By Paul Morin
This is a family business leadership succession story; however, the concepts and issues illustrated herein apply in most non-family business succession scenarios as well. The context may vary, but human nature in such situations is remarkably consistent. The key is to plan “early and often” to avoid unnecessary complications. Note: Names and some facts in the following story have been changed to protect the innocent, the guilty … and the “eagles.”
At Lerona Systems, it was time to bring the family together once again to discuss leadership succession. William Lerona, the third generation Chairman and CEO of Lerona Systems had just celebrated his 58th birthday and was becoming concerned that there were too many questions amongst the successor generation family members posturing to become the next CEO of the company.
Lerona Systems had been started by William’s grandfather nearly 80 years earlier. His grandfather grew the company, a manufacturer of industrial pumps, to nearly $100 million in revenues before passing away at the young age of 65. William’s father and uncle then took over the business about 50 years ago and, through a series of sizeable deals and beneficial alliances, grew the company to $250 million in revenues. William’s uncle then passed away unexpectedly at age 63, of the same ailment that had claimed his grandfather’s life. William’s father decided that it was time for him to step down and enjoy the fruits of his labor while he was still healthy and capable of getting around well. He passed on leadership of the company to William, as his brother’s and sisters’ children were still too young to take on such responsibility. William had now been running the business for almost 20 years and, not unlike his father, decided that he would like to look for a way to pass on the leadership of the company in a timely, orderly and logical way.
William’s uncle had three children, Aaron, Tom, and Howard (William’s cousins), all of whom were now in their late forties. Additionally, William’s two aunts each had three children, five of whom had worked in the business in various capacities and one of whom, Russell, had excelled and advanced to the point of becoming the Vice President of Marketing. While Aaron was perfectly content to run the maintenance operations of Lerona, Tom and Howard had also both reached Vice President level, with Tom running Finance and Howard being the COO of the Company. Thus, all major functional areas of the company were run by family members, with the exception of Sales, which was run by an outside professional, Tim Stevens. The cousins, Russell, Tom and Howard were very close to one another and all had aspirations of becoming the next CEO of Lerona Systems. William got along well with his cousins, but kept a bit of a distance given his need as the CEO to sometimes make tough decisions that weren’t necessarily the most popular with the cousins, or with the rest of the family. William’s cousins were so close and cliquish that he had given them a nickname: the “Flock of Eagles.” He didn’t use this term often. Mainly, it was an ironic expression he kept in his own mind, but he did privately share it with the Board of Directors of Lerona, which was comprised of William, his two aunts, his mother and father and two outside professionals. The outside Board members were a seasoned banker and a college professor from a prominent business school.
When William used the Flock of Eagles term in jest, the board members immediately questioned him as to what he meant by this term. William explained that the irony for him was in the fact that eagles hunt alone; they don’t form flocks. They are amazing predators, but they typically do not work as a team; they simply eat and nourish their young with what they kill, and they are more than satisfied with that approach. Their proficiency as solo hunters has led them to become symbolic of individualism and the ability to excel alone. As William explained his reasoning, the board became reflective and considered interactions they had had with these “eagles” on a personal basis, when they had been asked to provide reports to the board at previous meetings. They recalled the exceptional competence and focus of each eagle in their area of competence, but they also recalled the inadequacy of their responses when they had been asked pointed questions that required cross-functional knowledge and cooperation, in order to be answered well.
The Board asked William directly: “Do you think Russell, Tom and Howard are team players?” William hesitated. They drilled further: “Do you think Russell, Tom and Howard collaborate well with other members of the senior management and the next level management team of Lerona?” Again, William hesitated. Finally, they asked: “William, we know that they are strong performers in their respective areas, but do you think Russell, Tom and Howard have developed the cross-functional expertise to run this company as effectively and successfully as you have?” William felt compelled to answer honestly and concisely, for the good of the family and the future of the company. He simply said, “No, I don’t.” As time was running short, there was no further discussion of the topic at this board meeting, but it was resolved that William would come to the next board meeting prepared to discuss the topic further and to lay out his plan for leadership succession at Lerona Systems.
Three months down the road, at the next board meeting, William came prepared. He had spent the intervening time carefully considering the succession issue, and given his introspective nature, he had asked himself whether he had failed in his task to build a next generation leadership base at Lerona. If he was being honest with himself, he had to answer “yes” to this question. He had grown the company well and maintained strong profitability and paid healthy dividends to the family member shareholders, in the same way his father, uncle and grandfather had done before him. However, he had to admit to himself and to the Board that, rather than cultivate an environment of sharing, learning and development at the company, he had helped to nest a “flock of eagles.” Previously, the term had seemed ironic to him, particularly when he didn’t consider that at least a portion of the blame for the “flock” and resulting lack of well-developed cross-disciplinary leaders rested with him and the company culture he had helped to create. William felt extremely fortunate that, at least, he had had the presence of mind to begin to take a closer look at the issue of leadership succession at Lerona when he was 58 years old, rather than say, 63, the age at which his uncle had passed away unexpectedly.
He, along with the board, resolved to put a structured, formal leadership training and succession plan in place, which would allow William to retire two or three years down the road, comfortable in the fact that constructive steps had been taken to cultivate cross-disciplinary leadership development and collaboration at Lerona. While he knew that it still may be the case that one of the current “flock of eagles” took over leadership of Lerona when he retired, he took comfort and pride in the fact that this only would occur after a minimum of two to three years of conscious and deliberate cultural change for the better. He resolved to stop using the term “flock of eagles” with the board and even in his own mind and decided to begin using “leadership lions” as a term more descriptive of where he wanted to see the culture go. He liked this term better as he knew that, while lions have remarkable individual strength and abilities, they are nurtured and taught to work as a team and to hunt as a group. They nurture their young to survive and flourish individually and as a pride. This seemed a fitting term to William, as he took enormous pride in his family business, and he wanted to see the family and the business flourish well into the future, long after he left the CEO role.
What have your experiences been with leadership succession planning? I look forward to your thoughts and questions. Please leave a comment below.
Paul Morin is the founder of CompanyFounder.com. Morin has worked with various entrepreneurial companies in senior management roles and has led the development, review and selective implementation of several hundred start-up and corporate venture business plans, financial models, and feasibility analyses. You can e-mail Morin him firstname.lastname@example.org.
Originally published: Sep 25, 2011