Chapter 4
Grooming a successor

In the previous chapter, you made the decision of how your business will continue without you. You chose carefully after fully studying all options and implications of your decision. As you recall, there were only five ways to transition your business. If you chose family succession or employees, then you set out on a journey to groom the next person in charge. Keep in mind, however, that while you may be grooming the next person to run your trucking company, you may not be grooming him to own it. There is a big difference.

The process of grooming a successor is basically the same whether you choose a family member or someone else to be your successor. Chapter 5 addresses specifically the transition of your business to a family member. This chapter is generic to anyone who will run the company. And we also assume that you are looking for talent, whether that talent lies within the family or outside it.

Basically, you have three options: A family member, a key employee or someone hired from the outside.

In a family-owned business, usually a family member is chosen as successor in case of death, disability or retirement. In the case where no family member is qualified or the owner does not have any children, a top employee generally fills the void. And if no insider is qualified, the company may need to go outside for a leader, at least on an interim basis. And again, you have the option of separating management and ownership. Think of one of the sequels to the movie The Godfather in which Robert Duvall, the family attorney, actually ran the family business and the sons were “company” officers.

Assess skills
Even if you have already picked your successor – perhaps especially if you have done so – you still need to evaluate skills. If your chosen successor doesn’t have those skills already, you must help him develop them.

What skills you are looking for in a potential successor? The person must have some technical skill sets plus all the intangibles. Typically, the technical skills center around financial aptitude, operations mentality or a sales capability. In addition, the “soft” skills of leadership, charisma, management and other characteristics are critical.

A skills assessment is necessary for establishing a long-term development plan. Part of that development plan in today’s business environment is for leaders to be in charge of themselves. Especially in family businesses and privately held companies like the vast majority of trucking companies, the successor must be self-motivated and able to manage himself.

Successor’s self-assessment. In that spirit, ask a potential successor to evaluate himself. A good guide for this assessment can be found in Peter Drucker’s book, Management Challenges for the 21st Century. Drucker identifies five keys to managing yourself.

First, understand your management style. What are your strengths and weaknesses? Are you a financial type person? Are you a big picture person? Are you a detail person? Figure out what you do well and what you don’t do well.

Second, know where you belong. You may not be suited to running the shop, for example. You may belong in a highly structured culture where everything is a bureaucracy. Or you may be comfortable running a mid-sized trucking company with 500 company drivers.

Third, figure out what your most important contribution is today. Are you a good salesperson? Can you find a load anywhere? Are you a good driver motivator who can relate to their needs? Figure out what you do well and what your personality is.

Fourth, take relationship responsibility – in other words, communicate. What’s most important is to take that responsibility upon yourself. Don’t think that your sister, brother or chief operating officer is going to talk to you about all of the issues. Take the responsibility to give information and to receive information. Hiding information usually comes back to haunt you. It is all right to say you messed up and discuss the issues. Great managers assume a communication vacuum and fill it.

Finally, start thinking about the second half of your life. This is important for the exiting family member and for the successor. We are living longer. The average life of a business is 30 years, while the average individual’s working life is 50 years. The younger generations may not want to work like their parents did for 50 years in the same company even if they own it. That would mean starting a job when you are 25 and working until you are 75. Your successor needs to start thinking about his succession plan when he takes over. Remember, we are talking about the CEO, the top manager of the company. It is never too early for the successor to plan his own exit.

Your assessment. What are you looking for? Below is a skills inventory list that might be appropriate for your operation. Obviously, you may need to tailor it to fit your specific needs.

Business skills
1. Possesses innovative and effective management skills.
2. Establishes goals and organizes resources to meet them.
3. Develops long-range plans and monitors progress.
4. Effectively positions the company in the marketplace.
5. Perceives changes in the business environment and reacts accordingly.
6. Displays a dedication to quality and safety.

Leadership skills
1. Develops employees and drivers.
2. Contributes to the development and advancement of managers and dispatchers.
3. Fosters company loyalty and team spirit.
4. Conveys a vision for the company and its employees.
5. Uses power and influence effectively.
6. Promotes ethical behavior.
7. Encourages a free exchange of ideas.
8. Has the overall vision of how technology will shape the trucking industry and a plan to stay competitive.

Take the time to review these skills and begin the process of evaluating each candidate and setting a development plan.

Evaluate your company
You need to know the true state of your company for many reasons, but specifically so that you help choose the best successor. Each candidate has different strengths and weaknesses that may match with the state of the company. Knowing the state of your company will help you set a development plan and training program for your candidates.

To evaluate your company, perform a SWOT (Strengths Weaknesses Opportunities Threats) analysis. For more on the SWOT analysis, see Chapter 4 of How to Write a Business Plan, another how-to manual in the Commercial Carrier University program. Review your mission statement, organization chart and responsibility lines. Discuss your major shippers, safety record, driver retention, operating ratio and major vendors such as equipment suppliers. Make sure you fully analyze rates and lanes. Your candidates need to understand the fundamentals of your current business. Don’t take for granted that your top employees or children know your business the way you do. Certainly if you bring in an outsider, he will need to learn everything you know.

Train the successor
One of the most critical parts of the succession plan is ensuring that the successor is ready to take control of the company. If your candidate is a family member, consider sending him away, perhaps to another trucking company. Obviously, a direct competitor likely won’t work, so you may need to consider another city or state or possibly a different commodity. For example, if yours is a van operation, you might send the would-be successor to a flatbed operation.

One of the worst things is when a family member successor never experiences any other business than his own. Accept that a family employee isn’t truly an employee. Family owners treat their children differently, even if they try not to. And possibly more damaging, others in the operation don’t treat children as real employees.

Aside from this step with a family successor, teach any candidate a little bit about the financials of the company. Emerging leaders in the trucking industry are not typically from the financial side of the business. In fact, most successors are usually scared of numbers.

Take your successor under your wing and make sure you spend one-on-one time with him, just chatting about the business. And find a mentor outside the business, such as a CPA. The successor is often intimidated to talk to Mom or Dad about certain management issues. Finally, shadowing works well. Let your successor follow you for the day on a regular occasion. Debrief about the decisions made throughout the day.

Remove yourself
After you have trained the successor extensively, you need to remove yourself from the everyday business so the successor can truly learn it. No amount of training substitutes for hands-on experience. You can accomplish this in two ways.

First, create systems in the business to handle routine matters. As we discussed at the beginning of this book, that is a critical step you should take anyway given that you never know when you will no longer be in the picture. These systems should cover the issues that come up on a daily basis. Everyone may know these steps intuitively, but you need these policies and procedures in writing.

Second, teach each successor – and more importantly, yourself – to live with a result that is perhaps 80 percent as good as you would have done it. You will never find someone who is, in your mind, 100 percent as good as you are.

Using the golden handcuffs
Once you spend thousands of dollars grooming a successor, keep him motivated and don’t let him leave. Whether the successor is a family member or an outsider, everyone feels the pressure of greener pastures. Also the stress will intensify during the transition period. Make sure there is a compelling reason for the successor to stick around. You need what’s known as golden handcuffs.

Golden handcuffs can take various shapes. Stretch targets are a simple way. Set a target to achieve. If achieved, a bonus is earned. Set an even higher target called a stretch target and make the reward very handsome. All golden handcuffs center around achieving a goal and then delaying the reward. In Chapter 17 of this book, you will see various ways of paying for the company. Be creative on golden handcuffs for family members. It may be in the form of forgiving certain parts of a family loan or some other financial obligation.

That’s the basic approach to grooming. Next we turn to the specific options for transition, beginning with turning the company over to a family member.