Business owners must plan for succession long before they’re ready to step aside

October 26, 2012

One of the geatest challenges for a small business or family-run enterprise is preparing for the next generation of management to take the helm and ensure the company’s vitality. For nearly three decades, I have relied on strategies that guided the growth of my company, Troy Container Line, while also cultivating its next generation of leaders.

Too many small-business owners think they can put off planning for the future until tomorrow. They usually wait too long to plan their exit strategies, and many businesses suffer or fail because a leadership transition plan was never put in place.

Since starting Troy more than 28 years ago, I have always tried to plan for the “what ifs” in business. What if someone did not show up for work? What if something happened to me? What if there was a recession? What if I want to retire?

This what-if philosophy, which entails planning for the worst and working for the best, is also the driving force for a succession plan that has been in place at my company since the late 1990s.

When thinking about succession, I cannot stress enough the importance of seeking career-oriented staff rather than people looking for a 9-to-5 job. Recruit people who are motivated and bring something to the table that you do not. It keeps employee turn-over low and makes it easy to identify managerial candidates and future leaders.

This, however, is not a quick and easy process. Fifteen years ago, after going more than a decade without a vacation of more than a long weekend, I decided I needed to address my list of “what ifs” and better plan for the future. I formed a team of five managers to oversee the day-to-day responsibilities of each department. I looked for people who were better at their jobs than me; people who possessed qualities I did not have. While this process took more than four years, it was well worth the effort. All of the managers I initially hired are still with me today and are integral to the future of the company.

But recruiting next-generation leadership is only half the battle. Cross-training managers is critical, as I firmly believe you cannot ask someone to do something you have not done. Having a thorough understanding of the intricacies of each department gives managers the tools they need to understand the individual functions of what should be a well-oiled machine. I have made it a requirement at Troy for managers to have the knowledge of his or her department in its entirety and work every job in it for a period of time.

In addition, they are trained to work in nearly all of the company departments and are capable of performing all the necessary functions in every division. Even though the company outsources some items such as payroll services and insurance, all managers are taught how to perform these tasks in case of an emergency.

Taking the time needed to invest in leadership training while fostering ownership of company policies and initiatives is also essential in the development of confident, well-equipped leaders. My management team and I meet regularly to discuss company-wide I.T. needs and managers have 100 percent say in the design of our programs.

Two years ago, prior to my son joining Troy, I met with the managers to discuss whether this would be the best fit for the company. Just like any other prospective employee, he was hired only after a unanimous decision by our managers — he was not brought in at the top, and he works for his rewards just like everyone else.

Training staff to stay ahead of the curve is paramount. Whether you have a two-person or 100-person company, goal-setting and tracking history to build a stronger future is critical. Otherwise, a wait-and-see attitude develops that filters down to the entire staff. Troy managers are encouraged to read trade publications and stay up-to-date on current affairs, but they understand that they don’t need to drive the business by themsleves. Rather, they know they need to reinvent the business as times change.

The result? In 2008, when the rest of the country was downsizing, we added to our staff and IT department with a plan to grow the company through the worst recession I have seen in my lifetime. Through the past five years, the company has grown and turned a profit.

Today, it is the succession planning that I did in the late ’90s that has gotten us through these rough times today, along with the talented managers and staff that were able to navigate the rough waters and lead us into calmer seas. At 55, I can think about retirement and be confident in my managers to lead the company I started nearly 30 years ago. In 2014, the transition of leadership to my managers will slowly begin and plans are in effect should something prevent me from being at the helm at any time.

From my experience with succession planning, it is in the best interest of any small business to take the time to invest in people, as they are every company’s greatest asset, and always plan for the what ifs.

Michael Cadden Troy is chief executive and founder of Troy Container Line, based in Red Bank, N.J. The company is one of the largest American-owned non-vessel operating common carriers in the world.

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