By Hobson Hogan
Principal, Investment Banking
There is a time in everyone’s life when you are holding onto something too tightly. I was reminded of this fact by my son on Christmas Day. Santa had brought him a new bike and, unlike his old bike, it did not have training wheels or even a place to put training wheels – this was his first “big boy” bike. While I knew it was time for him to get out there and fall down, brush himself off and get back up; I had a hard time letting go – literally. I wanted to hang onto the seat and steady the bike, so my son would not fall. I am sure that part of it was that I did not want to see my son get hurt, but the other part was about control. If I was holding onto the seat, I still had some control over where my son was going and his speed. We worked on riding his bike the next day, but it did not feel like my son was making much progress.
Fortunately for my son, we had some mild December weather that allowed me a round of golf. Upon my return home, my son was doing laps in our driveway all by himself. It turns out that left to his own devices, he figured it out. Yes, he fell, but he learned from his falls. Did he need my encouragement? Absolutely! He also needed space to succeed.
Reflecting on my son’s achievement, I realized that this is the perfect metaphor for the situation that many A/E owners find themselves during an ownership transition. They must learn when to let go and allow the next generation the latitude to make decisions, to try new things and even fail. I think that all owners understand that they need to develop future leaders within their firms. However, many have trouble ceding the power to manage and ultimately lead. This can be very difficult, especially for leaders who helped build successful practices and firms. To some, letting others make decisions is admitting that they may not be as crucial to the success of the firm as they believe. This is a trap that can destroy value and lead a firm to the long road of decline.
I recently attended the seminar Ed Friedrichs’ did for ZweigWhite on leadership. Ed believes strongly in codifying a succession plan that allows up-and-comers in your firm the opportunity to grow as leaders. This is a process and one that cannot be completed overnight. The process must start out small and build up over time. Your next generation must learn to walk before they can run. However, they need to be in a situation where they can succeed or fail. It is only when the outcome is in doubt that you can truly determine who has the ability to succeed you in the future. The role of the senior principals in this case becomes that of counselor, mentor and cheerleader. It is counterproductive to second-guess every decision that is made, especially if the only fault you can find is that you would have done things differently. To be truly committed to the process, you must approach leadership development with a positive attitude – support the next generation as they learn to lead.
No business leader is perfect. Even Warren Buffett has made some lousy investments. There may come a time when a handpicked successor is not working out and you have to make a change. This comes with the territory. However, the possibility that someone may not pan out should not be used as an excuse to not begin a program that will build the future leaders of your firm. When an ownership transition plan is properly constructed, the cost of making the wrong decision on a future leader is likely to be much less than the cost of not developing leaders in the first place. I cannot guarantee that every person with leadership potential will pan out. However, I can guarantee that firms that do not develop a new generation of leadership are less valuable than firms with a deep bench of leadership.
The moral of the story – you have to let go, a little at a time. Be there when they fall or need words of encouragement. The next generation will not be ready to take over the firm tomorrow or the day after, just as my son will not race in the next Tour de France. However, with the right guidance and support, they will be ready when the time comes.