a different skill set around both negotiat-
“
ing and integrating other organizations into our own, and maintaining our culture?
“Those kinds of considerations would give us a set of specs, if
you will, for what we were looking for in a successor.”
Tom Sakellaris, a chartered accountant and tax partner at Hen-
derson Partners in Oakville, Ont., says succession planning can be
a challenge, particularly among smaller operations, but it’s some-
thing more business owners will have to face up to as the baby
boom generation retires.
“There are so many folks out there that just don’t want to deal
with it,” he says. “Everyone thinks they have an idea in terms of
what they want the future to look like, but when you start asking
questions like, ‘What if this happens?’ or ‘What if this person is
not interested?’ you find they sit back and say, ‘You know what, I
The challenge for family owned ventures,
he says, is that the generation that started
the business may have done so in somebody’s garage or basement and, although
the owner had a vision of the future, he or
she didn’t think about what should happen
when it came time to retire.
“Dad or mom built it up to a certain point
and then the time comes when there’s
thought given to, ‘Now what? What hap-
pens after us?’ ”
Quite often, he says, small business own-
ers turn to their children to carry on the op-
eration, which can result in problems.
“If the interest isn’t there, certainly the
passion of developing a strategy for the fu-
ture and the vision and goals of where they
want to take the company is just not going
to happen.”
Another is when a child is interested in
taking over the business but doesn’t have
the necessary skills. Sakellaris suggests one
solution to that is getting help from outside
experts. “Quite often you try to bring in
some outside help and external manage-
ment, folks that are experts in their areas
and can cover off a role.”
A third problem is figuring out how to
keep all siblings happy if a business is transferred to one child.
Sakellaris says that can be solved by including them in some way
in the business.
“You can develop a role for each one to play that’s suited to their
skills and strengths,” he says.
While some businesses, by their very nature, require successors to possess certain technical skills, Sakellaris says it’s more
important for owners to choose successors who are good communicators— those who can motivate workers and set goals that
everyone can achieve — and also those who are able to look at the
organization and have a vision for the future.
“Skills are certainly part of it, but for the most part you can
always get out there and acquire skills. It’s the high-level,
30,000-foot planning that’s needed and is much more difficult
to teach.” END
— Tom Sakellaris,
Henderson Partners
