A distributor turns over the daily reins of his company but stays on as Chairman.
The material handling industry today has a significant number of owners who are in the stage of their careers where they are considering slowing down or retiring. Throughout my 37 years in the industry, I’ve repeatedly witnessed principal owners not wanting to let go of their businesses. In the long run, this is detrimental to their organizations because they gradually lose passion for the business and become absentee managers. What was once a dynamic and growing organization becomes a model of complacency.
It’s obvious today more than ever that paying attention to the details of running a privately held business is extremely important. Business and technological changes take place so fast that one needs to address them on a daily basis. If a business owner doesn’t want to stay active any longer, then he or she should develop a well-thought-out business perpetuation plan.
By that time, however, it may be too late. It’s been said that the minute a business is bought or started, the owner should begin thinking about a succession plan. This process should involve family members and professional business advisors, and it is critical that the owner take time to sincerely address this subject on an annual basis. The owner should carefully decide when he or she wants to move aside and put the new leadership in place for a smooth transition. The successor should be trained and working within the current owner’s lifetime.
Once you have decided to move over and bring someone in to take over your company, some other things become very important.
- Financial arrangements with benefit perks (key man insurance, stock programs, etc.) need to be spelled out clearly up front.
- The owner must communicate to all employees and major customers that the change is going to take place. Media outlets and suppliers need to be advised of the important change.
- The owner needs to have a written plan on what his or her involvement will be going forward in the business if his or her ownership is maintained. Don’t underestimate the psychological impact on the owner. It’s important that the new president/CEO have decision-making authority within the parameters agreed to by the owner.
- When the baton has been passed, the former leader of the company needs to get out of the way. Absolutely no “second-guessing.”
- Periodic meetings should take place as the change moves forward to be sure all is going as anticipated. Communicate, communicate, communicate.
Miami Industrial Trucks
The founder of Miami Industrial Trucks turned over the reins of his company to me because he was ready emotionally and he had found the right person to successfully lead his company into the future. Once I achieved my ultimate goal of owning my own material handling dealership, it became apparent to me that a good business perpetuation and succession plan was paramount. A report some time ago in The Wall Street Journal found that 76 percent of business owners fail to create a formal succession plan, and I doubt that this statistic has changed much today. My advice: Don’t wait until it’s too late!
Promoting from within an organization is the best possible scenario, but if the talent is not in your organization, you will have to go outside. Choosing your successor internally means he or she knows the culture of the company and already has established a performance track record. If you look at the great companies in the book Good to Great, the presidents who led their companies to high levels of returns were promoted from within the organization. You create that talent based on whom you hire.
Of course, hiring is not that easy, but at least by having somebody in your organization you get a firsthand idea of his or her capabilities, strengths and weaknesses. Watch their actions, how they perform in their jobs with other people. From that, you can determine if that person is worthy of being your successor. In my case, Mark Jones met all the criteria.
Mark began working for MIT in 1997 as the vice president of finance and worked his way up the chain to chief operating officer. By that time, I was ready to take a step back from the day-to-day responsibilities of running the business, and I was confident that Mark was the right choice to take my place. He has all the qualities of a good dealer principal—integrity, work ethic, passion, knowledge and a stable family. He had a great track record as a CPA. He is a lifelong learner. He has good people skills and an analytical mind. He has a passion for our industry and for our business specifically. He has a great wife, and as we all know, behind every good man there’s a good woman.
Those are the things I think are extremely important. He was appointed president/CEO in 2004. In the ’90s I worked with a public accounting firm specializing in compensation plans to develop a financial incentive program for key employees to share in the rewards of the business. I didn’t want to give up ownership of the company at that time, but I was willing to give up part of the profits so they could build a financial nest egg of their own.
Are You Ready?
Many dealer principals and owners in this association are my contemporaries and don’t want to think of a succession plan. They ought to, because they need to get somebody with the same passion that they have. My interest in the day-to-day operation of our business is not what it used to be, but I enjoy the strategic planning aspect so I remain active in that role. It was a big psychological decision to move out because I was used to making the decisions. Now, I’m not involved every day and it is different. Now I’m a coach, and I stay out of his way and let him make decisions. I may not agree with everything, and he’s going to make a mistake here or there, but that’s business. He’s very coachable and he listens, but he’s not a “yes man” by any stretch of the imagination.
Our carefully thought-out succession plan is working out well. During the first year after the transition I worked 75 percent of the time. This year, I’m going to reduce my involvement to 50 percent. I’m very comfortable with all the decisions we’ve made for our company’s future. I think there are many other dealers today that would like to do what I have done but don’t want to let go.
Executing a successful leadership succession plan in any business takes time and planning. To take your company to the next level in performance, a careful and timely changing of the guard can mean a lot. A “win-win” business perpetuation plan doesn’t happen by chance. It needs the serious and sincere attention of a proactive principal owner. You’ve got to make the decision—am I ready or am I not? Don’t let your material handling company, family or employees down on this critical responsibility.