Be a Hero to Your Business
A Tale of Two Businesses:
Milton Ferrell was a successful Miami attorney. Under his leadership, his firm grew from a single Miami office in 2000 to a 17 office worldwide boutique firm by 2003. This full-service practice included some of the most prominent names in the South Florida legal community. Mr. Ferrell was widely respected for his legal acumen, business skills, and dedication to the community. Unfortunately, Mr. Ferrell died of mesothelioma in 2008. For all his success, his firm had no succession plan in place. As a result, the firm folded because there was no method for the business to continue as Ferrell Law.
Since 1906, the Kodner family has operated an auction house that buys, sells, consigns, and appraises quality art, bronze and marble sculpture, gold, silver, estate jewelry, porcelains, antiques, furniture, rugs, and more. They are a customer oriented full-service gallery serving private individuals, estates, attorneys, trust departments, banks, insurance companies, families of seniors, dealers and interior designers. The original store started in Chicago and the family moved to South Florida in the 1970s. The Kodner family has continually (and successfully) run this business for five generations with no signs of stopping anytime in the next century or two.
Kodner’s President, Russ Kodner talked about how some of the family’s success can be attributed to recognizing the next generation’s interest in the business and then providing opportunities to nurture that interest. Russ developed an interest and appreciation for art and craftsmanship at a young age. Seeing his son’s interest, Russ’s father created an education program that spanned the globe, with stays in London, New York, Moscow, and Paris (among others.) It seemed natural that Russ would take over once he was ready.
But, readiness to take over a family business is not necessarily a straightforward proposition. Although Russ had the passion for the business, after high school he lacked direction. Again, recognizing his son’s situation, Russ’ father (strongly) suggested he join the Army. Today, Russ attributes much of his success to the discipline and appreciation for systems that he learned in the Army. Indeed, Russ firmly believes that anything in life can be accomplished if one directs their mind to the task.
Presently, Russ oversees the entire Kodner Galleries operation. Under his leadership, the company has embraced the new technological innovations of the 21st Century, which resulted in the company becoming a truly international operation. True to his educational roots, Russ and his team have created a platform where people can attend auctions for rare collectibles from the comfort of their home. While he admits much of the current focus is on “modern” vice “collectible,” Russ still sees a bright future for the next generation of Kodner Galleries because of how children are being educated in technology in much earlier stages. Having a business succession plan as part of the company’s DNA, Russ is excited to see how the next generation takes the Gallery to the next level.
What is the difference between these two enterprises? I did not know Milton Ferrell and was too new to Miami to understand the internal operations of his firm. My understanding is that no one was “at-fault,” the succession plan was just never made. In contrast, the Kodner family passes its legacy and profession to each successive generation. The method is more than just the documents that memorialize a business succession plan; there is a commitment to lasting success.
Entrepreneurship presents numerous and constant challenges, but with hard work and dedication, comes with many rewards. Being your own boss, setting your own schedule, and increasing your earnings are some of the rewards that come with the calculated risks you take every day for your business. But, the one risk you should never take is leaving the future of your business to chance.
As your company grows, you hire more employees and maybe children join you to continue growing what you have built from scratch. Your small business becomes family owned, you have your sibling as your right-hand lieutenant and your children assisting with the everyday logistics of running your business. Although you are enjoying the benefit of familial solidarity, what happens when it is time to pass the leadership baton?
We have seen many cases where a once strong family bond is threatened by the tense emotions when it is time for a leadership position to be passed on. Who will lead the company in the next generation? Who will run the family business when you are no longer able to do so? Who can be trusted to advance the legacy? Leaving these “what-if” scenarios to chance are why succession planning for your business is the better path to take.
As your business grows, it is important to consider how you will structure ownership so that it can be transferred smoothly when you retire, pass away, or in the event you become incapacitated. Creating a succession plan is meant to give you the peace of mind to ensure your business is transferred into the right hands; or that loved ones will be taken care of out of the money produced from the ongoing operations or the sale of the company.
You may think that succession planning doesn’t reap immediate benefits, and as a result overlook it as a critical component of your current business success. However, during the succession planning now actually strengthens your business, supports growth, and allows for longevity and legacy. The best part of succession planning is that it can allow you to create the vision for your future, as the business owner, so that you can begin to experience the freedom you may have desired when you first started your business.
We have put together some steps that you can take now to set your yourself, your business, and your family up for a great succession plan. No matter which route you choose, planning early is a must to allow sufficient time to implement a phased transition plan.
The Mission, Vision, & Values
Building a business succession plan requires that the next generation understand the company’s mission, vision, and values. Often, the founder of a company knows these things, but never truly communicates them to the team or to heirs. Some founders are described as visionaries, but what exactly does that term mean? To answer this question, make the succession plan something more than just documents; it should define and explain why your company is worth continuing for the next generation of customers.
Your company’s mission statement answers the question – “why do we do this?” A mission statement should be brief and state the who, what, where (location,) when, and ultimately, the why for the business. The mission statement unifies the entire organization by giving the purpose for coming to work and producing for clients or consumers. Without a mission, your company will be adrift in the marketplace, though it might make some revenue in the short term.
The vision of the company answers the question – “where are we going?” This “where” is different from the mission “where” because the vision is the company’s guide to ultimate achievement, while the mission “where” relates to a geographic area. Members of your organization should understand and internalize the company’s vision to know how their actions can influence the company’s path to success.
The company’s values explain how it will achieve the endstate described in the vision. Stephen Covey discusses the need for an organizational constitution to provide the baseline from which every member can evaluate the choices presented to them. If the proposed task or potential client asks the company to go against its values, then the company should not do the task or serve that particular client. According to Covey, moving away from standing values only serves to complicate future services.
Growth is an important part of any business. But, growth means more than just financial increases. The trend in the 21st century is that employees are as much invested in personal and professional development as they are in salary. Employees brought in from outside the company and from your family might become disappointed with the opportunities—or lack thereof—for growth in their career. A business that cannot attract talent to take the reins and keep the company viable throughout a leadership transition risks everything the founder sought to build.
Small-business owners must clarify each employee’s role, including its limitations. Being upfront about the room for personal growth and advancement from the day an employee starts their job will help employees make the most of their positions. Employees will help the owner determine how the employee’s talents should best be used. These talents should have objectives and key results (“OKR”) for their work. The OKR must be measured with key performance indicators (“KPI”). Through these metrics, the company can monitor the growth of its employees. Productive and enthusiastic employees create profitable business. Small business owners should be flexible when attracting top talent. If they are not able to provide them room for growth, they should be sure the position is worthwhile in other ways if advancement is not a possibility.
Reluctance to Transferring Leadership
When a business owner starts from the ground up and sacrifices years of time and money to grow their business, it can be hard to let it go. Few people, if any, are comfortable with handing over the keys to the kingdom that they devoted time, effort, and money into over the years. Some business leaders are reluctant to retire because they have a psychological investment in the company. Others are prevented from retiring because they have not established their succession plan. Either of these two situations will create significant barriers to creating a succession plan. But, a gradual transition will allow you to share your vision with the succeeding leader, transfer necessary knowledge, and provide you with time to see if they are indeed up for the task. Keep in mind that King Hussein of Jordan changed the Crown Prince from Hussein’s brother to his son Abdullah II. Hussein’s brother had been Crown Prince for 33 years, but never sat on the throne.
Hence, a good first step is to establish a phased transition plan. A phased transition plan can help you to retain some involvement while incoming leaders learn the ropes. Easing out of and into new roles creates a more successful transition as the incoming leader takes time to get to know and understand how the current leader sees the future of the company.
To ensure the succession of your business beyond you and that your legacy is fulfilled, you will have several options, including selling your business outright, creating an agreement to sell after a certain triggering event like your retirement, or transferring through a living trust.
An experienced lawyer can be a valuable advisor not just regarding the law, but also by advising you based on what they have learned has worked for other companies like yours. Owners can often get emotional about their businesses, having invested so much of themselves over the years. While skilled counsel will take your entire experience into account while also providing valuable objective legal advice from an outside perspective.
If you are ready to create a well thought out succession plan for your business and the legacy you want to create, start by sitting down with us. You too can be a Hero to Your Business. We are here to help you implement a succession plan for the needs of your unique business so you can focus on what matters most.
 Covey, Stephen, The 7 Habits of Highly Effective People,