Clarity and My Own Transition
October 24, 2011 by Harvey Wigder
I am going to share a bit about my own transition from a home in Newton (that we sold two years ago) to my new digs in Worton, Maryland. The picture shows a view from my new deck. Although I will continue to spend much of my working life in Boston, the Maryland address will be my primary residence.
Twenty eight years ago, when we lived in Philadelphia, we enjoyed a second home in Maryland on the Eastern Shore of the Chesapeake Bay. About four years ago, my wife Kathy and I decided we wanted to go back to the Bay. I have been in the Boston area for 28 years and although I will always feel part Bostonian, I was ready for a change and this adventure.
Once we changed our family dialogue from should we move to actually selecting a target date (it was October 2011), the problem definition changed dramatically for us. Since I have no desire to retire, my really big question was how I could move without damaging my business. My specific questions were (1) how do I maintain business in Boston; (2) how do I build a network and become known in this new territory; and (3) should I change my business model to accommodate these changes? I had two years to find answers to these questions.
Although I will briefly describe some of the decisions and changes I made, my main point is more existential. I believe I have worked through the issues and arrived at good answers to my questions. For this, I give the most credit to the fact that I stopped and consciously asked them in the first place. In my view, and from my experience, something magical happens when we identify and clarify our goals: life’s energy and gravity works in a mysterious way to help us fit problems and opportunities together.
The opportunities I discovered include:
- Refining my executive search model to make it more unique and less bound to New England.
- Seeing that the Exit Planning Exchange was seeking to expand to Philadelphia, helping to launch the chapter. I am now its President.
- I also have been active in the Mid-Atlantic Chapter of the Family Firm Institute. This gives me presence in Philadelphia, a major city near my new home.
- Seeing Personal Transition Planning as something that could help make my search practice unique, getting trained to deliver the service, and then integrating it into my practice and launching it as a separate element within my business framework.
- Changing the name of my company from Fulcrum Search to Fulcrum Transitions (with the corresponding tag line: Better Lives, Better Businesses), to reflect the new excitement I feel about my business future.
I approach my transition with some fear that it might not work as well as I hope it will, but also with great excitement and careful optimism. I hope to help others making transitions feel the same way in my new career as a transitions coach.
I am happy not to be saying goodbye to my Boston friends and look forward to continuing to work with you all as I develop new friends in Maryland. Feel free to call me if you would like to talk. Starting Friday, the number will be 877-694-1855
1. What is the missing ingredient in “Traditional” Succession” Planning? and 2. Clarity and My Own Transition
October 19, 2011 by Harvey Wigder
This time we have two topics. Both are about transition planning. The first takes a contrarian position on succession planning and the second is about my own personal transition.
What is the missing ingredient in “Traditional” Succession” Planning?
Succession planning refers to an owner designating successors to lead the business.
Last month, we showed how when an owner became committed to exit planning, he or she was far more likely to achieve their personal and financial goals. Despite this, the sad fact is that most
owners do not plan and thus do not maximize estate value, thus harm themselves, their families and the business’s stakeholders. We said that the missing ingredient is emotional readiness. Quoting myself:
“Although I have heard there are owners who want to retire, I don’t know them. The ones I know have their identities and lives so wrapped in running their companies that they do not have a clue about what they might do with their lives if they didn’t have the business to go to. Instead, they ask themselves, “If I sell my business on Friday, what do I do Monday morning?” When they contemplate the prospect of not actually not “going to work” at the business, they figuratively (and sometimes literally) grow cold and clammy because they feel that without the business, they would drop into a black hole that feels somewhat like a walking death. In a sense, the business is their life and without the business, life seems pretty empty.”
As one antidote, we summarized a process for Personal Transition Planning that provides a pathway for owner’s being motivated to move on to the next exciting stage of their lives.
When succession planning only focuses on the needs of the business or just considers the dynamics in the family, we miss considering the needs of the owner and forget that nothing will happen unless the person in control is excited by the prospects of his or her life after the transition. This excitement is necessary for the owner to be motivated to make the transition happen.
A second factor is a bias toward viewing multigenerational businesses as a good thing. In this view, the “fact” that 30% of businesses don’t make it to the second generation is a sign of failure. A few newsletters ago, we mentioned a study that turned this notion around by focusing on families, not businesses. It identified enterprise oriented families that stayed in business for generations even when it sold particular businesses.
Besides referring to this study I recommend Every Family’s Business by Thomas Deans. This book examines the value of a perspective on maximizing wealth. In this view, a family should only hold onto a particular business when the family feels it offers the highest return.
Clarity and My Own Transition
I am going to share a bit about my own transition from a home in Newton (that we sold two years ago) to my new digs in Worton, Maryland. The picture shows a view from my new deck. Although I will continue to spend much of my working life in Boston, the Maryland address will be my primary residence.
Twenty eight years ago, when we lived in Philadelphia, we enjoyed a second home in Maryland on the Eastern Shore of the Chesapeake Bay. About four years ago, my wife Kathy and I decided we wanted to go back to the Bay. I have been in the Boston area for 28 years and although I will always feel part Bostonian, I was ready for a change and this adventure.
Once we changed our family dialogue from should we move to actually selecting a target date (it was October 2011), the problem definition changed dramatically for us. Since I have no desire to retire, my really big question was how I could move without damaging my business. My specific questions were (1) how do I maintain business in Boston; (2) how do I build a network and become known in this new territory; and (3) should I change my business model to accommodate these changes? I had two years to find answers to these questions.
Although I will briefly describe some of the decisions and changes I made, my main point is more existential. I believe I have worked through the issues and arrived at good answers to my questions. For this, I give the most credit to the fact that I stopped and consciously asked them in the first place. In my view, and from my experience, something magical happens when we identify and clarify our goals: life’s energy and gravity works in a mysterious way to help us fit problems and opportunities together.
The opportunities I discovered include:
- Refining my executive search model to make it more unique and less bound to New England.
- Seeing that the Exit Planning Exchange was seeking to expand to Philadelphia, helping to launch the chapter. I am now its President.
- I also have been active in the Mid-Atlantic Chapter of the Family Firm Institute. This gives me presence in Philadelphia, a major city near my new home.
- Seeing Personal Transition Planning as something that could help make my search practice unique, getting trained to deliver the service, and then integrating it into my practice and launching it as a separate element within my business framework.
- Changing the name of my company from Fulcrum Search to Fulcrum Transitions (with the corresponding tag line: Better Lives, Better Businesses), to reflect the new excitement I feel about my business future.
I approach my transition with some fear that it might not work as well as I hope it will, but also with great excitement and careful optimism. I hope to help others making transitions feel the same way in my new career as a transitions coach.
I am happy not to be saying goodbye to my Boston friends and look forward to continuing to work with you all as I develop new friends in Maryland. Feel free to call me if you would like to talk.
What Is The Missing Ingredient In “Traditional” Exit Planning.
September 30, 2011 by Harvey Wigder
In this newsletter the word “exit” refers to an owner leaving his or her business via sale, transfer or liquidation.
The first baby boomers have passed the traditional 65 year retirement age and every year, that number will increase. This will impact the economy because it is estimated that this age quadrant owns about 8 million businesses. This is an important time for making some key decisions in the life of a business owner, especially since it is estimated that 80% of his or her wealth is tied up in the business. Since a business is not a liquid investment, it must be sold for the owner to realize its value.
There are two problems with exits. The first is that the owner has spent his life operating the business and usually doesn’t have the skills to sell it. What generally seems to happen is that the owner has a crisis or 
gets fed up and seeks an immediate sale. Since owners often have unrealistic notions of the value of the business and have not done anything to prepare it for sale, selling the business can be very problematic. One statistic that shows the result of that lack of expertise is that 78% of businesses presented to M&A firms do not find a buyer and are subsequently liquidated. Many others find buyers, but don’t maximize the selling price. These transitions are not good for the owner, his or her family, employees, or customers; it also represents a loss of jobs and value added for the economy.
Advisors who understand that most owners do not have the skills to sell their businesses have begun to focus on the idea that bigger picture exit thinking needs to be coupled with their specific professional expertise. Many money managers, M&A firms, lawyers, accountants and business consultants are realizing that each situation has its own complexity and it will take a team of specialists (legal, tax, accounting, and others), plugged into the needs of the owner, to help guide that person to a successful exit. These advisors help the owner understand the process and form the team needed for success. And in this case, the term success is defined as the completion of a transaction wherein the owner is able to monetize his or her investment to the greatest financial benefit possible, while at the same time ensuring employees, customers, vendors, and the buyer are also benefited.
Thus, the initial approach to the realization that “exits” would become increasingly prevalent was financial. The questions most often posed to owners were “how much money do you need to fund the life you would like when you no longer have cash flow from the business?”, and “what is your business worth – assuming you can sell it?” If the business was worth more than his or her needs, the owner could sell it and was encouraged to create a plan around value maximization. If the business was worth less, the challenge was to create a plan that included steps to increase the businesses value (and its likelihood of sale). However, these insights often don’t necessarily lead to action. Why? What is the missing component?
The missing ingredient is emotional readiness. Although I have heard there are owners who want to retire, I don’t know them. The ones I know have their identities and lives so wrapped in running their companies that they do not have a clue about what they might do with their lives if they didn’t have the business to go to. Instead, they ask themselves, “if I sell my business on Friday, what do I do Monday morning?” When they contemplate the prospect of not actually not “going to work” at the business, they figuratively (and sometimes literally) grow cold and clammy because they feel that without the business, they would drop into a black hole that feels somewhat like a walking death. In a sense, the business is their life and without the business, life seems pretty empty.
Understanding the emotional component has led to the next generation of exit planning, more properly called transition planning. With this focus, the owner considers his or her (and often the spouse is included) emotional readiness early in the process. If an owner can get excited about the prospects of an interesting and meaningful life after leaving the business, they are motivated to proceed. Otherwise, they nearly always put off needed planning; avoid the subject altogether, or (unconsciously) sabotage planning and selling efforts because of this lack of emotional readiness to move into another phase of life. This emotional component of the situation has many variables – and they differ from person to person. The point here is that those variables should be carefully examined, planned for, and resolved as part of the transition process.
I have gone through my own transition planning which I will discuss in the next newsletter. During my planning I discovered the Successful Personal Planning Institute which has created a systematic, business oriented process to help owners deal with emotional issues. I have been certified by them to use their process and am now working with business owners to help plan and effect a successful emotional and financial transition from their business to a new and equally fulfilling life. We will continue on this topic in the next newsletter.
The Executive Search Business Model and the fable of the Emperor’s New Clothes
July 29, 2011 by Harvey Wigder
If talk to any executive search firm about filling your opening, they will tell you that they will do an awesome job. They might assert the value of their contacts, the skill of their research department or their ability to fit people to your company. You should consider these claims carefully.
In other blogs we have documented the sad truth that less than forty per cent of executive candidates last 18 months, and have shown you that one of the leading and a most respected search firm admits this is true. Given these statistics, you might ask, “What is going on and why is successful search so difficult?”
The executive search firm’s business model is straightforward in its simplicity. There are three major elements:
- Client tells the search firm the position it wants to fill and skills and personality desired,
- Search firm finds excellent qualified candidates, and
- Client selects the candidate it thinks is best, and hires him or her.
The first step in the process, the client setting the specification, sets up a fantasy situation that can be likened to the fable of the Executive’s New Clothes in that the Emperor’s vanity gets in the way of his discerning the simple truth that the garment he was promised couldn’t be produced.
The success and failure of an executive placement is not only about whether the right executive is hired! It depends on many factors including:
- Realistic understanding of what the new executive should accomplish to be successful,
- Particular challenges posed by the hiring company and the way it operates in achieving that result, and
- Hiring executive and organization’s being willing to accept flaws in their processes and take some of the responsibility for making the new executive successful.
When search firms join their client in the belief that they only variable making for success is the candidate, they are buying in to the client’s fantasy of his or her omnipotence in understanding the needs of the organization, because they benefit from it. They don’t risk alienating the client by telling that he should dig deeper to understand what is needed for success; they deliver strong candidates, let the client chose, and collect their fee and leave. This is a safe and profitable business.
We don’t want to overstate and say that the traditional executive search model is never appropriate or that search firms never do a good job. That clearly isn’t the case. However, we believe that every search should start with an assessment that helps the organization dig deep and understand what is most important for the success of a new executive and what needs to be done to ensure that the executive isn’t in a job that can’t be done. Only then, we believe, should the focus turn to the hiring specification.
Surprising Study Reframes Beliefs About Family Busines Longevity
May 9, 2011 by Harvey Wigder
At a recent workshop of the New England Chapter of the Family Firm Institute, Rob Nason shared results of FFI/Goodman Longevity Study he and his team conducted on the staying power of Family Businesses. The statistics that 30%, 13% and 3% of families survive to the next generation comes from a pioneering 1987 by John Ward. The results have dominated the dialogue and are oft quoted by newspapers and consultants.
Unfortunately the original study is often misquoted and the resulting popular conclusion is misleading. We have come to believe that there is something inherent in family businesses that cause them to fail at the sited “rapid” rates.
I wanted to share some highlights from Rob’s presentation since this goes a long way toward reframing our understanding of the survival rates of family businesses and asks us to consider their strengths anew. To me, the main take away messages were:
· The now shop worn 30%, 13%, 3% statistic is often misconstrued to mean that 30% of businesses fail in the second generation. That is wrong. The numbers were meant to show, to use the first number, 30%, as an example that 30% of family businesses last through the second generation and begin the third. As a further consideration, even if the business does not go beyond the third generation, this does not always represent a failure. Is it, for example, a failure if the business is sold? The study used the family, not the business, as its unit of focus. By doing so, it confirmed the positive result of the older study by showing that the average longevity of these businesses is about 60 years (2½ to 3 generations). It also presented a new and very provocative statistic: most of the families in their study owned multiple businesses so that the family’s involvement in enterprises outlasted its tie to any single entity.
· It makes a significant difference in perspective when you use overall survival rates as a benchmark. As we all know, the world is ever changing and businesses fail all of the time. The statistics show that only 25% of new businesses last 10 years. Another way of saying the same thing is to consider that one company that was in the original Dow Jones still survives. That is GE. From this perspective, everything is turned around. If the 30% number is valid, then it doesn’t show the weakness of family businesses; rather it is a testament to their strength.
Businesses are created by entrepreneurs. The study ask us to consider that the family business is compatible with entrepreneurship and may even be a breeding ground for entrepreneurs. I want to applaud Rob and his team for the study and invite anyone to learn more about by going to :
http://www.ffi.org/default.asp?id=411