Manifestation of power, authority, control, and influence (*PACI) among shareholders and employees in closely held businesses serve as leading indicators for the likelihood of success at points of significant transition. While these attributes are observable, they can be tough to pin point. Here are a few underlying symptoms to look for:
- A lack of trust or transparency (artificial harmony may dominate)
- Ineffective or inefficient decision-making
- Lack of role clarity
- Absence of a formal budget or strategy
- Excuses substituting for results
- Lack of accountability
- Non-productive conflict
- Strained relationships
- Absence of a documented succession plan for senior leaders and owners
- Significantly slowed, plateaued, or declining annual revenue growth.
When PACI is properly diffused through the organization shareholders have controls in place that give them visibility and control over their investment, while freeing employees to drive more profit to the bottom line. The process of overcoming barriers to scale, engaging in a transition, or executing a family succession forces the business into the uncertainty of liminal space (the space in between leaving what was and moving toward the future state). Moving through liminal space requires people to let go of old ways of being and doing and adopt new ways. When PACI issues exist in the culture, transitioning through the liminal experience will be difficult, if not impossible.
Solving PACI issues requires careful observation of symptoms and identification of the root cause(s) to properly frame the problem. Unfortunately, this is where things tend to go awry. The most common approach is to address the symptoms – lack of role clarity, write a job description; lack of trust, hold a communication training; declining growth, work harder. Operating in these environments feels like being a rat on a treadmill running faster and getting nowhere. People begin to argue about all sorts of issues without having a clue what they are really wrestling with.
When PACI issues exist driving through a transition requires owners and business leaders engage in transforming long held patterns that served to satiate their essential psychological needs. This process introduces a threat to psychological security – this is the fundamental cause and major pitfall of transition.
The fundamental solution – properly frame the challenge:
- Discover: What is the current reality for PACI in the system (shareholders, managers, influencers)? How might (or is) this reality impacting the transition?
- Explore transition goals: What is the vision for the transition? What are the expectations for owners and managers?
- Design the approach: Align the organizational structure, roles, responsibilities, governance and management decision-making that will support the organizational strategy and a successful transition. This must include establishing new channels for control, authority, influence, and power that are explicitly managed.
- Implement: Incorporate these dynamics into the transition strategy and action-planning so that all parties have visibility, shared understanding, and can effectively coordinate.
- Iterate: No transition goes exactly as planned. Having clear points of evaluation and refinement are essential. This also helps build a culture of adaptability and shared learning.
For advisors and owners more inclined toward strategic and execution phases of transition this approach may seem esoteric, unnecessary, or next to impossible. Admittedly, fundamental solutions are a much bigger investment of resource than the quick fix. However, the quick fix always leads to more and more investment (think death by a thousand cuts). The pay off on a fundamental solution will have a far greater rate of return, driving profit to the bottom line, and making transition success much more likely. It is a case of “going slow so that you can go fast successfully”.
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Control: is subdivided into two spheres, control over self and control over others. Control over self is the ability to direct and influence the course of one’s own life. Control over others is the ability to exercise power that enhances or impinges upon the autonomy of others.
Authority: a legal or formal right to direct the activities of others for the purpose of achieving organizational goals and to expect subordinates will respond appropriately. Authority most often comes from position or role in a company. It is power that is recognized or accepted by others.
Influence: the ability to shape the cognitions or behaviors of others without using authority or control.
Power: the possession of authority, control and/or influence over others that can be used directly or indirectly to achieve a desired outcome. Power may come through positional authority or by use of influence. It is not tied to a role or position and results from expert knowledge and/or charisma.