In many ways, the main objective of a business owner is to make themselves the least important person in their business.
Because if you are the most important person, then you can’t leave – which means you can’t sell it (or, at least, it is unlikely to be worth as much if you are still an integral part).
This blog provides a practical activity to asses the extent of the challenge in your business.
Transference of Control
The maturing of a business is all about the transition of control, typically from a founder to a leadership team. In the case of a sale to an Employee Ownership Trust (EOT), the transference continues to the employees as a whole.
When a business owner approaches us to discuss preparing their business for an eventual sale, the main thing I am interested in knowing is to what extent control has already shifted from one or two people at the top.
Decision Making Structures
A typical decision structure in a small business will comprise: a board; a leadership or management team; and maybe an employee forum of some description.
The three questions to ask yourself, therefore, are:
- What are the decisions required in your business?
- Who makes them?
- Are you suitably empowered and qualified?
The first step in this activity is, therefore, to write down the decisions that are made in your business. It’s up to you how much detail you want to get into, but a comprehensive job would mean asking your employees to write down all the decision they get involved in, and collate all the replies.
Step two is to bunch these decisions together in a way that is logical to your type of business. Some will fall into clear groups – following up an enquiry would come under ‘sales’, for example. Others might be a little less obvious.
You might even take the opportunity to devolve some of the decision making. Who decides whether to offer someone a job, for example – could the employees get more involved in the recruitment process?
In step three, you allocate which of the existing decision making groups makes these decisions. If this is not an easy exercise, then it is even more important that it is done.
Now ask the following questions of each decision-making group:
- Do you feel the correct decision making group is making each decision? Is someone involved in making some decisions which doesn’t really have anything to do with them?
- Are there any decisions not being made? For example marketing (as opposed to sales) decisions;
- Does each group have the necessary authority to make those decisions? For example, does the board allow the management team to make its decisions;
- Does each body have the relevant skill set, training, and information? For example, do the skills of the individual board members match the responsibilities of the board;
- Does the reality match the theory? For example, does an owner allow each body to make decisions, or do they override decisions they do not like.
A really honest appraisal of the decision-making structure within the business is essential to be able to build a succession plan.
If you would like some help with this activity, or if you’re interested in our online programme to help owners prepare their businesses, then get in touch.