In a recent episode Lexi, the very efficient but
temperamental cook, walks off the job. At the same moment the century old
furnace conks out. The hapless family
assembles around the furnace armed with wrenches and hammers, confounded as to
a fix. Thankfully Lexi hears of the
troubles and despite her temper, comes to save the day. She saunters up to the furnace, lifts a rusty control panel cover and pushes the big red button. Wa-La - the furnace ignites,
disaster is averted!
Many business owners fail to avert their own disasters by
transferring their own ‘Institutional Equity’ to their
successors, or management team members. Institutional
Equity is value you bring the organization that reaches far beyond your
ordinary duties because of the things you know about the institution.
Just because you know
about the red button in your organization does not mean that your management
team does.
More importantly, to our conversations about transfer of
ownership, Institutional Equity is
information that may seem to be of secondary importance until it is required to
solve a problem. Lexi’s knowledge of the red furnace button, perhaps mundane on
most occasions, was critical on another. But until that evening, knowing about
the red button didn’t seem to Lexi worth passing along.
The same thing can happen to you.
Over the course of your career in your business, as perhaps
the founder and certainly as the owner, you have amassed a wealth of ‘secrets
and tips.’ It is those often proprietary or intangible bits of knowledge,
proven approaches or unique enablers that make the business operate more
efficiently and effectively.
In order to smooth
transition, and build ongoing value in your company, you must find a way to
systematically impart your unique approach and knowledge to your key managers.
In your business, do you know what these tidbits are? Have you shared them in an orderly and
systematic fashion? If not here are 5 Questions to become an Institutional
Equity Champion like Lexi:
Why is it important? The obvious answer is to reduce the risk of transition. Remember- acquirers, both external and
internal, want to eliminate risks in operating the business and your insider’s
information is the key to a more favorable valuation, and terms.
When should you
start? It takes time to share a life
time’s worth of wisdom so start today. The best way to convey vital information is
in real time. As situations arise it is
the perfect opportunity to share your perspectives and problem solving approach
with key managers. This real time learning lab will demonstrate your confidence
in your managers, and they may even surprise you with their enthusiasm to learn
and excel.
How should you start?
Step 1: Become aware of the
information and analysis you use to make decisions.
Step 2: Become intentional about sharing these tidbits.
Step 2: Become intentional about sharing these tidbits.
Step 3: Write down these points.
Step 4: Share them at your management team meetings or one on one sessions. Make them a regular feature of your leadership approach.
Step 4: Share them at your management team meetings or one on one sessions. Make them a regular feature of your leadership approach.
Who should you share
this information with? Obviously share this information with your key
managers, especially those on your leadership team. But you may also consider those beyond your
inner circle who could benefit from your wisdom.
What is worth
sharing? All information that is
exclusive to you is important. But that
may be a long list. So I suggest starting with these three:
· The People: key relationships with
external partners (customers, vendors, advisors such as accountants, bankers,
attorneys, etc.)
· The Facts: financial information, company documents and
commitments, performance targets and acceptable variances, etc.
· The Processes: your problem solving and management approach to
specific operational, talent, finance or sales problems.
If you master these 3 areas you will be building value in
your company each and every day. You
will see the pay off now in the form of improved performance, and when it is time to transition.
Your institutional
equity is one of the most significant assets you have, but it only becomes
valuable if you transfer well ahead
of handing the keys to the next owner.
Please post your thoughts and questions below. I enjoy hearing from business owners who are building value and preparing for transfer.
Other blogs in this
series:
