As a manager or leader, you’re going to deal with conflicts. There’s no avoiding it, especially when people work closely with one another. Some managers say they spend up to 25% of their time resolving conflicts between employees. That’s a lot of time!
Here’s the thing about conflict: You have to take it seriously.
Employee conflict isn’t a distraction from your job. It’s part of your job. If you expect to work in leadership roles, you ought to get used to dealing with it. If you become a leader who excels at recognizing growing conflicts and diffusing problems, your team will always be more productive and less-stressed than other teams. Less stress also means happier teams, which I don’t know about you – but if my team is happy, I’m happy!
It’s easy to dismiss other people’s problems as “pettiness” or “drama.” We’re all guilty of that at some point, and we all have avoided someone because they “create so much drama.”
But that mentality doesn’t solve anything. It only isolates people. And isolation is not something we can tolerate in the workplace.
You might think “I can just fire people who create problems.” Technically, that’s a solution, but everyone has problems, so you’ll just create an environment with lots of stress and high turnover and retraining costs.
Imagine if you were struggling with a coworker and your boss said “Bob, stop being dramatic and go back to work.” How demoralized would you feel? You’d probably be browsing Monster.com that evening!
So, in order to resolve conflicts between people (whether it’s between other people or one of those parties is yourself), you have to assume that every problem is legitimate.
That doesn’t mean every problem requires a solution, or that every problem should be handled the same way. But it means that you must approach all conflicts with an honest attitude and a willingness to solve them.
For instance, let’s say Maria is upset that Jim uses her desk supplies and never returns them. Sure, her problem isn’t as big as, say, embezzlement or sexual harassment, but it is a serious problem for Maria that’s affecting her life and work.
Maria’s frustrating problem is probably manifesting in other ways, too. She may fail to invest herself in projects that involve Jim. She might delay responding to Jim’s emails or resist his ideas. There could be a general tension in the office that other employees can feel. Passive Aggression at its finest.
So, Maria’s problem isn’t “just drama” because it can have tangible effects on your business. Plus, Maria is a human who is entitled to healthy leadership from her manager and a comfortable work environment.
As a manager or leader, avoiding conflict is always a mistake. Left unchecked, conflict will erode your business.
Leadership advisor Matt Myatt says it perfectly: “Conflict rarely resolves itself – in fact, conflict normally escalates if not dealt with proactively and properly. It is not at all uncommon to see what might have been a non-event manifest itself into a monumental problem if not resolved early on.”
So how do you do it? Start with genuine concern. Show both parties that you take the problem seriously and want to uncover a solution that makes everyone comfortable at work.
Second, have everyone voice their concerns. In many cases, you’ll find that some parties aren’t even aware that another person is upset. Jim might not even know that Maria is frustrated with his behavior. Simply making Jim aware of the problem will probably solve it.
Third, use constructive language. Poor language: “OK, why are you guys so pissed off?” Good language: “I feel some tension and want to help make everyone more comfortable.” Address the problem, not the people with the problem. Take your emotions off the table. You must be objective.
Fourth, provide actionable solutions. “Be nice to one another” isn’t a solution. It’s what we tell children. You must give people goalposts to reach. You might say “Jim, please ask Maria before you borrow her supplies. Maria, if you feel Jim doesn’t respect your things, please let him know right away.”
Obviously, that’s an abridged version of the process. We discuss employee conflicts in more detail in our Leadership Training for Managers course. To see a full list of course offerings – Click Here!
Here’s the most important piece you should take away: No one thinks their own problems are drama. No one wants to be dismissed. Everyone wants their manager or leader to take their problems seriously.
Be that leader and your team will walk through hot coals for you.
If you look around your work, your school, or your social groups, you’ll notice a phenomenon repeat itself everywhere: We surround ourselves with people like us.
That isn’t a surprise, of course. People like us grew up in similar environments, liking the same things, and having similar experiences. We have similar tastes in humor, entertainment, politics, etc.
Often (but not always) this means our cliques are filled with people of similar ages. We know how to communicate with those people.
Talking to people our own age is easy. There’s no barrier. There’s nothing to figure out. Jokes, references, satire, innuendo… They are put out and picked up easily in conversation. Even body language and posture are understood comfortably.
But life doesn’t allow us to isolate ourselves amongst similar people. Often, we have no choice but to work and live alongside people who are older or younger than ourselves.
That’s a good thing, really. We should venture outside of our comfort zones if we want to grow. When you surround yourself with people who are different, you gain a unique perspective. Diversity breeds innovation, they say.
Without similarities to rely on, however, communication with different people can be challenging. There is no familiar ground to fall back on. Communication errors can happen. People might be confused or offended. This happens a lot when we talk to people outside of our age group, especially when there’s a large gap between parties.
There’s a lot of advice we can give you about dealing with each generation. We could tell you that Millennials are strong with written communication, so they prefer emails and text messages. We could tell you that Baby Boomers respect formality and appreciate having options. We could tell you that Generation X likes receiving and giving feedback.
But those are just generalizations. They’re true for some people in each generation, but what happens if you come across someone who doesn’t fit the stereotype?
The truth is that if you want to communicate with someone, you must learn their language. You can’t expect them to learn yours. Don’t assume you speak the same language just because you both speak English.
There’s a funny anecdote that was floating around when Facebook became really popular and everyone’s grandmother was signing up. It’s hard to tell if this story is true, but the message is valuable nevertheless.
An older woman was reprimanded by her family because she frequently posted “LOL” on sad content, such as posts about death, cancer, or missing kids. She thought “LOL” meant “lots of love” and was expressing her positive feelings. She was a new social media user. She didn’t speak the language that was dominated by younger people.
To communicate with older or younger generations, you have to learn their language. Not the generation’s language, but the language of the specific people you’re working or living alongside. The best way to do this is through constant engagement with other people. After all, the best way to learn a language is to immerse yourself in it.
Furthermore, you need to self-reflect regularly. If you didn’t understand something (like why that 20-year-old sends you text messages rather than walk across the floor to speak with you, or why that 60-year-old wears a tie every day), you should ask in a non-threatening manner.
If you keep an open mind and accept that everyone else’s language is just as valid as yours, you’ll develop skills to communicate with everyone.
Communication, after all, is the most important skill any of us could have. Everything else is built on top of it. Regardless whether we’re talking about our career, our studies, our relationships, or our community, we need strong communication skills if we want to grow ourselves and our organizations.
Speaking of communication, we would be remiss not to mention the Dale Carnegie Course, which is the premier workshop for people who need to improve their communication skills. It will help you or your team strengthen interpersonal skills, which leads to enhanced productivity and less stress for everyone. Check it out.
Most people wait until events happen to them before they respond.
They figure out how to pay the bill once it arrives, rather than budget. They fix the car when it breaks, rather than maintain it. They are caught off guard when they are offered a promotion, asked out on a date, or reach retirement age (who knew that was coming!).
Most people are responding to the world as it happens, not deliberately shaping it.
This is because most people aren’t mindful. They are not focused on what they want. In fact, many people don’t even know what they want.
You’ve probably heard jokes about people with “five year plans.” I admit those seem silly. Our lives aren’t goals on a spreadsheet, are they?
But those five year planners have the right idea. They are proactive, focused people. They have decided what they want in life. They’ve put it on paper so they can look at it every day. Most importantly, they get the satisfaction of crossing items off their list when they achieve those goals.
Whether you’re a student, professional, parent, friend, leader, or anything else, you have to figure out what you want so you know what to work toward. If you don’t set goals, all of your struggling to achieve is mindless water-treading.
Once you determine what you want in life, your next job is to list the steps you need to achieve those goals.
Let’s say you want a new car. Financing will cost $250/month, but there’s no room in your budget. Do you abandon your dream because it’s not possible? Do you mope around the house, lamenting about your poverty?
No, of course not. You have to be mindful. You have to focus on what you want. How do you secure that car payment? What do you have to do to make $250/month, or an extra $60/week?
A few extra hours at work could pay for that, or maybe a slight salary bump in exchange for some extra responsibilities. Maybe you could lower the payment with a longer term or negotiate the interest rate with another lender. There are lots of ways to make your dream happen instead of waiting for it.
The point is that focusing on the things you want is the best way to achieve them. If you sit by and just let things happen to you, you’ll never achieve your dreams.
It works the other way, too. Focusing on things you don’t want is distracting.
When we focus on criticisms, our doubts, worries, judgments, fears, anxiety, anger, or discomfort, we disempower ourselves. We end up accepting these feelings not as temporary states, but as part of ourselves. There’s a saying you’ve probably heard that’s applicable here: “Whether you think you can or you think you can’t, you’re right.”
Furthermore, focusing on what we don’t want doesn’t define what we want. This is a bad goal: “I don’t want debt.” That doesn’t put you on a path to having more money. It doesn’t even put you on a path to avoiding debt. Here’s a better goal: “I want to eliminate my debt.” Even better: “I want to save $10,000 this year.”
So how do you focus?
Recognize when you’re not. Take a breath and reorient yourself. Say “What do I want?” Then, “How do I make that happen?”
Before you take action (make a phone call, enter a meeting, attend a class, meet with friends, or anything meaningful), determine what you want out of the engagement.
At work or school, generate goals that solve bigger business problems. Don’t be reactive here just to survive the month or year. Think big. This even works with relationships, but be prepared to be flexible because you’re dealing with another person.
Put your goals on paper. They can be short-term or long-term. They can be as simple or complex as you like, but put them down so you can hold yourself accountable.
Focus and mindfulness, like other skills, can be exercised and grown. Over time you’ll get better at it. With practice, they become easier. Even more, you’ll be rewarded by their effectiveness and incentive to further clarify your goals and focus on them.
You’ll become a proactive person who shapes the world.
“Everyone thinks of changing the world, but no one thinks of changing himself.” – Leo Tolstoy
You want to make an impact on the world, don’t you? You want to change people’s lives, create something powerful, or solve a serious problem?
Most of us are like that. The size of our aspirations varies, but we want to make a difference in some way. We want to change our workplace, our home life, our friends, our industry, our market, or our community. A few of us genuinely want to change the entire world.
Look at some of the world’s most successful people – the people who made the biggest or most important changes. They aren’t so different than you or I. Biologically, they’re the same. They grew up in normal households with the same challenges and many of the same experiences.
So, what makes them different? How do people like Warrant Buffet, Bill Gates, Mark Zuckerberg, Elon Musk, or our namesake Dale Carnegie manage to create profound change in the world, over and over?
The best leaders, developers, creators, inventors, investors, thought-leaders, artists, performers, and hustlers have one thing in common: They know how to change themselves.
Here’s a little story you might have heard before:
There was once an old man walking the beach. He came across thousands of starfish that had washed onto the shore, all struggling to return to the water. The old man was sad at the display, but he knew he couldn’t help them all, so he continued walking.
Later, he came across a young man who was dutifully picking up the starfish, one at a time, and throwing them into the water. The old man asked: “What are you doing? You can’t possibly hope to make a difference to all of these starfish.”
The young man lifted a starfish and tossed it into the water. “I made a difference for that one,” he said.
This story tells us that a difference must start somewhere. We can’t wait for change to happen. We can’t expect to make giant, sweeping changes. We must start with one change. Then we make another. Then we make another.
The first change must be your mentality. It has to start with a change in yourself. Are you ready to commit to the change you’re asking of other people?
The pay-it-forward movement is an excellent example of people making small changes that snowball into big changes. If you haven’t experienced a pay-it-forward moment, you probably know someone who has. With a simple act of kindness, one person can incite a wave of charity and generosity.
Changing yourself isn’t easy. It takes work. You must be honest with yourself. You can’t dip your feet in. You can’t embrace change only during work hours, or only when you speak publicly. You have to dive straight in. You must commit. You must live and breathe the change, even when you’re alone.
Don’t misunderstand us: You should not begin your quest to change the world by criticizing yourself or others. Complaining and condemnation erode relationships and divides people. It doesn’t inspire other people to become better. It doesn’t build anything.
Make the change within yourself, and then use honesty, transparency, and communication to spread it to others. If you want to start a charity, be charitable. If you want to disrupt a market, be innovative. If you want to create a positive environment, be positive.
Turn yourself into a little snowball of change and push yourself down a hill.
In time, the change you make in yourself will spread to other people. In time, you’ll make a difference.
When you come across a great leader, you know it. You can almost feel their presence as if they take up more space in the room than anyone else. Somehow their greatness spreads to others.
Great leadership is tough to articulate, but we all know it when we see it. The best leaders find ways to introduce an empowering and inspiring dynamic. Problems become challenges. Complaints and apathy seem to fall away.
How do you become a leader? You can start by emulating the habits of the world’s top leaders. Here’s how they behave…
Top leaders play to their team’s strengths. Forcing people to do something they aren’t suited for is a recipe for disaster. Great leaders identify the strengths of each person on their team and assign work based on those characteristics. They don’t force square pegs into round holes. This comes from an ability to see people as people, not as numbers or titles.
Top leaders don’t need to be liked. They’re happy to be friends with their team, but they don’t need it. They make tough decisions if they have to. They aren’t everyone’s drinking buddy, but they are respected on some level. Like an army’s general, leaders inspire their troops to go to battle. (This isn’t to say a leader can’t be liked. In fact, many are quite likable, but it’s not necessary.)
Top leaders take responsibility. They know where the buck stops. If the team doesn’t come through, great leaders don’t point fingers. If they must take a beating from upper management, they do it standing up without complaint. They accept responsibility swiftly and begin taking steps to clean up the mess and fix the problem. They don’t throw their staff under the bus.
Top leaders are concerned about results. They create clear goals, communicate them to the team, and measure the team based on their performance. They don’t care about how many hours their teams work or how they got the job done, only that the work is quality.
Top leaders focus on the long term. They don’t stress about “urgent” tasks. They identify the tasks that address the team’s long-term goals and direct everyone to put their effort into what really matters. They don’t get caught up in petty politics, gossip, or company silos. They focus on what matters.
Top leaders like seeing their teams achieve. They want their staff to grow and accomplish great things. They don’t worry that their job is at stake. Great leaders lift other people up and take pride in other people’s accomplishments.
Top leaders exhibit their own good advice. They live by the values they preach. If they expect their team to behave a certain way, they do it as well. If they require communication, they communicate. If they demand world class customer service, they serve. They become role models.
Top leaders are transparent. They aren’t ashamed of their leadership style, so they don’t mind explaining their thoughts. They don’t fear their staff as rivals, so they share all the information they have. They don’t undermine their team; they give tools freely.
To become a better leader, it’s important to learn from your own team. How do they work best? What leadership style do they prefer? What works for one team might not work for another. The top leaders of the world know how to use the tools in front of them.
Is your quest to become a better leader? What do you need to improve?
Every business needs some type of structure, but that’s especially true for larger companies. Once a business reaches 15+ employees, the team is usually broken into departments by role.
In many cases, these divisions turn into silos. Business advisor Michela Quilici defines silos perfectly: “Organizational silos are when individual people, departments, or companies, conduct business in a vacuum, without taking into consideration the impact their actions have on the entire organization. The term silo literally means a ‘storage tower’ – a tall, cylindrical building that separates and stores material on a farm.”
There are a few types of silos you should look out for:
Hierarchical silos – When people stick to their own level within the company and communicate poorly with superiors or subordinates.
Virtual silos – When remote workers don’t integrate with your office staff.
Geographical silos – When people limit communication to their own branch/office/region/time zone.
Departmental silos – When people limit themselves to their team or teams with the same purpose. This is the most common type.
Silos can handicap your business in several ways:
Time and resources are wasted.
Information isn’t shared so needless mistakes occur.
Learning isn’t shared. Multiple teams fight the same learning curve.
Investment dollars are wasted because knowledge/solutions/tools are trapped in one part of the company.
Staff morale fails because people don’t feel like their work has much impact.
Tasks/tools/solutions are duplicated in different teams.
In the worst cases, siloed organizations experience a failure to collaborate so tragic that teams actively work against one another. For instance, a marketing team who is measured by their generation of leads might pass leads to the sales team they know won’t convert. If there is no communication or cross-measuring between departments, marketing would have no ability or incentive to properly qualify their leads. The result is an ineffective sales team.
Breaking through silos can only happen at the top levels at the company. Their insulation prevents them from working together on their own, so only the top dogs can break the barriers.
Encourage mistakes for the sake of learning. One of the reasons silos develop is because people want to protect their jobs. It’s easier to blame another department when things go wrong. Create an environment where failure is permissible if it creates learning for the organization. Instead of focusing on who was responsible for mistakes, spin them into opportunities to prevent them in the future.
Direct competitive personalities externally. Healthy competition is good for an organization, but not if teams are competing against one another. No team is truly working in a vacuum, so leadership should help teams understand how their work is interconnected. This is best done by creating a set of shared values for every team to follow.
Provide greater flexibility and autonomy. Do you encourage innovation and creativity? Can your employees find better ways to do their jobs? Processes and workflows are important, but the people who use them should have the autonomy to make them better. Growth and new ideas come from testing the status quo.
Build trust throughout your entire organization. In medium and large businesses, employees aren’t fully aware of the contributions of people in other departments. You might hear talk like “Sales throws out our leads,” “HR takes forever to respond,” or “Product never uses our recommendations” even though you know those teams are doing their jobs. This is because teams can’t see into the operations of other teams in a siloed organization.
Build trust across teams by making everyone’s job transparent. If sales is disregarding leads, make it clear why. If HR is busy, explain their priorities. If product teams disregard ignore feedback, have them educate the organization as to why so feedback can improve.
Silos don’t form overnight and they can’t be busted in a day either. They require deft leadership (which is something we teach in our Leadership Training for Managers course). But with a little vigilance, they can always be broken.
Millennials are the largest generation yet, and most of them have entered the workforce. A study by Forbes predicts that by 2025, three out of four workers will be from the Millennial generation. Even if we hadn’t begun seeing the signs already, there’s no doubt a generation that size would have some effect on our working environments.
What’s different about a Millennial?
Millennials are creative and ambitious. They prefer to create processes and automate portions of their job so they can focus on tasks that require a human mind. They love to use technology, especially solutions that are specifically designed for their needs. They are extremely comfortable with social media and mobile technology, and often incorporate both into their work as much possible.
This new working generation considers work/life balance an absolute priority. They are happy to give 100% of their effort to their job, but they won’t allow it to sacrifice their health (physical or mental). This is good for your business because they don’t burn out as easily as Generation X or the Baby Boomers.
You’ll also have to accept the fact that your Millennial team members won’t want to be at their desk from nine to five, Monday to Friday. Millennials prefer flexible schedules that allow them to enjoy life experiences. You’ll get their 40 hours, but it has to happen on their schedule. If you’re a micromanager, you’ll find Millennials to be challenging.
Millennials in your office
Most interestingly, Millennials prefer non-traditional workspaces. They like to work in open work environments that allow for maximum collaboration. They like to have informal, impromptu meetings and lots of communication. They don’t want offices of stuffy professionals; they want communities.
Now, that doesn’t mean open spaces are right for every company. There’s evidence that open office plans can be distracting and create pressure to look busy. The newest offices are using a layout called “hoteling,” where the work space is mostly open, but small, isolated workstations are put in place for quiet, uninterrupted work.
The best thing you can do for your millennial employees is be there. Millennials are looking for a coach, not a boss. They are entrepreneurial minded and expect great accessibility to their leaders. Research shows that the number one reason millennials leave their job is because of a poor or insufficient relationship with their leader.
Let’s not generalize
While you can make some changes to appease millennials, it’s never smart to generalize a group. The best way to lead your team is to create a set of values for your company, hire people who respect and abide by those values, and then create a work environment and culture that meets their needs. That means you’ll have to put yourself on the front lines and talk to your team anyway (which, fortunately, is exactly what millennials want).
Let’s be honest – 8 hours is a long time to be thinking, sitting at a desk and constantly being “on.” Keeping your team motivated AND productive isn’t easy. A simple solution: LEAVE! I’m not suggesting closing up shop and heading to Bora Bora for a month. How about taking a day or even a half-day for some offsite work? Trust me; the team will LOVE it!
The Effects of Off-site Meetings
An offsite meeting can have profound effects on your team. It puts the focus on them, making them feel important. Team members who feel appreciated and valued are open to learning new skills and more often than not, are willing to work harder. (We know that happy employees outperform their competitors.)
Off-site meetings or training also help people focus. When they’re in a new environment, they are actively paying attention to their surroundings, instructions, and tasks. A fresh perspective can also help them come up with new ideas. The excitement of a new environment (and a bit of fun) can get them to speak up when they normally wouldn’t.
If you need your team to learn something new, sometimes taking them for a walking meeting around the block can help the lesson sink in better. Spring is almost here, and cabin fever has probably taken its toll on morale. When the temperature hits 60 – take it outside!
Going on Retreat
If you want to supercharge your team’s learning, creativity, and bonding, take them on a work-cation. The Team will consider it part vacation and part work if you do it correctly! You may want to get your money’s worth out of the trip by instructing your team to work or learn 12 hours a day, but they need time to decompress and enjoy the location. Use your imagination – if budget allows, head to a destination spot or resort, a spa or even a health themed location where you can combine brain training with Yoga!
Richard Moran, CEO of Accretive Solutions and a longtime venture capitalist, thinks you have to strike the right balance with off-site retreats. “Don’t close the windows,” he says. “Why go someplace beautiful if there is no time for the pool or golf, and people are locked in dark rooms from 8 a.m. to 8 p.m.?” If you take your team to a nice place and deprive them of its enjoyment, they’ll be even more distracted than if you’d left them at the office.
The trick to getting the most out of retreats is to recognize shared leisure time and fun as assets to your company. Let your team regroup from months grinding away at work. Put them in an environment that is slightly challenging, but still comfortable.
That said, you want to get the most out of the retreat, which means scheduling activities and training that support your business. You’ll get more productivity and learning out of your team because (like I said before) the new environment will help them focus.
If you run any team-building exercises, don’t make the proverbial mistake of having your team members compete against one another. That’s a quick way to build a shadow hierarchy into your office. Instead, orchestrate problem-solving tasks where everyone works together, which will foster a team atmosphere.
Retreats are effective for leaders too. One of the things we teach in our Leadership Training for Managers course is the important need to engage with your team to turn them into allies, not whipping them to work like a boss. On an off-site meeting or a retreat, you have the opportunity to lead them to improve themselves.
(The course also teaches how to effectively communicate, listen well, and make better decisions. Check it out.)
The best leaders in the world have one thing in common: They are excellent communicators. I would even go so far as to say that one can’t be a top leader without strong communication skills.
Many bad communicators have poor listening skills. Instead of absorbing what you are saying, they just wait for their turn to speak again. You probably know someone like that. It can be maddening.
Strong communicators like Warren Buffet, Jack Welch, or Stephen Covey make sure to listen to the other party. They capture the other person’s thoughts and problems and turn the conversation to those concerns. They use the language of their audience to make strong, personal connections.
A smart communicator is not a fast-talker with a smooth voice. The traditional never-stop-talking, always-closing, push-push-push salesman is an outdated trope.
The best communicators find ways to add value to every conversation or presentation. Over time, great communicators develop a sense of situational awareness. They observe the room, evaluate expressions and take note of body language. They learn how to look over a room and gauge its mood and dynamic. They use this skill to adapt their messaging.
Even when they’re presenting their ideas, strong communicators speak to the needs and aspirations of their listeners. They understand that the only way a message will take hold is if the listener wants it.
You shouldn’t just learn communication skills in a classroom. No book will have all the answers. The only way to become a fantastic communicator is to do it often. (Therefore, we have our students present up to seven times in our High Impact Presentations workshop.) But when you get the chance to practice, here are some rules to follow.
Don’t be afraid to get personal. You should feel encouraged to build meaningful relationships with other people. Don’t feel like you have to keep everyone at arm’s length because you work in a professional environment. Engage them. People like it when you use their name, ask about their families, and let them into your social circles.
Communicate with clarity and brevity. There is no value in being wordy or long-winded. If you waste people’s time, they will tune you out. The best communicators can pack a lot of meaning into as few words as possible. Don’t be afraid to use specifics, but don’t let details confuse your meaning.
Earn trust, don’t demand it. Telling someone “you can trust me” is the surest way to make them never trust you. People will invest their time and take risks for you, but only if you earn their trust. That’s done through honesty, helpfulness, and integrity.
Drop your ego. Arrogance doesn’t communicate ideas, it just turns people off. Be authentic and transparent, even when it comes to your shortcomings.
Let others speak. Communication can only happen when you’ve listened to the other side. That’s the only place you’ll get the information you need to sway them to your side or transfer your ideas. But that can’t happen if you’re always talking. There’s more to be gained by yielding the floor and filibustering.
Only talk about what you know. Unless you’re asking questions, don’t speak about things you don’t understand. No one will want to listen to you if you speak but don’t add value to the conversation.
Leave value behind. Instead of using conversations or presentations as ways to get something for yourself, find a way to leave something valuable behind. If you become known as a problem solver, you’ll find other people perk up when you start speaking.
One last point to keep in mind: Communication is not about you. It’s about the relationship between you and the listener. Once you’ve built that relationship, your ideas will take purchase.
All good things must come to an end. You can’t run your business forever or you may not want to! At some point, you will sell it or step down. If you’re like most family-run small businesses (by small, I mean 50 or fewer employees), your plan is to take enough money out of the business to fund your retirement and pass the reins to a family member or close friend.
That’s a fantastic goal, but you may be making the same mistake most family businesses are making: You lack a plan to manage the succession.
Your first step is to determine who will own the business once you’re gone. You may be sure who will run it, but there are likely several people who expect to receive a part of it. There’s no easy way to make this decision. Our only advice is to be firm with your choice once you’ve made it.
Next, identify what you need to meet your retirement goals. If the business can’t be sold for enough to support your lifestyle, you may want or need to retain a percentage of the company and structure a buyout over time.
Crafting a succession plan
A succession plan is a formal document that outlines the procedure of transferring the business from the current owner to the successor. It explains who will be the new owners and how roles with change within the organization.
The plan also identifies any tasks or duties that must be managed due to the succession. For example, a big client might need to be personally reassured that the company will continue to deliver the same service. The succession plan might instruct an upper-level manager to visit the client’s office.
The succession plan should be written around a timeline. Transitions can be difficult, and often people will put off the details because they don’t feel right “doing dad’s job” or “stepping into Aunt Jane’s shoes.” Keep the transition moving by giving each milestone a hard deadline.
Finally, the plan should outline any goals the outgoing leadership wishes the company to follow. The new leadership can obviously override these goals, but at least the company will have some direction in the interim. They also assure the employees that the company is still pushing forward.
Preparing for the succession
The outgoing business owner needs to take some special precautions to protect themselves. He or she must absolutely consult with a corporate attorney (someone who represents the outgoing owner, not the attorney who also represents the business) and an accountant with estate planning experience.
In most cases, companies aren’t transferred freely. They are sold to the younger generation. Discussing sale prices with family can be difficult, so it’s best to manage the process through attorneys and representatives like a typical sale.
If the outgoing owners and incoming owners plan to have a social relationship outside of the business, it’s critical that neither try to take advantage of the other. Everyone should be prepared to accept a fair market deal. Unless the business is sitting on a pile of cash, it’s best to arrange a financing structure, so the incoming owners aren’t burdened with cash flow problems, but the outgoing owners are still compensated.
There are ways a careful estate planner can help structure the sale to avoid taxes and make the transfer process smooth. For example, if the owner were to die without a plan in place, the company’s transfer may be administered by the probate court, which is a long, arduous process that no one wants to go through.
Time to beat the odds.
We don’t mean to seem grim, but many family businesses fail to survive the first succession. The rates for second successions are even lower. However, those failures usually stem from a lack of planning. Knowledge is power so acknowledging the statistics are important! The key is to create a solid plan AND have a strong support system for both the outgoing and the incoming leadership all while ensuring your team and clients feel confident that your company will not only survive the transition but thrive!
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