Succession Planning - Developing a 2IC
There comes a time in the life of most entrepreneurial companies when the founder/owner decides to reassess his or her role in the company and considers bringing in a “second in command.”
When done properly, says TEC speaker Steve Coffey, this process offers a host of benefits to both CEO and company, setting the stage for a stronger management team and a new level of growth for the business.
Why Bring in a #2?
According to Coffey, CEOs tend to bring in a second-in-command for three specific reasons:
1. Professional
A good #2 can allow you to find a new role within the business, something that you are uniquely qualified to fill and that adds real value to the company.
2. Business
A #2 with broader business experience or more specialised expertise in a particular area can help you accomplish visionary, financial, market or other business objectives.
3. Personal
The most common reason is to free yourself up from many of the day-to-day operational activities. Or, you may simply want to relax and enjoy running the business more.
“In the best cases, a good second-in-command can accomplish all three. The right person in the right position allows you to spend more time with your family, invest in the company’s growth, harvest cash from the business, build the business for sale or establish a succession plan.
Before bringing in a #2, however, be very clear on your new role. Never bring someone in just because you want to get rid of some things on your plate, because that only sets both of you up for failure. Instead, identify a driving need of the business that you alone can fill, such as sales, R&D, maintaining customer relationships or making acquisitions. Know the direction of the company and your role in it. Determine how you truly want to spend your professional time. If the two match up, bringing in a #2 may make sense for your business. Without clarity in this area, you won’t succeed in identifying the #2 role, and will be far less likely to recruit a great one.” says Coffey.
According to Coffey, whether you hire from outside or promote from within depends on a number of factors, including your organisational culture, the strength of your management team, the role of the #2, political issues and more. However, in most cases, he recommends bringing in an outsider.
“If you have the right person internally, chances are they will already have risen to the position. This may have happened informally, but they will already be in place and all you have to do is to formalise their position and recognise your new one. If you have to wonder who in your organisation might fill the #2 role, that person doesn’t exist, in which case you must look outside the company for someone who can fit the bill.
When you do promote someone from within, they know your company but you won’t get any new ideas. Plus, insiders bring a lot of baggage with them. Employees tend to think of this person as they were, not as they are.” says Coffey.
Insiders also have a harder time adapting to change, which can make it difficult for people to acknowledge the new boss. In contrast, an outsider starts with a clean slate. They have unquestioned authority until they make a major mistake.
“Either way, the fundamental issues involved in taking on a #2 remain the same. These must be worked out well in advance of the hiring/promotion to have any chance of success.” he explains.
Potential Pitfalls
Bringing in a second-in-command carries a number of inherent risks, including:
Loss of your identity (Your role will change. If you don’t identify the new one, cautions Coffey, you will get lost in your own reorganisation).
Frustration because the #2 doesn’t do things your way.
Reduced focus on the vision.
Increased turnover.
Frustration with the pace of change (most entrepreneurs are transaction-oriented, while many #2’s fill a need for more process orientation to coordinate all the discrepancies within the company).
Increased overhead with no guarantee of commensurate benefits.
Employees can lose confidence in you if the #2 fails.
Decreased productivity while people assess the politics of who to follow.
To avoid these pitfalls, have a clear and compelling reason for designating a second-in-command, one that makes sense for you personally and for the business. To help determine if you really need a #2, ask:
What will be different with a second-in-command?
How will that allow me to do my job more effectively?
How will it benefit the company?
“Even when you know the pitfalls and ask the right questions”, says Coffey, the first attempt at bringing in a #2 often fails due to one or more of the following reasons:
The owner/CEO fails to make the adjustment.
Unclear objectives and role definitions.
Limited authority inhibits the #2’s ability to get things done.
Poor communication with the owner/CEO.
Hiring the #2 for the wrong reasons.
Poor fit with the corporate culture.
The #2 manages the business but not the relationship with the owner.
The owner/CEO refuses to share real responsibility.
Most owners view the cultural fit as the biggest potential hurdle. However, more often than not, the biggest stumbling block turns out to be the CEO.
“Cultural fit represents a legitimate concern, but if you hire a professional manager who has worked in several companies, he or she will know how to identify what works in your company and how to fit in.
In my experience, the CEOs cause most of the problems. They have a difficult time making the necessary adjustments because they’re used to calling all the shots. They expect people to adjust to them instead of the other way around, which doesn’t work in this situation.
When you hire a second-in-command, you may discover that you don’t enjoy sharing some of your responsibilities - especially if you haven’t clearly defined your new role.
You also may not like the fact that people no longer come to you for all the answers. If you can’t find a new, valuable, comfortable role for yourself in the organisation, you probably won’t be able to tolerate a #2.” says Coffey.
Defining the #2 Role
Once you have gained clarity regarding your new organisational role and accepted the notion that you have to make some personal adjustments, you must then define the #2’s role. Ask yourself:
How will the company be different with the right person in place?
What is not happening that would be improved with a #2?
What, specifically, do I expect from a #2?
What will a new executive provide that the current management team doesn’t? Why?
How will my life be different with a #2? What will change for me personally?
In some cases, notes Coffey, your answers to these questions may not point to a second-in-command as the ideal solution. As alternatives, you may want to consider:
Reorganising the company around your desired objectives.
Resetting your objectives.
Management training.
Upgrading the talent level in existing positions.
Another critical issue revolves around whether you want a leader or a manager. A leader comes in as president, COO, or CFO and typically expects an operating partner position. They will likely want equity and will push hard for it in the interview. A leader expects authority, accountability and a large degree of autonomy.
They will help you set the vision, goals and objectives and then expect to be left alone to accomplish them.
In contrast, a manager comes in as a vice president or general manager and focuses on getting things done. They may ask for equity in the company but will quit asking when you say “no” the second time. A manager expects and needs more direction and feedback in order to get the job done. They want you to share your vision and set the strategy, goals and objectives for them.
Both roles serve a valuable purpose. However, you need to be crystal clear about which one you want. Should you give the #2 freedom to select direction, process and accountability (leader), or should you stay involved in the decision-making process and have the #2 constantly keep you in the loop (manager)? Your clarity around this decision will set the course for your working relationship and greatly impact your #2’s chances of success.
Creating the Ideal Profile
If you decide to hire from outside the company, Coffey suggests creating a profile to guide your selection process. First, determine your objectives and clearly define your organisational chart and where the #2 fits in it. Then prioritise your expectations for the position and create a profile based on those expectations.