Case Study 1 – Business Transition from Generation 1 to Generation 2.
It’s tragic! More than 80% of businesses transitioned to the next generation fail within 5 years of that transition. Companies tend to focus on the legal transition of a company more than the business operations, client relationship transition, and wisdom transition parts. With transitional all the new leadership will have a hard time surviving.
This company is a real success story. After working for a very successful HVAC company for over a decade the founder decided to branch off and create his own opportunity. It would require him to step outside of his comfort zone and take some risks but he was up for the challenge. In 1985 he berthed his company and they were off to the races.
As we all know growing a business from nothing to something is not easy and it requires hard work and dedication. You also have to learn quickly from your mistakes, and they made their share of mistakes, and slowly but surely the business grew.
They had three basic strategies:
1) Find skilled people and empower them to succeed and satisfy the client.
2) Work your tail off.
3) Be generous and give whenever possible.
Thirty years later the company is a 35 million dollar multi-state enterprise with over 350 employees. The founder, who had reached the ripe old age of seventy, decided it was time to step down and enjoy the fruits of his labor. Several other longstanding executives decided they wanted to exit too. So within a year or two all the executives were going to retire. This left the founder with a predicament. What’s next for his company? He tried several times to identify a buyer but he couldn’t find the right fit and if he was being honest with himself he really wanted to pass the company to his kids.
Unfortunately his blended family did not operate like the television series “The Brady Bunch.” As the kids grew and moved on with their adult lives they carried massive baggage from the unresolved conflict from their childhoods. As the founder’s wife said “Getting them to not have World War III at Thanksgiving would be a miracle. How could we ever get them to a place where they could run the company together.”
If we could get the family to communicate better we would help open up the option for dad to pass the company to his kids. We were charged with making that happen.
We started with our Leadership Training in April focusing completely on their interpersonal relationships and removing the mountains of long standing family conflict. We held monthly daylong transition meetings to continue the transformation. As we dealt with the conflict the relationships started healing. As healing accelerated they started communicating better. Thanksgiving went more smoothly than it ever had and Mom gave me a big hug and an appreciative smile.
As we moved forward we identified the strengths of the kids and created clear rolls for them to operate in. We also created a mentorship strategy to pass all the G1 wisdom to the G2’s. To help accelerate the G2’s growth we coached all of them on how to run a business and be better leaders.
Since the old operational strategy had worked so well we didn’t want to completely ditch it. So we decided keep most of the existing DNA and sprinkle in new improvements where they were necessary. Our goal was to make them nimble enough to evolve with a continuously changing marketplace while keeping some of the conservative and proven processes that made them so successful in the past.
The next step was to focus on the client transition. Many of their contracts were expiring and in order for the company to succeed we needed their clients to continue with them. We asked the clients a lot of questions, made some additional improvements, and spent time building trust with the new leadership team.
Just 8 months after that successful Thanksgiving we were celebrating the successful transition of the company to the next generation and the company is thriving beyond our expectations. Less than a year after the transition the company grew 10%. Not only did they not lose a contract almost all of their clients agreed to 5-year deals. The company is now set up for long-term success well into the future.