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John Dodd

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Handing over the baton

For private equity investors keen to maximise their return, ensuring smooth leadership succession from the entrepreneurial founder is crucial. Although the skills of the entrepreneur in spotting opportunities, innovation, product development and risk-taking are vital to get the new business off the ground, an injection of professional management skills at the appropriate stage is usually necessary in order to engineer a more scalable and sustainable enterprise. 

So how can the investors, the founder and any incoming executives work together to ensure a successful transition in leadership? For the investor, it is vital that the new CEO has experience of the sector, a track record of achievement and the core leadership competencies to get the job done. In an ideal world they will have also worked in PE. The founder must be convinced that the new CEO will act as an enthusiastic ambassador for the business and share their passion for ‘their baby’. Although entrepreneurs usually recognise that they need help, they are often uncomfortable at the prospect of letting go of the reins.  The new CEO, meanwhile, will need re-assurance that the founder accepts the need to step back, and will resist the temptation to wrestle back control, which, when it happens, almost always damages the business. 

According to Wickland Westcott’s John Dodd, cultural fit is key. John offers the following tips for succession planning in entrepreneurial businesses;

  • Be very clear about the skills, experience and style of the person you are looking for. Ensure that the investor and founder have clear agreement on the preferred profile. (If there is disagreement, Wickland Westcott’s Blueprint tool will help).  Try and identify a candidate early on in the process who personifies these attributes so that everyone knows what good looks like. Also, be realistic and identify areas where compromise is possible.
  • Pick a candidate who is a strong leader and can galvanise the team - a self starter with a high work rate. Ensure that they have an entrepreneurial instinct, even if they have spent the last few years within a big-business environment.  Those who are too corporate rarely succeed.
  • Look for motivational drivers in the candidate including a hunger for success and recognition, autonomy and a desire for ownership, wealth creation and fair reward.
  • Focus on identifying capabilities and experience in leading a change agenda, and an emphasis on cost and profit, rather than the technical aspects of product, which are usually the speciality of the founder.
  • Make sure that the new CEO is able to embed structure and process as the business develops, but in a way that does not create bureaucracy or stifle growth.
  • And, last of all, check cultural fit – does the candidate share the values, beliefs and aspirations of the founder and the backers?

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