Positioning a Business for Continued Success
Well, as always, lots!
After months of working remotely, it’s great to have the team back in the office.
And we’ve had some interesting work keeping us busy during lockdown. Here’s an interesting business situation where we’ve worked closely with the owner of an established family business to position the business for continued success during a period of change.
Imagine a good-sized private business in a high-volume, low-margin space. Whereas the top-line has grown over the past several years, profitability hasn’t always followed the same path. If you were to judge it dispassionately, you might say it has underperformed its potential.
Let’s add a layer of complexity.
This is a second-generation family business and whilst our Managing Director isn’t ready to retire, he is ready to move on because a. he owns the result and b. he has other projects that deserve his attention.
“Progress is impossible without change.” – George Bernard Shaw
Meanwhile, the third generation isn’t ready to assume control.
Happily, there is an obvious candidate for the MD role, the current CFO. A hard worker with a high degree of emotional intelligence, the ability to be hard but fair and with the respect of all. A man who in his own words is “happy to run a leg of the relay before handing the baton back to the family”.
Following are a few words about setting this up for success:
Signalling: the outgoing MD moved out of the office he has occupied for decades. Why? To send a signal to him that he has turned the page, to send the signal to the incoming MD that the buck now stops with him, to send the signal to the staff that this is real and we are not turning back.
Positioning: if this isn’t positioned correctly, it could be very unsettling – not everyone sees change as opportunity. It’s important to put the right ‘spin’ on such a major change.
Communication: if you don’t effectively communicate the change, rumours will fill that void. Key stakeholders in this were the family (the shareholders), the staff and the customers. Don’t forget the Bank!
Clarity: so, what does good look like? How will the new MD be judged as a success? What are the rules of the game? Is the long-term more important than the short-term? What is the dividend policy? Does the Board have a view on the right debt-equity ratio? And what of culture?
Support: OK, so we now know what success is. What support does the new MD need, in order to have the best shot at success?
Incentive: professional management are often rewarded with shares or options. In a family business, that isn’t going to happen. So, how can we reward management for the right behaviours and outcomes? What is the right mix between short-term and long-term incentives? What form will they take? What are the objectives of this particular incentive program?
“The secret of change is to focus all of your energy, not on fighting the old, but on building the new” – Socrates
Something to look forward to: it would be pretty easy (but seriously counter-productive) for the outgoing MD to stray back into familiar territory. Comfortable old slippers, force of habit and all that. So, it’s important that he is squarely focused on the next chapter of his career and excited about going on that journey.
Comfort: uncertainty breeds anxiety. So, we need to set up a reporting system that gives the outgoing MD (as head of the family) all the comfort he needs that things are being well looked after and the earlier referenced “rules of the game” – both qualitative and quantitative – are being followed.
Courage: It takes a whole lot of self-awareness and courage to take a step forward into uncertainty. Not least when the whole family are watching. Bravo, massive respect! Together, we’ll make it work.
If you think your business has more potential, reach out to BridgePoint Group for a chat about how we can help you review and re-position your business to move forward.