Business owners and CEOs are often clear on the vision – but the real challenge is execution. Big plans start strong, then lose momentum as priorities shift, teams drift into silos, or the metrics being tracked don’t clearly tie back to outcomes being sought. 

What makes the difference isn’t more planning – it’s building a system that actually sticks. 

At Checkside, we call this an High Performance Operating System – the way leaders set priorities, establish accountability, check in on progress and keep everyone focused on what really moves the business forward. 

Why an Operating System Matters

Without structure, even the best strategies stall. Our expertise has helped support leadership teams where:

• Regular meetings between the senior team weren’t happening
• Meetings were happening, but accountability was weak
• Metrics were being tracked, but they weren’t the right ones
• Energy was high at planning off-sites, but execution fell flat afterwards

In each case, a High Performance Operating System was a pivotal part of the solution – and it wasn’t about adding more noise. It was about embedding the right conversations, at the right time, with the right focus – to ensure exectuon became part of the strategy process, not an adhoc afterthought.

The Three Essential Elements of a High Performance Operating System

From our work with mid-sized organisations, three elements consistently stand out:

1. Clarity of Focus: Agree on the few key priorities that matter most and make them visible. Then spend the time upfront to plan for successful execution. Design casts the biggest shadow.

2. Measure What Matters: Regularly track performance against KPI’s and progress against Objectives and Key Results. Address any issues at the earliest opportunity to get things back on track.

3. Clear Accountability: Ensure each objective has one accountable person assigned. Link rewards and consequences to KPIs and objectives – in a way that fits your business and culture.

 What Good Looks Like

When a High Performance Operating System is working well, you’ll notice:

• Leaders and teams consistently talking about the same priorities
• Meetings that are short, sharp and focused on outcomes
• Teams identifying and addressing issues early
• Progress that builds – and compounds – quarter after quarter
• Less noise, stress, “busy” work and pet projects that don’t really “move the needle”

How Checkside Can Help

Our work with busienss owners, CEOs and leadership teams focuses on embedding strategic thinking and execution into the way your business runs – not just during the annual strategic planning process, but every day.

We help sharpen your focus, design high performance operating systems that stick and create alignment and accountability that lasts well beyond the strategic planning day. 

The result? Leaders who spend less time reacting to noise and more time moving the business forward towards its performance goals and strategic objectives. 

Final Thought

The question isn’t whether your business has a High Performance Operating System – it’s whether that system is helping your team get the stuff done that really matters. 

The post From Strategy to Execution: Why Businesses Need a Rhythm That Works appeared first on Checkside.

Each family group had 4 children – two boys and two girls, but the way the business was transitioned to the next generation, and subsequently sold (in each case) provided great insights into what works and what doesn’t when it comes to succession planning in a family enterprise.

Its easy to say that failing to plan is planning to fail (it is!), but there are other reasons that private enterprises fail at succession planning, or never get started on it in the first place.

Here’s 5 of the main reasons that succession planning fails in family businesses:

1. Unspoken fears and avoidance around the capability of key people and successors.

Nobody really loves conflict – and when family is involved, relationships obviously come with more history and complexity. Unfortunately, this often leads to key people biting their tongue, ‘sugar-coating’ or building resentment behind the scenes, rather than having open and reasoned discussions about the real skills, gaps and risks of each person involved in the business.

This gets even more complicated where spouses and life partners are involved and are absorbing the resentment of those concerned.

2. Not knowing what ‘next’ looks like.

For the older generation of family members who are about to transition or retire, taking 6 months off and seeing what happens is not a strategy… in fact, it usually means, “I’ll have a break then come back to tell you what you should be doing”.

If you don’t know what your typical week looks like in retirement, then you’re probably not ready to move on.

3. Failure to address and educate family members on the difference between income, equity and control.

It’s easy for lines to get blurred, particularly when there may be a history of everyone getting paid the same in a family business. At it’s worst (from an income perspective) I’ve seen a family business pay one sibling who is an effective CEO exactly the same salary as his brother who rarely turns up for work and has no functional responsibility.

Whilst it may be understandable for equity holdings to be the same, who actually directs the business should also be a matter of capability, not ‘equal say and equal pay’

4. Failure to set performance standards for principals and successors.

It’s not uncommon for family businesses to claim a good work culture and strong loyalty from their people, but all too often there is a lack of measurement and accountability. Employees often get treated ‘like family’, but this can include the acceptance of excuses and lack of consequences for poor performance (across the board).

This makes it hard to define the standards required for people ‘stepping up’ in the business.

5. Choosing the wrong ‘independent’ advisors

At some point, most family businesses realise they need some external help if they want to nail their succession plans, but unfortunately the selection process is not always sound. Often the strongest family member will try shoe-horn in someone to try drive their agenda – or the business can move too quickly to establish a board of subject matter specialists.

Key here is to find a deeply experienced succession advisor with strong business and financial acumen, but also deep empathy and understanding for the dynamics of family business. The right person can then drive the process of building out a board over time, once they have established trust and a mandate from all family members.

What can I do to future proof my family business?

As we have mentioned in previous blogs, succession planning is a process and not an event and requires considered investment to get it right.  At Checkside we have a long history of helping manage these discussions and issues to help family businesses reach their full potential.

The post 5 reasons Succession Planning fails in family enterprises appeared first on Checkside.

Over a wide-ranging lunch discussion with an investment banker yesterday, I got a very familiar answer to the often asked question ‘what is the number one thing you look at when investing in private companies’? Without hesitation the reply was ‘the quality of the management team’.

Many of you will have heard this before, but it’s important to reflect on what corporate advisers mean when they say this – and the core management capabilities they look at when valuing opportunities.

Included in this list are:

• Clarity of strategy and the business model
• Common language amongst leaders
• Effective and timely management reports and scorecards
• Good visibility and sharing of objectives and performance metrics
• Effective training and development programs for managers and future leaders
• Contingency plans for key managers and employees
• A clear remuneration and incentive scheme strategy

The thing about all these capabilities is that combined they form the basis of an effective ‘operational’ succession plan, which is all about developing and managing the expectations, energy and performance of key people and rising stars within the business.

And in turn, potential investors will apply a much higher valuation to a business who can demonstrate a history of this type of planning and process, given it is a key indicator for earnings sustainability and significantly reduces risks around principal dependency.

Let’s consider the following common business succession scenarios:

Company A

A $30M revenue family business in the logistics game. The patriarch is still involved in decision making as ‘Managing Director’ and his two sons run two business units as the GMs of each.

There is an intent for Dad to ‘step back’, but there is no advisory board in place and the boys have learnt on the job, with no management or leadership training along the way.

There is a loyal group of employees, but most people are doing the same jobs they have always done and are given Christmas bonuses each year.

Mum is in charge of the finances, supported by their long-term external accountant and a bookkeeper.

Margins are getting squeezed and EBITDA has dipped from $2.1M to $1.4M over the last 3 years (on flat revenues). Technology uptake is low and there is no formal goal setting or performance review program in place.

Company B

Also a $30M revenue family owned logistics business.

The patriarch stepped out of the business several years ago and sits on an advisory board with an external business adviser.

Two siblings are involved – one has completed LEAN training and manages operations, whereas the other runs Sales for the group. Both are on continuous learning programs for their respective roles and have identified their own ‘right hand man’.

There is a professional Executive GM in place (who the siblings report to) with a phantom equity scheme in place, supported by an experienced Financial Controller – and the business is advanced in terms of its use of technology, management dashboards and training programs.

Pricing is very competitive in current environment, but the group has managed to hold margins and grow revenue each year, with EBITDA improving from $1.8M to $2.4M over the last 3 years.

How your succession plan can determine your enterprise value

From an investor perspective, company A is probably worth little to nothing. Unless they address their management and principal dependency issues, the family is facing the all too common prospect of closing the business without realising value or enabling transition to the next generation.

The enterprise value of Company B is likely to be in excess of $7 million, but with great prospects of enhancing this value over coming years.

We see these stark differences between competing companies all the time, no matter what the sector, but unfortunately too many companies fail to close the gap.

____________________________________________________________

Interested in learning how an effective ‘operational’ succession plan can multiply your enterprise value?

Contact us

The post How great operational succession planning multiplies your enterprise value appeared first on Checkside.

The evidence shows that for owners who have invested a large part of their life and identity into building a successful business, retirement often doesn’t last long.  They miss the void left by the work they used to do and life they used to lead – and end up going back into the business, or back to work.

There are a number of reasons for this, but most of the time it comes down to a lack of awareness, preparation and transition planning. Consider the following tips if you are considering your retirement…

1)      Know what you are going to do next

If you don’t know what you are going to do next, you’re probably not ready to retire. Often people say they are just going to take some time off, or a long holiday, and work out what they are going to do later.   Often these comments come from those who are burnt out and are looking for a quick exit, rather than a planned approach.  Most business owners and executives  are used to living full lives and thrive on the challenging and rewarding aspects of work.  Without projects or interests to focus on they soon get bored.

2)      Perfect practice makes perfect

A friend recently told me they were going to retire and take up golf. When I asked if they liked golf or had played before their response was ‘only once or twice, but my friends all play and there is a golf club down the road from my house’. The danger here is that they have chosen a challenge that may not be suitable.  If you think something like golf might be for you, you need to build a transition plan that sees you playing more golf (for example) prior to retiring, to work out if it is something you really love and want to do a lot more of. Basically you need to start ‘practicing’ retirement, before you do it.

3)      Communicate with your family

Retirement is obviously a big change for the retiree, but it also presents a big change for your loved ones. They know you very well, so map out, test and agree your plans together.

4)      Have a transition plan in place

This will probably require bringing in new talent or developing existing human capital to allow you to start edging your way out of the business (and practicing for retirement).  This is a detailed process that requires sound planning and communication amongst stakeholders. The extra benefit for owners who are planning a business sale to fund their retirement is the increase in business value that results from reduced owner dependency. It also means that buyers are less likely to ‘lock you in’ to working in your old business…

The post Four key tips for successfully retiring appeared first on Checkside.

Of more than 500 hundred small-to-medium sized businesses that we have conducted initial interviews with over the last 7 years, less than 30% said they had a business succession plan in place – and the majority related succession to a sale or exit strategy.

In a human capital context, Succession Planning is really about planning for the continuation of a business through the skills, development and motivation of capable people. It applies whatever the stage of development – start-up, growth, maturity or exit.

Put another way, it is about managing energy – that of the business owners, employees and the business itself.

When discussing succession plans with clients, we talk about 3 layers of succession that should be considered:

1)      Strategic Succession

2)      Human Capital (Operational) Succession

3)      Crisis Succession

STRATEGIC SUCCESSION 

As with all business processes, succession should be guided by a clear purpose and positioning statement for the business (and its owners). Strategic succession looks at ownership and control issues including valuation methodology, equity transfer and an ultimate exit plan.

It should consider the owners’ personal objectives (including family and lifestyle needs), timeframes, legacy issues as well as an open dialogue around blocks to change.

This process requires a high degree of self analysis and awareness and should cover all the other emotional issues that impact on the business. This is often a sticking point for owners (and their business advisers) when there are multiple stakeholders involved.  Without a framework and facilitation process to deal with these issues, many plans will falter at this stage and never be finalised.

For those owners who get past the self analysis and awareness stage, gap analysis and what if scenario’s need to be addressed.

At this stage clients should develop a defined ICE Matrix, that outlines the alternate Income, Control and Equity structures (and trade-offs) for the business as it experiences a range of scenarios.

The ICE Matrix and scenario plan should form the base of a formal shareholder or partnership agreement.

HUMAN CAPITAL (OPERATIONAL) SUCCESSION 

Operational succession involves the recruitment, assessment, management, motivation and development of capable people.

Owners need to manage the expectations and energy of their people, in particular the rising stars within the business who may be potential owners, as part of an internal sell-down or Management Buy-out (MBO) strategy alternative.

Creating a quality team of people not only adds exit options for the business, but increases equity value by adding extra depth to functional areas, minimising key man risks and freeing up owners to work on strategic initiatives.

Owners need to create an effective human capital management framework that should incorporate the following tools:

• Career maps
• Functionality charts
• Position descriptions and KPI matrices
• Cognitive and behavioural assessments
• Performance review and feedback programs
• Personal development plans
• Progressive incentive scheme

Whilst most of these tools are not uncommon within organisations, we have found that less than 3% of the firms initially surveyed have Career Maps in place.

A Career Map acts as a visual ‘pathway’ that summarises the behaviour, skills and performance expectations for each position in the business, as well as the functions and responsibilities that people will need take on as they progress towards a leadership or ownership position. It should also include likely timeframes and clear KPI’s.

Career Maps should be a base document in any human capital plan and are integral to recruitment, induction, personal review, SWOT analysis and training processes.

Of course, not everyone wants or needs to lead or own a business, so it is also important to include alternate pathways and cap-out options for valuable people.

For those who are selected for potential ownership, owners should work through an ICE matrix with them and explain how they can acquire equity, in what timeframes (may be a progressive sell down), how this impacts on their income structure and what level of control / decision making they are entitled to – as well as the associated risks and responsibilities of owning a business.

For many companies, potential owners will move through a profit share phase first, before equity transfer (which can often mean a forfeiture of profit share entitlements).

CRISIS SUCCESSION PLANNING 

Most SME owners will think of key man and income protection insurances as the primary method of crisis succession planning – and with good reason. It is critical to protect the business and family members of key people in the event of death or disability.

There are also a range of other business and liability insurances that are typically covered in a business risk management plan, including interruption or continuance cover.

However, one of the things that is nearly always overlooked in crisis planning is how to manage the energy of employees, clients and other key stakeholders in a crisis event. This can extend from handing over key relationships if an owner is incapacitated, through to a communication and relocation plan if your offices are destroyed by fire (and everything in between).

It is difficult to consider every risk event, but the key is to run scenario plans and have a crisis recovery mindset that can be applied to most situations – and to communicate this to your people in advance.

PUTTING UNDERSTANDING INTO ACTION…

Even when business owners develop an understanding of the 3 core areas of succession planning and its associated processes, they still find it hard to implement. The major blocks include (but are not limited to):

• Control and trust issues, resulting in limited buy-in or ‘real’ responsibility shared with potential stars or successors
• Most people don’t think far enough ahead – they have an income focus, rather than an equity focus in their business
• Memories of bad experiences with business partners in the past –with a belief that all partnerships are doomed to fail
• Single-mindedness about their ideas for the company, rather than an adaptability mind-set
• Many owners are just so busy and stressed and don’t take time to implement effectively

A skilled adviser needs to understand these blocks and be at their best during implementation, to ensure any plans do not falter at this stage.

The outcomes of not getting it right are unpleasant. Typically we see owners burn out and succumb to the pressure of not being able to effectively ‘share the load’. This is usually accompanied by a corresponding decrease in the equity and goodwill value of their business, associated to key man risks.

A vast majority of business owners sell because they hit a wall in their growth curve – financially, emotionally or both. They take a view they have limited exit options and as a result either sell to an external party or (usually worse) ‘merge’ with another business that is often in the same situation.

Effective succession results in less stress, higher profitability, improved culture, a continuation mindset and ultimately a greater range of exit options at a higher price!

It’s worth getting right.

The post Succession planning – not just an exit plan! appeared first on Checkside.