The Conversation That Empowered a CEO to Replace Himself

Michael (not his real name) was the CEO of a family owned company, with about 100 employees, that has a niche market serving custom marine, aero and road vehicles, including motorcycles. (I’ve also altered enough description to ensure confidentiality)

The company is sixty years old and Michael is the grandson of the founder.  He’s young enough to be at the helm for another 20 years.

Michael knows the business inside out. It’s the only place he’s worked at, since graduating from university with a double engineering degree.

Michael engaged me to help him figure out why the company was declining in a market that had growth potential and currently little competition.

I spent a couple of weeks visiting the business and talking to the employees.  I also became an undercover customer, because I wanted some things done to my boat, and I’d get first-hand experience as a customer.

Here’s what I learned:

  1. There were too many people, long term employees, who would leave if an opportunity presented itself.
  2. Some customers were annoyed with the business, about decisions being made that they hadn’t agreed to.
  3. I had similar minor issues with the work I’d engaged the company to do on my boat – I had no special arrangements and the people who were serving me had no idea I was also engaged by the company.
  4. Staff felt they were being micro-managed, not only by their direct supervisors, but from above.
  5. The business was siloed, with departments not sharing information and effort.
  6. Staff liked Michael as a person, but had no respect for him as a leader.
  7. Senior staff wished Michael would focus on design and intellectual property development and find a more suitable CEO.

After double checking and some soul searching, I decided I’d have a confronting conversation with Michael.

We met off site.

Here’s how it went:

Me: How serious are you about wanting the business to flourish?

Michael: We met to discuss that?  You know my answer already.

Me: OK, what are you willing to do to ensure it flourishes?

Michael: Whatever it takes, of course.

Me: OK. Now step aside for a moment from thinking like the CEO and answer this question:

“If you were an employee of this business, with all the knowledge you have, what job should you be doing to ensure best value for the sustainability and development of the business?”

Michael: Well…hey I don’t have that option, I’ve got the responsibility of making sure the whole thing keeps going.

Me: Yes, you do, that’s why I’m asking you that question.  Can you answer it?

Michael: OK, is it what I should be doing or what I’d like to do?

Me: Great question.  Give me your answer for both.

Michael:  OK.  What I should be doing is what I think I’m doing now, getting expert advice – as per you.  What I’d love to do, would be to focus on innovation and design.

Me: Well, why haven’t you done that already?

Michael:  Are you kidding?  I’m the grandson of the founder.  I succeeded Dad.  The family expects me to run the show.

Me: How do you know that?  Do they want you to run the show no matter what, or do they want to see the family investment grow and prosper for the long run?

Michael:  Hmm… good question.  I believe the latter. So long as we don’t lose any shareholding.  So why are you slanting the conversation this way?

Me: Because I need to understand your answer to this question “Is your skill more about people or more about the technical?”

Michael:  I like our people heaps, I know they are valuable, but I’m more interested in the technical.

Me: OK, I’ve learned and verified this… (then I detailed my findings).  Given that, do you think you could find the right CEO who could allow you to follow your preferences and ensure sustainable growth and profit, growing the value for the family?

Michael: How am I going to find the right person?

Me: Through a combination of science and skill.  Are you willing to hear my thoughts about that?

Michael: OK, explain yourself.

  • I laid out a plan that firstly focussed on:
    • the values the company really believed in;
    • the vision for the company; and
    • the key results areas that mattered most, namely:
      • customer delight and customer growth;
      • operational efficiency (includes productivity and innovation); and
      • the culture, which I asserted was the next step after reviewing the values.
    • I asserted that Michael was the ideal person to head innovation and design.
    • I asserted that IP and customer delight and growth were dominant for continued success and that depended upon the culture and that in turn depended upon the right CEO.
    • I asserted that we’d take our time and use deep profiling, track record, careful interviewing, and careful on-boarding as the tools for selecting and embedding the right CEO.

Michael:  So, you are saying that I should step down as CEO and head innovation and design?

Me: Yes, so long as you honour the staff, the customers and you and your family.  Oh, and you should do it only once you’ve identified your successor.  You should invest carefully in that.

Michael:  Hmm…, you’re pretty blunt, aren’t you?

Me: Only because I want what you want – sustainable growth and profit for your business.

Michael: OK, let me think about that.

Michael discussed it with his family and two long term senior staff and agreed to my plan.

Why this conversation worked was because of these five elements:

  1. Michael has a high sense of duty for the company, above himself.
  2. Michael has real talent in the design and IP area.
  3. Michael has control of his ego.
  4. I did my homework thoroughly.
  5. I only asked questions until I was asked to explain myself.

The company flourishes, but with a twist – the family wants an exit plan.

But that’s another story for another time.

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