The Smart Way to Cast Off That Shadow CEO
Too frequently, naming Junior as the company CEO is a purely symbolic act. In these cases, the title of chief executive officer sounds important and prestigious, but it signifies nothing.
The reason for this is simple. Junior was promoted as part of what I call the "successor shell game." Dad's intent in elevating his child to the top spot is not to transfer power, but to buy time — to create the illusion of change with nothing really happening.
He realizes that he has to address Junior's need to feel a greater sense of control over the business and his own future. Dad's response is to give a title and the trappings of power without any of the substance associated with it. There's no pea under the shell.
Dad hopes that by engaging in his feat of organizational legerdemain, he can satisfy Junior and remain as the shadow CEO himself. He is unwittingly sowing the seeds of some potentially destructive conditions within the business. These include: role conflict and confusion for junior, a power struggle between Dad and Junior for control of the business, and split loyalties within the firm's management team.
This is the stuff of which great dramas and tragedies are made. In fact, it is the story of King Lear. To refresh your memory, Lear claimed that he wanted to retire and turn his kingdom over to three of his daughters, though, he would not give up his title as king. He also wanted to keep his office in the palace and insisted that 100 knights be assigned to him. The inevitable consequence was tremendous conflict between father and daughters and their respective staffs.
Things don't play out on quite such a grand scale in today's family businesses. Few of them have 100 knights to do the CEO-king's bidding. However, the plot remains the same. A typical modern-day version of this story might read as follows: Dad calls Junior in and says that he's either going to retire or substantially cut back his involvement in the business. He names Junior president and himself chairman of the board — a position that didn't exist until now. He states that he's going to spend the winter in Florida playing golf. When he's at home he'll only come to the office on Fridays to pick up his mail.
Junior is ecstatic. He's 40 years old. He has his MBA, two years of outside experience, and during his 15 years in the business has worked in every area of operations. He's ready for the ultimate challenge. He wants to professionalize the business, launch some new strategic initiatives, and take the company into the 21st century, making it bigger, better, and more successful.
Here's what happens. Dad goes to Florida, and Junior tries to initiate changes, but he's blocked at every turn by the members of Dad's old management team. They don't see the need for change and, more importantly, Dad agrees with them. When he calls in daily to see what's going on, he countermands Junior's directives and generally wreaks havoc on junior's plans. The comer office may be vacant, but Dad's shadow reigns.
When Dad "reaches out to touch someone" in management, he destroys any chance that Junior has for building credibility or making the management team his own. The result is that Junior is forced to make a choice: to resign himself to his fate, to resign from the firm, or to fight the old man for control of the business.
Is there an alternative? Can a situation this problematic be resolved? It's difficult and uncommon. However, based upon my experience, it is possible. There is a three-phase process that I advocate to deal with these circumstances.
Phase One: constructive confrontation. Junior has to initiate the change by confronting Dad. Sometimes an outsider can be helpful in facilitating this confrontation. The purpose is not to blame, but to attempt to find a solution that is acceptable to Dad and Junior. This requires defining the current situation accurately, pinpointing problematic behavior, identifying alternative courses of action, and agreeing to work together to change the situation.
Phase Two: joint transition planning. If an agreement is reached, then Dad and Junior have to collaborate in putting together a transition plan-in writing — which is acceptable to both. Major steps in this process include:
- Defining the specific scope of responsibilities for each of the parties.
- Initiating a phased program for reducing the involvement of the father.
- Establishing a set of criteria for measuring the performance of the successor.
- Convening the management team and informing them of the plan and their role in making it work.
- Monitoring progress of the plan.
- Setting a definite date for completing the transition.
Phase Three: management team building. Assuming that all goes well to this point, its now up to junior to make the management team his own. For this to happen, he must exert personal power and leadership as opposed to the power bestowed on him by Dad. The key stages in this phase include:
- Clarifying his personal and organizational values. This entails defining what's important to him and what the company should stand for and represent.
- Creating a personal vision or agenda for the direction of the company. This vision should not be a written plan, but the strategic perspective or philosophical orientation of the leader.
- Communicating his values and his vision to the management team.
- Selecting from that team influential individuals who are in accord with the agenda and can assume important roles in ensuring its implementation.
- Replacing and recruiting new management team members as required.
Implementing a process for change should improve the organizational climate and enhance its odds of beating the successor shell game.
Edwin T. Crego Jr., national director of Laventhol & Horwath's organizational consulting division in Chicago, is coauthor of the newly published book, "Your Family Business."