Passing It On
post # 275 — January 4, 2007 — a Strategy post
Rich Saletan (who built a very successful consulting firm and then sold it to a mega-firm), posed the following question:
How does a personal services company/consulting company of small to medium size continue after its founders and key management people “retire.” Sustainability of the “Brand” is what I am talking about. It seems to me that only larger entities have been able to make this transition. Your thoughts?
Rich, Iâ€™m not sure it has anything to do with size. My hypotheses are that if the founders / key managers want the institution (and itâ€™s â€œbrandâ€) to survive their departure then they must start doing some things many years before their planned departure. In particular, the founders must:
- Make sure that the brand of the firm is built on the reality that there are shared ways of behaving,values and consistent principles that underlie decision-making. The founders need to have ensured that they have enforced these through the years, thereby ensuring that only those who share (and live) the values are allowed to remain in the firm. A brand is what people consistently do, and it takes a decade or more to build that reputation for consistency. If the goal is to have the brand survive the founders, people must have been living the brand for so long, they cannot conceive of an alternative way of running the firmâ€™s affairs.
- Start grooming their leadership successor(s), choosing them on the basis of their ability to be â€œhigh priests of the brand religion,â€ not for their business or rainmaking skills. The force of entropy is very high, especially when the founder departs — leaders must be left behind who have been carefully groomed and battle-tested as stewards of the cause, not self-interested individuals who will run the firm as personal fiefs. Choosing the next CEO is critical.
- Share power, decision-making authority and ownership very early in the life of the emerging firm, so that the up and coming next generation have a sense that itâ€™s â€œour firmâ€ very early on. Itâ€™s hard to make an overnight revolution from the dictatorship of the founder. Founders can often act like kings — their people will accept it. But few of their successors can get away with acting that way.
- Leave money on the table. I often say that the founders can either extract the maximum sales price or leave behind a vibrant institution, but they canâ€™t do both. They must decide what they want.
Anyone else have an opinion on this?