Michael Beck - Finding or Making the Right Successor
On today’s show, Ed talks to Michael Beck, executive succession and leadership coach and author of Eliciting Excellence: Bringing Out the Best in People. Michael helps owners successfully transition their business either internally or externally. His work focuses on objectively assessing and coaching potential successor to ensure that they are a good fit for the business over the long term. Whether owners are handing down a business or looking to sell on the open market, Michael’s commitment to leadership training is an invaluable asset.
[01:26] Intro to Michael
[02:04] Welcome to Michael
[02:57] Good Leadership Inspires Excellence
[03:39] Michael’s experience as Executive and Owner
[04:27] Internal Transitions
[05:00] Assessing a new leader
[05:55] External Transition
[07:06] Grooming Process
[11:30] Experience vs. Leadership Skills
[12:45] 360 Leadership Assessments
[15:20] Shifting Perspectives
[15:53] Most Common Competencies
[17:03] Lifestyle or Legacy
[20:32] Leadership Strength Impacts Value 15%-20%
[22:36] Successor Recruiting
[24:59] The Impact of Personality and Business Style
[31:09] Michael’s Advice for Immediate Impact
Learn More From This Podcast
Michael’s business, Eliciting Excellence, provides business and executive coaching and leadership guidance that not only builds stronger businesses but helps facilitate a seamless transition of ownership. Michael also works as a business strategist and author, focusing his coaching on helping leaders improve their interpersonal skills, sharpen strategic thinking and enhance judgment. His work helps maximize the value of a business for sale and increases the likelihood of closing by strengthening the core leadership team. Michael offers leadership assessments and executive coaching.
Years ago, Michael noticed that everyone seemed to be talking about the importance of leadership and how to improve leadership skills, but no one had ever broken down exactly why strong leadership makes a difference across the entire breadth of a company. Through his work, Michael began to articulate that the reason good leadership is so important is that it inspires excellence in every part of a business. Unlike many other coaches, Michael has boots on the ground experience and has held executive roles in a variety of industries both at home and overseas. These experiences form an invaluable foundation for helping customers work through the difficulties of executive leadership. Besides holding executive positions, Michael’s experience as an owner gives him further insight into the unique challenges his clients face. These experiences, along with his commitment to a 360° assessment of leadership give Michael the tools he needs to help businesses create enduring legacies.
Any time there is a transfer of power there must be a shift from within the company. While internal and external transfers have different needs, Michael says there still must be an evolution that takes place from within.
In internal transitions, Michael says he brings a crucial level of objectivity to the table. This can be especially hard to find in close-knit companies and family businesses. For internal transitions, Michael begins by objectively assessing the individual who has been chosen to take on the leadership role. The key is to evaluate not what the current owner thinks of the successor, but rather what their peers think. Michael says that family dynamics can be particularly difficult to navigate and often parents don’t believe their children are up to the task, even if people in the organization feel otherwise.
External (purchase) Transition
External transitions are typically more objective about who needs to be taking on the leadership role and focus on leadership teams over a single individual. Interestingly, buyers are eager to know that the structural integrity of the business is in place without input from the owner. They want to make sure existing leadership is capable so that they believe a successful transition will succeed.
Even though some statistics point to the contrary, Michael says his clients largely want to pass the business on to a family member or an individual within the community who has similar values as the owner.
For a capable individual who understands the mechanics of the business, Michael says that his timeline for establishing leadership skills is only 6 months to a year. But, Michael warns, every business is unique and finding the right successor can be a huge challenge. Often, standing leadership doesn’t have a good grasp on what skills their successor needs. Industry experience alone does not necessarily make a good leader. Leadership skills like judgment and strategic thinking are, in most cases, more important than experience. Even though the executives Michael works with are shrewd business-people, he says they will often have blind spots about what their business needs from its leader.
360 Leadership Assessment
The concept of a 360 assessment is an assessment that looks all around the individual. When the team does an assessment, they start by getting feedback from the individual’s boss and peers, collecting all direct and indirect reports. They then look at 35 different leadership and ownership competencies. This feedback helps give an overall picture of the individual’s strengths and weaknesses and allows Michael and his team to craft a course of action. They validate strengths but spend the bulk of their time strategizing on what improvements will get the most mileage for the company. The entire coaching experience is confidential and done entirely online and generates a 30-40 page deliverable. There are rare exceptions in which the team will get someone who isn’t coachable. Such individuals are thankfully far-and-few between and Michael says people are eager to be effective as possible and prove their worth. The art of Michael’s work is putting the empirical data into context and he says that shifting people’s perspectives takes up the lion’s share of his time and energy.
The leadership characteristic that Michael says is the most crucial to get right is the ability to influence people. In reality, leaders can force employees to do whatever they want, but what is much more effective is influencing them to do the same thing. Same outcome, but with better results. According to Michael, getting employees to buy into an idea is where the magic happens. Ultimately everyone wants what’s best for a company and it’s employees. Even though Michael works more with successors and less with owners, he says that the people hiring him are by and large concerned with their legacy. Most people want to ensure that their businesses continue to be healthy and their employees will be taken care of after they are gone.
Something that has been on Michael’s radar a lot these days is the beginning of a generational shift. He says his research indicates that there is going to be a difficult market for Boomer business owners looking to sell to a third party as that generation ages out of ownership. 3% of people in Generation X own their own business already, which is just a 1.5% lag behind Boomers. When the time comes to sell this glut of businesses, Michael says that only those with strong leadership teams who function well without the presence of the owners will survive. Michael says that a lot of business owners who haven’t done the work to prepare for succession will likely have to sell assets or hope for the best.
To get ahead of the problem Michael and his team have been crafting a program for successor recruitment. He says that the qualities of a successor are both competencies and personality, but that ultimately, personality is more important. Competency, Michael points out, can be taught but traits like high energy, optimism, and drive aren’t so easy to train for.
Business Style Assessment
As part of their successor recruitment work, Michael says they give owners a business style assessment. Evaluating things like decision-making style, drive, etc. helps his team assess whether those qualities are still what the business needs or if they need to look for other characteristics in potential successors. Once the team has fully evaluated the needs of a company, the recruitment team begins looking for the match. The system is working—hires made from this process have enjoyed a 97% retention rate so far.
Michael’s last piece of advice to owners is this: If you are planning on selling externally, you owe it to yourself to maximize the value of your leadership team. Doing an assessment will allow you to give proof to potential buyers that you have effective leadership in place. On an internal sale, the same process is essential. It’s crucial to turn your business over to someone who is going to be an effective owner and leader, not just an employee who knows how to make widgets.
Connect With Michael
Michael typically works with the lower middle market which is defined as businesses who value within the ten million to low hundreds of millions range. His services are tailored to fit individual companies and the team offers affordable services for every need.
If you want to connect with Michael or dig into his work, you can do so via his website at www.elicitingexcellence.com If you’re interested to know more about his successor recruiting program, you can visit that website at www.successor-recruiting.com