The third step on the Executive Track is Real Work Experience. The first two steps are completion of the High School Track then Education (see previous articles). Once the educational component beyond high school is attained or maybe while it is ongoing, then the successor should get a job with a business outside of your control. They should work there for a minimum of three years or until they receive their first promotion, whichever is longer.
For some, a tour of duty in the military may be an excellent choice for this experience.
Ideally it will be with a larger company in your same industry but it doesn’t have to be. For extra credit, the company should be known for its employee training.
This work component is done for two reasons.
First, you, as predecessor, will appear more reasonable to them as you require that they do their job while working in the family business.
Second, and probably more important, the successor will come into the business with a work portfolio.
Other workers will look upon them as having value in their own right, which they will have. They won’t just be the “owner’s kid” who has to be tolerated.
Real Work Experience Then Work in the Family Business
Once the external work component of the Executive Track is met, then you and the successor may choose for them to work within the family business or not.
They have work experience and real education outside of the cocoon of the family’s business that everyone can rely upon.
Worse thing that usually happens when we bring our successors into the business without going through the Executive Track is the successor quickly runs the business into the ground, depriving the predecessor and a bunch of other families of their livelihood.
Doesn’t mean the successor will prosper, but it is much more likely.
We must compete for the successor’s talent after Real Work Experience
Our business must be ready to compete with the successor’s other opportunities and potential that they have for work.
This means a competitive salary, an adult working environment, and the potential for a real job with real authority and responsibility.
Sometimes successors are educated (priced) out of our business. If they have become brain surgeons or engineers, it probably is illogical they then take over the family’s plumbing business.
You may budget for someone on the Executive Track beyond the normal pay for the precise position that they occupy while training. However, always base their pay on what they are “worth,” not what they “need.”
In a business of $50,000 jobs, don’t pay them $100,000. If they can earn $100,000 doing something else, they should do that and you should look for another successor.
Start from the bottom
Once the successor(s) are in the business, don’t start them as supervisor or your star salesperson on day one. They should be assigned a series of “learning tasks.”
Start them in the most basic of jobs. Make sure they can do that before you move them to the next job.
I don’t care if they have a Master’s in Business Administration, they must learn the “work of the work,” otherwise they will always be hostage to others.
You may pay a successor on the Executive Track a salary that is higher than that called for by the basic function assigned. You would do this for any successor you hoped to attract.
However, a successor on the Executive Track who fails along the way should be terminated, related or not, or moved to a needed function and paid accordingly. You may not allow them to quit in place and block anyone else from participating on the Executive Track and thus deprive the business of a successor.
The successor should report, whenever possible, to someone who is not a family member.
That does not mean, however, that the predecessor abdicates their oversight responsibilities; rather it means they are delegated. The predecessor is still responsible for the business and that includes training the successor.
As the predecessor masters various functions; increase their responsibilities and rewards as deserved as they are assigned new tasks.
What would be a logical progression?
Let’s use the print shop as an example.
Start them at the bottom doing delivery and bindery. Then full time bindery and perhaps then into customer service where they learn pricing and entering jobs. Then they could move into the major functions of the business such as digital output and prepress. Then they can move up to the position of production management.
The amount of time spent in each position depends somewhat on what they know. But in no case should they be moved to another position without mastering the first. The amount of time in each position would increase with the responsibility and authority of the job. Less time would be allotted to more manual functions with fewer responsibilities however a successor should not be moved on until they have mastered the tasks. Successors may be credited with tasks they have already mastered and demonstrated.
From there move them into outside sales where they are charged with developing customers and creating demand for existing capacity.
Here they may (should) receive additional outside training in professional selling as well as sales management when appropriate.
When they have accomplished the basics of sales management they could focus, in their spare time, on the finance area of your business.
They don’t have to necessarily work as a bookkeeper but they should know and demonstrate the tasks as well as how to read and analyze financial statements and participate in major finance decisions you make.
Now, they are prepared. They have completed the High School Track, obtained formal education, gained work experience outside the business, learned the family’s business from the ground up, earned the respect of co-workers and have a good grasp on all the major functions.
But some of us still have one more thing to do and that is to select the successor among the potentials. We’ll pick up on this in our next installment.
Are you ready to sell?
We do provide on-site valuations of businesses that include an estimate of value as well as include recommendations of “fixes” that will improve earnings and thus value if there are issues there. We also can provide a non-onsite arms’ length estimate of value for planning purposes for businesses if not in need of fixes. These are particularly valuable for owners with three, five or even ten year time horizons. If you are ready, then email me at firstname.lastname@example.org and let’s see where you are.
Do you want to transition to son/daughter or employee?
Fine, does the son/daughter or employee have the knowledge to “run” a business? This is particularly important for many times an “internal” transition requires the seller to finance all or part of the sale. So, you need to assure that you will get paid in your golden years and not have to come back and run the business. The way to do that is to assure your successor is trained. Our CPrint program has helped many prepare successors for business over the years.
If you’d like more information on how our program could help you, please message me at email@example.com