Today’s guest is Doug Sippel from Leadership Transitions. Doug helps private business owners understand their value systems and from there develop a vision for their business that all of their stakeholders can get behind.
In my experience, values led businesses are always more fun to do business with, more profitable and easier for it’s customers to understand what they’re trying to accomplish in the wider world. In today’s podcast we’ll be covering the following topics and more:
- How vision helps you focus on the right things in your business.
- Why you might want to be thinking about the term culture transition in what you do.
- The importance of thinking about your business without you being involved in the day-to-day operations of the business.
- What institutionalizing your job means and how it can make your business sustainable.
- How letting go doesn’t mean abdicating your role in your business.
Narrator: Welcome to the Sustainable Business Radio Show podcast where you’ll learn not only how to create a sustainable business but you’ll also learn the secrets of creating extraordinary value within your business and your life. In the Sustainable Business, we focus on what it’s going to take for you to take your successful business and make it economically and personally successful.
Your host, Josh Patrick, is going to help us through finding great thought leaders as well as providing insights he’s learned through his 40 years of owning, running, planning and thinking about what it takes to make a successful business sustainable.
Josh: Hello today, my name is Josh Patrick and you’re at the Sustainable Business Podcast. Today, our guest is Doug Sippel. I’m really excited to have Doug with us today. He is the CEO of Leadership Transitions. He and his firm spend a lot of time working with family businesses and internal transactions and how to move the business from one generation to another. Doug tells me that he believes it’s all around culture and we’ll find out what he means by that. But off the top of my head, I have to agree with it. We’ll have Doug give you his contact information. So, after we’re done today, I’m kind of sure that you’re going to want to get some more information from him and we’ll let him tell you. So, without further ado let’s bring Doug on board.
Hey, Doug. How are you today?
Doug: Great, Josh. Thanks for having me.
Josh: Oh, it’s my pleasure. I’ve been looking forward to doing this podcast with you for quite a while. Why don’t we start right off in here, why are vision and values the things that drive the process when you help a business owner transition?
Doug: Well, the reason I say that vision and values are the key is because many times a founder, a business owner who’s spent a number of years growing a business and having to really focus on the day-to-day details to make sure that the business is successful and at the point where I would start working with them, it really has become now a successful business that’s operating fairly well but the founder is often times still very involved on a daily basis. The first thing that we really need to start thinking about is “what’s the culture of the business?“ I like to think of it as creating a culture of transition because as you start considering all the things that need to be thought about and dealt with, having a vision for what the future of your business is going to be, when you’re no longer really part of it or you’re certainly not actively involved with it and it may go beyond your lifetime.
The values are critical – the values that the founder really started the business with and is what is really the culture of the business has now become. Those values have been embedded in the culture, is a very important component to be very clear and to understand how those values and that vision for the future are going to be achieved. If we can’t get real clarity around that, it often times is a struggle to be able to put together a plan and a sustainable-type business model that will help the business continue to be successful as it moves forward into the future.
Josh: Maybe you can help me with something. What is a culture transition? I mean, I know what culture is in a business but I’ve never heard the term culture transition before.
Doug: Well, I use that term to describe what you have to be thinking about when you start thinking about “who’s going to do this job next” and “what does it look like when I’m no longer the person doing it?” We hear in a lot of bigger organizations, the concept of succession planning is really about the movement of people within the organization as somebody retires, how people move upward and take the place of people that are leaving the company or retiring.
In a closely held business, that’s also true but what often times is different is that if that if you’re not thinking about how the business is going to operate and be successful without you in it, you’re not really thinking about a culture of transition. You’re thinking about a culture of current successful operations but that may be different than when you think about how somebody else needs to be doing this job next. That really is one of the first key questions that most business owners begin to ask themselves as they consider the last third of their life and what they want to do next is “Who’s going to run the business?” That really starts to change the questions that you ask and change the things that you focus on. And it means the culture needs to be supporting all of the work that needs to be done to be able to allow that successful transition to happen so the business can move forward.
Josh: What kind of different questions might you ask if you’re thinking about transition versus successful operations?
Doug: You would be asking questions like “Okay, this procedure we’ve built, is it built in a way that’s built around me as an individual? Or is it a procedure that’s built to allow anybody to step into doing the job and it clearly defines how the job needs to be done but is not specific to any one individual?” Often times, I see work is built and habits are built and the way things are done are often times built around the personal skill set of the founder. That may be things like they’re really good at sales, or they may have a technical skill or an engineering, or something that’s given them a unique ability that they have built the success of the business around.
But if you start thinking about how you build your policies and procedures, how you build governance structures, how you decide who has authority and decision making responsibility. If you do that in a way that’s not built around any one individual, it means the business is starting to be built for succession and for transition and the ability to continue successfully no matter who the individual people are that are working in the business.
Josh: Okay. I’m a little confused, I think. Maybe you can help me out with this. So, if I’m the owner of a company and I’ve been doing these things for a zillion years and it’s my skill set, are you saying that you need to institutionalize the jobs? Is that what you’re saying here?
Doug: To some degree, yes, because the business reaches a plateau at a certain point in the first generation where it’s successful but if we can’t institutionalize how the work is done, if the way the work is done and what makes the business successful cannot be transferred from one person to the next, then the business tends to operate in a way that it will not be very likely that it will succeed after the current individuals have retired. That’s one of the key thought processes here. There’s a term, generally speaking for this kind of knowledge, they call it tacit knowledge. It’s really that the things that you do and you know but you’re not really necessarily even that aware of them and it’s the transition of that tacit knowledge that often times is one of the key components of success.
Josh: How do you find out what the tacit knowledge is that you know?
Doug: Well, that’s what this is really about in terms of when you start sitting down with someone who you’ve chosen as your successor, as someone that will do the job next. As you start to actually go through a training process and a coaching process to help them become successful and to understand what needs to be done. This by itself, often times, flushes out a lot of that tacit knowledge because it forces you to think about, “How do I teach somebody else to do this?” rather than just almost unconsciously doing it because you know it so well but you haven’t really thought about how it needs to be done by someone else.
So, just that process alone can really help bring this tacit knowledge and these unique skills to the surface so that you can build an institutional process, as you referred to, around it and be able to help that next person be successful and continue to run the business. This is critical because I call the first step “becoming a passive owner” from the point that if a current founder or owner can do this, then it gives them a lot more options on when they’re ready to transition the ownership. If they’ve successfully transferred the leadership and the management of the company to other people and the business continues to operate successfully without them being there on a daily basis, it opens the door to a lot of better options when they get ready to transfer the ownership.
Josh: What kind of skills does an owner need to learn to become a successful passive owner?
Doug: Well, I think one of the key skills is what I refer to as letting go. It’s the ability to realize that you need to set up the structure of the business so that you let go of the things that you’re doing and you allow other people to start doing them. That skill, by itself, often times is hard particularly for founders.
As you get further down the road with business that have gone through transitions, the second, third, fourth generations so to speak of leadership and management, it isn’t quite as difficult for those people to be able to retire and step away. But often times, a founder particularly has—you know, they’ve poured their blood, sweat and tears into growing this business and in many ways, it’s a little harder for them to just let go. But when they can learn to do that and be confident that the management team or the people that are replacing them have the ability and most of all they trust their ability, then they can let go and move on into the next stage of their life doing other things and the business will quite likely be successful.
Josh: You just brought up three things which I think are really interesting. First, is letting go. Second is something I’m adding which is we need to talk about business owners as control freaks. Business owners tend to not be the most trusting people in the world. What is this specifically they can do to transfer responsibility and authority in their business where they can do it comfortably, maintain the control when they need it and learn to trust their key people? What are some of the specific things they need to do?
Doug: I like to really focus a lot on leadership development amongst the people that are going to be replacing the founder, being able to really trust their skills and their abilities as a leader. I found that oftentimes self-awareness is a huge component of that and starts with knowing yourself and emotional intelligence is a big part of this.
Josh: Can you please explain to us what emotional intelligence is because I’m going to bet a lot of listeners say “huh”?
Doug: Sure. What I mean by emotional intelligence is really probably primarily three things. It’s the ability to know yourself and to know how your emotions drive your behavior and what you do under stress, and what your natural style is and how you may change or become more of a driver or more of an authoritarian as things get a little stressful and there’s a lot of critical decisions to be made. So, knowing yourself is really one of the first steps.
And then secondly, knowing others and knowing how they’re wired and how they’re built and why their internal wiring can be trusted, and that you can trust them to be able to do the work in – maybe not exactly the same way that you would do it but you know them very well. And so, there’s a lot of different assessments and tools out there that we can use to measure some of the emotional intelligence and the internal wiring that we all have – our internal values, our internal styles and how we make decisions. Once we understand each other at a deeper level, those can really help to raise the trust level.
I like to think of trust in two ways primarily. One is personal trust and one is professional trust. Personal trust for me is primarily about integrity and about intent. If I feel like I trust you because I believe that you have my best interest at heart and that your intent is honorable and we’re trying to do the right thing and get to the right place together – this also goes back to shared vision. But if I trust you that way, then I can be a lot more confident in your professional competence as well. I think about professional trust as being about competence and your ability to do the job well – with just your talents and your skills. But you really have to have both types of trust to be ready to turn things over to other people. Those are some critical components that I think about.
Josh: So, when you’re working with a control freak, first-generation owner, what’s the first thing you ask them to do when you’re trying to help them become a passive owner?
Doug: The first thing I ask them is really to identify the issues or the challenges that they’re facing as they think about, “If I was to take a six-month vacation, what would I be most fearful of? And what would be the things that I’d be afraid that would go wrong?” And as we start to identify those things, those are the things we first start to work on and be able to build the trust around other people doing some of those things. That’s really first step in building a management or a leadership succession plan which is identifying all of those things that you do every day and making a list of those things so that we can start to build a plan for “Hhow is somebody else going to learn how if they don’t know how? Who is going to do these things? When will they start and when will you stop?”
So, we build what I call a stair step down for the transition of decision making and authority around all the different areas in the business that have to be thought about so that the baton handoffs will go well. I like to think of this as a giant relay-marathon-triathlon because it takes a lot of different skills. It’s a long‑term process. It’s not a sprint. And it takes a number of different baton handoffs to pass the responsibilities for all the different areas that the founder is generally responsible for to other people. And so, thinking about the action of the baton handoffs – somebody has to be ready to give the baton, somebody else has to be ready to take the baton; but if you don’t let go of the baton, it fails. So, this again goes back to letting go as a huge component of this whole process.
Josh: In my experience, a lot of times, my business owner folks I work with have a hard time with mistakes. How do you deal with that?
Doug: I like my clients to really think about the fact that mistakes are learning opportunities. That’s hard because sometimes you only have one chance to get it right. It’s very hard for people who have learned how to do it right the first time to watch others make mistakes. So part of it is just a coaching process to help people realize in advance and to start to plan for “How am I going to manage my own thought processes and my own behavior – watching other people that may be making mistakes in their learning process?”
I talk about five guiding principles underneath this work that’s going to help everything be successful. One of those is learning. We all have to realize that in this process, I may be a beginner. I may be starting from a place, doing this kind of work that I’ve never really done before because I’ve always done it myself or I’ve done it in a way that I have a lot of control. So, this concept of learning how to deal with allowing other people to make mistakes but realizing that as we make mistakes, we have to grow and learn from them is a part of building a new process, possibly, and a new way of allowing others to learn and it’s not easy. There’s no easy answer to this challenge but it’s something that has to be done. And dedicating yourself to learning how and thinking about what you’re going to do is a huge first step.
Josh: You said there are five things. You mentioned one. What are some of the other ones?
Doug: The other four are people – and that really relates to building other people, developing leadership and management skills in others and in yourself.
The third one would be processes. If you have not documented and written down all of the policy/procedure-type things that need to be documented and how the organization works, that’s a critical step. That can look like a planning process. It could look like “How to do a job or do a certain task.” A strategic planning process is a huge component of that type of thinking. So processes are very important.
The fourth one would be structures. Examples of structures would be things like governance structures like a lot of the time in the clients that I work with, there’s not necessarily a really functioning board of directors or a board of advisors and the decisions around how the business operates and, especially if it’s a family business, there’s not any clear governance structures in place for family decisions around a family council or how the family interacts with the board of directors or the shareholders. There may be more than one shareholder. There may be multiple owners. In that case, it may look like there’s multiple families involved. Having decision making and authority, in the form of good governance structures is critical. That’s an example of what I’m talking about when I use that term – structures.
The last one is high trust. To me, you have to have the high trust levels to be able to do this kind of work. Dealing with internal conflicts and struggles over being able to actually communicate and deal with the dynamics that can happen especially when family members are involved is a challenge. Often times, one of the key components that I would start working on is building trust. Again, focusing on a culture of trust and how to build trust through a shared vision and through shared values can be a huge part of that process.
Josh: I have time for one more question. It sort of in this were goes back to the title of this podcast which is a Sustainable Business. If your business owners do all of those stuff, how does this help make the business sustainable and move it from success to sustainability?
Doug: That’s a critical component because a business, to be able to be successful in the long run – and I think of this and call it a 100-year planning because I want people to think about what their business looks like 100 years from now, when they’re dead and, practically speaking, most of the people that are working in the business or have much to do with the business are no longer alive or no longer certainly not involved. And so, thinking about what does this business need to look like for it to be successful in the long run and have those systems, the processes, the leadership development, the high trust – all of those structures will help that business to be created and be put together in a way that it will continue to be successful and everybody who works in it begins to view themselves as stewards from the standpoint that the ownership passes, the management leadership passes from one person to the next but the business continues to be successful.
If you have a mindset that “I am responsible for taking care in operating this business and making sure that it’s successful but it’s moving on past me – it’s not going to die with me, so to speak, it changes how you make decisions. It changes how you think about things. It changes how you interact with other people and how you want to prepare them for success as they take over from you, so it creates a much stronger chain of communication and support for people as they work together to make sure that the business continues to be successful. Without that, often times, that’s one of the reasons the business fails
Josh: So, Doug, we’re out of time. I’m sure some of our listeners might want to contact you. If they were to go about doing that, what would they do?
Doug: Well, the phone number to reach me here in Portland, Oregon is 503-479-7790. And they can also e-mail me at firstname.lastname@example.org, that’s T-R-A-N-S short for transitions. The website is the same, www.leadershiptrans.com.
Josh: Great. Doug, thanks so much for your time today. This was a really interesting program. For those who are listening, success and sustainability is really about becoming a passive owner so listen and take some notes. Thanks so much for your time.
Narrator: You’ve been listening to the Sustainable Business Podcast where we ask the question, “What would it take for your business to still be around 100 years from now?” If you like what you’ve heard and want more information, please contact Josh Patrick at 802‑846‑1264 ext 2 or visit us on our website at www.askjoshpatrick.com, or you can send Josh an e-mail at email@example.com.
Thanks for listening. We hope to see you at The Sustainable Business in the near future.