Snowflakes are one of nature’s most intriguing structures. Every snowflake has its own unique character and complexity, yet they all begin with a single tiny nexus (a particle of pollen or dust). As droplets of water coalesce around the nexus a hexagon (6 sides) is formed. Never a square or pentagon, always a hexagon. Closely held businesses with multiple shareholders (particularly family businesses) are very much like a snowflake. They are complex, multifaceted, and no two will ever be the same, particularly at the point of significant transitions (scale, sale, succession), but there are patterns that inevitably repeat.
A misleading aspect of transition is the notion that all owners (and potential owners in the case of family succession) can be approached in the same manner or share the same values because they have shared business interests. That is simply not the case. In every business system there are three domains (business, money, self) that contain 22 variables which must be aligned to achieve a successful transition (we call this the M3 Framework). While the business variables are the nexus, complexity stems from the interplay of the self and money domains. This complexity will always be present when a business has more than one owner. In fact, the complexity grows exponentially with every shareholder added to the system.
Bottom line: the presenting transition challenges are rarely the real issues – there is always greater complexity that what can be observed on the surface.
Issues that get in the way of successful transitions are often as multi-faceted as the owner group itself and never reside exclusively in the business domain. We call this the Snowflake Effect and we know it is happening when we hear things like, “nobody will make a decision”, “everybody agrees with me, but we can’t get anything done”, “every time we meet it is like World War III”, “I’ve told them exactly what to do, but things never change”, “we’ve got so many bottlenecks I don’t know where to start”, “Jim and Bob are at each other’s throats and I’m done”… and the list goes on.
Stepping back to examine the system in all of its complexity offers the opportunity to identify fundamental solutions and points of leverage. Our advice to clients: start with a deep breath and know there is a way through transition that doesn’t have to be painful. People tend to create narratives that are only a part of the picture and this skewed perspective distorts decision-making. Consider taking a “seek first to understand before being understood” approach – meaning seek feedback without trying to reframe or deflect. A good way to do this is by using a survey tool that allows people to process independently.
Here are a few questions that might help:
- What does each shareholder or potential shareholder expect for MOM (Management, Ownership, & Money) out of the transition?
- Are the anticipated time frames the same or are they different for each shareholder?
- How does PACI (power, authority, control, and influence) currently manifest in the business?
- Who makes what decision when? Are management and governance decision-making structures clearly defined in the business?
- Do current leaders have the necessary knowledge, skill, ability, and experience (KSAE) to drive the business through the transition?
- Do the leaders trust each other? How is conflict handled?
- Are all shareholders individually able to financially support the transition?
- Is the business getting results shareholders would like to see?
- Is there a succession plan for senior leaders in the business?
- Are all shareholders satisfied with their level of engagement and with their role (or lack of a role)?
These questions expose areas of shared understanding and expectations as well as areas that are out of sync. Sometimes this is all it takes to get a bit of traction. In other cases, a more robust exploratory process is required.
Here are a few resources that might help:
- The M3 Framework For Successful business Owner Transitions
- 4 Things Leaders Prudently Manage – PACI
- Seduced By Conflict?
Or drop us a note: firstname.lastname@example.org