You already understand that if you hire the wrong person for the job they'll probably fail. But what if you're the wrong person for the job?
The entrepreneurial spirit that it takes to start a business usually isn't what is required to grow an established company. And the skills and attitudes required to maintain a mature business are far different than the ready, fire, aim approach that overcomes startup obstacles. Unfortunately, most entrepreneurs don’t understand that. As a result, they either ruin a good thing or they’re kicked out by investors.
Recently, a Harvard professor surveyed 212 US companies and discovered that by the time the ventures were three years old, 50 percent of the founders were no longer chief executives. By the time of the companies' initial public offerings, only 25 percent of their founders were still leading them. Most, in fact, had been forced out.
In fact, entrepreneurs are resoundingly naive about the problems they’ll face and overconfident in their ability to succeed. A Purdue University survey of 3,000 entrepreneurs showed that one in three thought they had a 100 percent chance of success. Their estimate of their competitor’s chances? Not surprisingly, they were far lower at 59 percent.
Here’s a hard truth—eventually all founders either:
- Are forced out by partners, investors, or bankers
- Realize their charisma and passion aren’t enough to make the business what it could be
You’ll be far happier and your company will be better off if you recognize when it’s time to step down, and make plans for your succession. Here are five tips for making the transition.
1. Brace yourself
The new leader isn’t always going to do things your way. If he or she did, you might as well have stayed on board. Letting go is hard to do, but if you’ve made the right choice the result will be bigger and better things for all concerned, especially for you.
2. Learn from the mistakes of others
Any company with a board probably has a succession plan, thanks to the Sarbanes-Oxley Act of 2002. Boards now consider it one of their most important responsibilities and lots of guidance is available.
But for founders working alone, it’s easy to sabotage the process by:
- Looking for someone like themselves or at least someone they like. (What the company really needs is someone with entirely different skills and temperament.)
- Looking for someone of lesser stature so the founders’ legacy isn’t overshadowed.
3. Decide between an internal or external successor
Finding a new leader from within is less risky than hiring an outsider. Be careful not to view someone in a lesser role as incapable of stepping up to the plate. You may overlook your best candidate.
Even if you have identified excellent candidates in-house, that’s no excuse for not looking outside to make sure you have the best possible choice. The search inside and outside should go on concurrently.
There’s a tendency to think that candidates have to be ready to take over immediately. In fact, business and market circumstances—especially the strength of the management team and how their skills compliment each other—will determine how quickly a new leader can take over.
4. Try before you buy
If you bring in a successor as, say, general manager or COO, you’ll have time to watch him or her work for a period of time. Ideally that period will include any seasonal peaks or other crucial points in your year, such as an important trade show.
If you make succession a sink-or-swim test it will be hard on everyone. Even someone chosen from within your organization will have to overcome a learning curve. Remember, mistakes will happen, the issue is how they’re handled. Make succession a process, not an event.
5. Create a supportive environment
In addition to the support of a great team, mentors, executive coaches, and the board, be sure to bring the new leader into a supportive environment that encourages honest feedback.
If you have a board, directors will have to make sure they not only pick the best new executive, but that they provide the support he or she needs. If you don’t have a board, you can do no less. Your future and your company’s future depends on it.