Key Components of a Business Transition
“Business transition” is defined as a change in leadership for an organization, either with the primary leader or leadership group. In my work, I have found that transitions fall into one of three categories: “Train Wrecks”, “Stagnation Leading to Death” and “Success”.
Oftentimes, I see that businesses focus too heavily on the financial, legal and customer aspect of the transition. How much money is this going to cost us? How will this affect our customers? What legal matters need to be settled? While these questions are important and should be thought about, there is one huge aspect that’s being neglected: your people. How are they being prepared for the transition? Are you developing the next generation of leaders? What’s the vision of the new leader? How do you align and start moving your organization toward the new vision?
Regardless of how perfect your transition may look on paper, neglecting the development of your culture and people will result in your organization heading for the “Train Wreck” or “Death” category.
Business Transition Train Wrecks
Train Wrecks happen when you have clashing cultures. This can occur with a new leader or the merging of two business cultures in the case of an M&A. When someone or something new is introduced, change happens. With business transitions, this usually means a change in culture due to the new vision and values that the new leader brings. However, as a new culture gets implemented with the leadership change, oftentimes, there will be a feeling of disregard for the old culture, causing tension within the organization. If this tension goes unaddressed or unresolved, you can end up in a Train Wreck Transition.
An example of this is with a large organization I worked with that experienced a change in leadership. Key values that the previous leader had, in terms of loyalty and empowerment, were replaced by a sense of control and drive for success. Neither set of values were right or wrong, but the old set of values were something employees found empowering. They believed this made the company successful. While the new set of values aimed to achieve the same success, they did not have the same sense and feel as the old values. As a result, people felt disenfranchised and the entire leadership team either left or were fired. This caused a severe decline in profitability and growth in the organization for a period of five years, before they weathered the storm and intentionally implemented the new set of values.
Stagnation Leading to Death
Stagnation happens when a business tries to maintain the status quo – which really means that the transition is going to go downhill. In cases like this, people are so worried about the transition that they decide to play it safe by hiring or promoting people who aren’t going to rock the boat. In other words, no innovation occurs.
The fear of “what if?” can lead people to do only what they have to do, in order to maintain the status quo. This lack of innovation puts people into the position of hanging onto the old, believing that if they do, they will continue to be successful. This, however, is not the case. An organization we worked with had this same mentality. They knew what made them successful and believed that it would keep them successful as long as they didn’t change. While they maintained the status quo, their competitors innovated. Slowly, their competitors crept up on them and surpassed them with new, innovative products, leaving them in the dust. The organization went from a 17% profit margin to just breaking even within two years.
Successful Business Transition
A key component to creating a successful transition is planning. Not months or weeks in advance but years. There is a mindset that says, “We’re always going to grow. We’re always going to innovate.” This is not necessarily true. We need to understand what it is that makes us successful in the first place. With successful business transitions, there is a clear understanding of what the current culture is and how the current culture can evolve.
Evolving the current culture can mean many things. It can mean choosing your next generation of leaders and helping to develop them. It can mean examining your culture and identifying your strengths and areas of growth and creating a vision of what you want your culture to be. Nevertheless, this isn’t something that can be properly done within a few months or weeks, so planning ahead will save you trouble down the road.
In all three scenarios, I only highlighted certain elements of what makes a transition successful. There are many other elements in the strategy for transition. However, most strategies only look at financials or customers because those are the easier, more tangible things to look at. But it is the intangibles that will determine the results of your transition. The “people element” of any business transition is the element that is going to make you successful.
If you’re in the process of a business transition or looking toward one in the future, feel free to reach out to our team for assistance. Our team has over 25 years of experience in working with businesses on their organizational culture, leadership and team development and business transitions.