[Fredslist] Organizational Effectiveness Issue - March

Wed Mar 30 18:15:10 EST 2005

Welcome to
Phyllis Weiss Haserot's
Organizational Effectiveness Issue of the Month

SUCCESSION SCENARIO GONE WRONG

A CASE STUDY

March 2005

Here is the sad story (reported in the Wall Street Journal, March 21, 2005) of the two owners of a popular independent bookstore who wanted to make sure that their business would thrive into the future. As the cornerstone of their succession plan, they hired a younger entrepreneur with the understanding among the three of them that he would eventually buy them out.

When the owners decided it was time to sell the store, they didn't discuss the matter with their employees, mostly because they doubted any of them could afford to buy it. Instead, the opened negotiations with a longtime customer, the entrepreneur. They saw in him someone who had built a successful company and had an amiable personality, a quality the owners valued because neither wanted to cut her ties to the shop.

They decided to move more slowly but also decided not to tell the staff that he was preparing to take over the store. This proved to be disastrous. 

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This story highlights the difficulties of making management decisions without sufficient attention to the culture and support of all key employees. It was a culture that created fierce, proprietary feelings, and when staff was presented with a fait accompli, they felt betrayed and rebelled.

In a culture designed to compete with the big chains, the staff needed to be smart, motivated and charged with responsibility. Many employees had carved out their own fiefdoms and tolerated little interference from the owners. Employees of the bookstore exhibited "a kind of swagger about their expertise." Regular shoppers confided in them, and employees prided themselves on their close customer relationships.

The entrepreneur started at the business part-time with the understanding he would become a full partner if all three felt comfortable working together. He had considerable access to the bosses, which was unusual for a new person. That raised suspicion and gossip.

When the trio decided to go public about their arrangement, they assembled the store's senior staff, announced that he would be joining the company as a full partner, and quickly sent an e-mail to the general staff. Here are some of the reactions:

- Many were stunned. 

- Nobody wanted to deal with a new boss - period.

- The gossip was that the new partner was looking to cut dead weight. (He said he wasn't contemplating anything drastic, but he did want to add some efficiencies.)

- He significantly underestimated the staff's resistance to newcomers.

- Some staffers resented taking criticism from him; they regarded him as a neophyte.

- "You don't want to be treated like you are selling underwear," said an assistant manager of one department.

Faced with what they considered a staff rebellion, the original owners hired an organizational psychologist to meet with the staff and listen to the concerns. At this fairly late stage, the problems could not be resolved, and the will of the store's employees that he had to leave won out. The disruption, heightened emotions, waning trust and the departure of a long-time key employee threaten the future of the business. Now one of the original owners intends to stay for 10 more years in some capacity; the other is ready to move on...........The fate of the business is a big question mark. 

"We forgot how much anxiety change brings in a small business," said the owners. 

This case study has applicability to professional and service businesses because it is a knowledge-based business that depends on long-term customer relationships and special service. 

WHAT LESSONS CAN WE DRAW ABOUT SUCCESSION PLANNING?

* Advanced planning is a necessary, but not sufficient, requirement for business continuity success.

* In assessing candidates for a position that is critical to smooth business continuity and/or ongoing client relationships, go well beyond quantitative factors. Learn about their personal style, interpersonal skills and vision for the future in the exploratory and trial stages of a working relationship.

* Don't underestimate the power of organizational culture to determine how people will react and undermine even well-intentioned plans.

* Be transparent about anything that can seriously affect the business or key people's vested interests and how they operate.

* Err on the side of open and frequent communications.

* Just because partners are happy with a change in circumstances, it doesn't mean that staff will be, especially if it is left to their imagination as to how it will affect them.

* Bring in expert help early. A neutral party can see the situation objectively, speak confidentially with managers and staff to assess their concerns and recommend how to address them.

Do you have any success or unsuccessful stories to share with us? Please do.

Phyllis

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Phyllis Weiss Haserot
Practice Development Counsel
Consulting/Coach to the Next Generation
Author of "The Rainmaking Machine: Marketing Planning, Strategy and Management"

60 Sutton Place South
New York, NY 10022
Voice:   212-593--1549
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pwhaserot at pdcounsel.com  
please visit: www.pdcounsel.com  
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