EP6 - Foundations of Transition- Courageous Leadership

In this episode, Jason and Makenzie continue “The Foundations of Transition” series by highlighting the courage it takes to transition a company and its leadership. Each workshop-style episode builds on the last, offering practical guidance to help business owners move forward with confidence.

This second foundation explores what should be included in a thoughtful transition plan and how leaders can focus on long-term vision rather than falling into fear. Jason and Makenzie discuss how intentional planning, clear direction, and courageous decision-making can shape a successful future for both owners and their organizations.

Transcript

[0:12] Welcome everyone to the journey to an ESOP and Beyond podcast where we seek to make all things related to Employee Stock ownership plans both accessible and understandable. Uh I'm your co-host Today Jason MillerI'm McKenzie worth. And we are going to be discussing the second of our foundations of transition and today specifically uh it's, leadership and decision Authority uh and the courage that it takes for owners and Founders to, allow for themselves to trust in their leadership uh and what it takes to uh transition uh that leadership to the Next Generation, this is the second part of our again 12 12. Park Foundation throughout the year uh this is uh February's episode The Design here is to allow you, uh to think about not only the mechanical side financial side structural side of uh a an eventual exit or transaction or transition but also the real human element of what it takes to embark on a journey like that.

[1:37] Why does this matter why does uh leadership we're we're saying leadership and decision Authority um set set the stage for us on the importance of this particular step.

[1:50] Yeah well I think in anyum business transition and obviously we deal with ESOP specifically and so. Um especially in those cases but in any transition in generalit's important to.

[2:06] To know that who the next leadership group is um. Especially in smaller Middle Market or um privately held companies the owner is. Heavily involved typically that's what we see often with our clients umand they don't always have a plan of who is kind of going to be. Taking their taking their role once they inevitably someday have to step out of the businessand if all of the decisions and, knowledge is all kind of hoarded by the owner.

[2:44] The company isn't really set up for Success when the transition ultimately happens. And so kind of having a process in place or at least starting to plan for that, allows for the company to be better positioned when the transition occurs. And we talked about plans succession plans exit plans and our our first foundations uh episode and I think that the trend is more and more companies are a greater percentage of companies are aware of exit planning or taking educational courses or reaching out to resources like us uh for for education in that um we also identified that you know secession plan is a very loose term uh and exit plan is a very loose term, despite more people uh when pulled saying that that they have 1so, this is that let's break down what should be in that plan for you as it relates to 2 leadership for all the reasons that you just laid outum, and I I I think thatit's it's a it's an interestingum.

[3:59] God what's the what's the term that I want to use like almost self-fulfilling prophecy that if if I'm afraid that things will fall apart if I'm not here at 1 point in the future I'm not going to be here and if I don't plan for that. Then things will fall apart making that fear become reality.

[4:21] Yeah andvery true go ahead, I was just going to say that the the whole idea for for us and having these episodes is to really pull that out and examine it piece by piece and not put you in the cycle of a a self-fulfilling prophecy of, if I don't if I have to do it this way then this will happenum but if I don't do it that will happen anyway umand that's that's going to be hard, uh not not just again mechanically structurally as as a leader but emotionally letting go, of certain things we say letting go uh my wife would tell you I'm a control freak I've always been a control freak its control the controllables because there's so many things outside of your control that you know you you can't do anything about but pivot and triage and adjust um and I I'd like to think that as I've gotten older and wiser that I've been able to let go of more things that I can control um not not just uh as a personal development but frankly because I I don't think my health could sustain that uh that's, just 1 1 angle around the stress that it creates and wanting to to to do that but the importance of it is is umis is key.

[5:45] Anduh the term that that when we were doing our our research for for this episode that I liked was the uh the founders trap um and the the fountain was it founder syndrome was at the the other like almost diagnosis of that, so we're we're going to talk about those um and where where you can recognize them and I I think that's part of where we we'd like to startum before we get to what the diagnosis is with that little lead in um what are the signs uh of.

[6:25] Yeah how would we recognize whether we're in a a more or lesshealthy or constructive spot uh for this idea of leadership and and Authority.

[6:38] I think it's just 1 of the most simple things istaking a look at how many decisions.

[6:45] Funnel through the owner what's being. What processes are in place is it is every like what approvals are needed by the owner um. To keep the company operating and to keep things moving or I guess in other words if you were to step out for a week. Do things get delayed is is your company kind of on hold or does itstill operate seamlessly. So examining that.

[7:17] It create you need a almost a a a testing Zoneright like how how do I know what makes it to my desk as an owner as a Founder as a leader um and then what percentage of those things uh do I have to decide on and should the the real question is should I should I be deciding on those things um or is it just because I I want toum.

[7:45] Just always been that wayright I think the answer is probably a little bit of all of that in many businesses and many companies that we work with we we see that it's why why does that occur how how is the system set up what is your process for and what why is it like that what'swhat requires it to be that way sometimes the answer is. It's always been that way um and sometimes the answer is I like to be the the decision Authority um it it's it's my role.

[8:25] Right and I thinkthat's. Maybe more so the the theme here or what we're trying to get at is that maybe subconsciously these owners don't realize thatthey're tying their. Um Identity toto being the 1 that everyone is kind of dependent onand maybe they subconsciouslyum.

[8:54] Keep keep going off of that like they don't, that's what keeps them motivated umthat's that's what drives them is kind of being the go-toproblem solver the the center of the glue of the company. I'm glad that you mentioned the word identity um I I've been the 1 it up in the last number of episodes people would start to think that I might be having an identity crisis um as often as I I I speak about it but it's very very trueum. And. I don't I don't know that a lot of people take time to examine uh you know what what role am am I operating in how many roles do I have in my life not not just my company, uh and kind of which which of those roles is the driver.

[9:48] Andfor many entrepreneurs like that V visionary leader uh identity is the the 1 that's in the control seat of their life because that's what they've spent all their their timeum most of their time building, for all of the other elements of their life right that that's what they're using to provide a stewards for their their families and for the life that they want to provide. Um and you know whatever causes they want to advocate for, um the the driver is I I'm I'm the leader I'm the owner I'm the entrepreneur and that's the way it always has been but that's also who I am. Rightand I don't think there's anything necessarily wrong with that either but. I think you have to be able to realizewhere it can hold you back or your company where it can hold your company back.

[10:51] That delegation umelementis and transitioning, the authority and transitioning leadership responsibility to another from that seat is really a threat to that identity psychologically, right I was psychologists not a doctor not trying to diagnose anyone here from from that right we said we were uh looking at this from almost like a health healthuh scenario with um you know this Founders syndrome. Uh diagnosis and where where are you on the Spectrum so just caveat there um. But uh when you put it in those terms it may give you a new perspective on am Iun have I not taken steps to create the next layer of leadership. Because I feel like it would take something for me in individually, um or is it just a matter of oh I didn't know the process or I didn't know how important this process wasand I need to prioritize this so that, the I guess the you can harvest the fruit of your entrepreneurial Spirit as a leader in in the future for whatever transition you're going to be undertaking. Right.

[12:16] Maybe let's uncover some of thethe costs of not letting go of this control in the statistics thatthat we found um.

[12:28] I mentioned how. Not letting go or or realizing these these key items can can hold your company back um and there's actually evidence that organization led by founders, Who Won't Let Go actually grow slowerso it holds back the growth of the company. And I think when you kind of take a step back and think about it it really does make sense when you have an entire company you have employees and 1 personis, in charge of or has all the knowledge and processes and the approvals and the authority um. You're forgoing all of the other bodies that you have that are capable toto help you know. Move the ship in the same direction.

[13:26] I had a thought it's still there I know where I want to address it so we'll pick it up in a little bit um. And I Iit does make sense it creates we use a term bottleneck right at some point. There is a an opportunity cost or there's too much frictionin the processuh to allow things to move.

[13:53] At the right speed of the of development that's occurring so if you think about this um if someone needs to order a certain part or product or replacement, um on an assembly line in order to uh keep the assembly line moving at the pace if you think about um I Love Lucy and like the chocolate uh packaging seen if you've ever seen that or seen it referenced um or I'm really old and I'm 1 of the only people that's seen it um.

[14:25] You know that that idea of it, the work keeps coming but then there's there's a challenge or there's a problem and then it speeds up and uh then there becomes this issue and then at the end the that product doesn't get packaged and sent out because of how how quickly it's moving and where the inefficiencies are occurringumand, if that has to go up 2 or 3 layers so if it if it's an overburden process or if the only person who has the authority is also in charge of everything else then you can see how waiting for that to occur costs, not not just time but time is moneyand if there was a a, less friction in that process than it could move smoother and sometimes delegation of authority is really being purposeful about removing friction from processes that you already have.

[15:25] Rightso, 1 of the statisticswe found was that 46% of family-owned companies have no formal succession plan in place which is something we discussed on our our first episode of um. The foundations oftransition butthis could often imply that or be assigned at the owner is. Still in charge of most decisions or is maybe the bottleneck um. And so maybe just starting starting with a little assessment of. That can help you uncoverum and see where to start with putting together a succession plan but regardless. The lack of this just sharing decision Authority andand kind of assigning leadership roles or having your employees understand their leadership roles will directly impact um, your Readiness for a transition and it will impact the the perception of that the buyer has. On the company as well.

[16:38] I like the um there's a survey that was done by US Bank that uh we we pulled some of these statistics from and it said uh that 85% of owners started their company in order to create a legacy to pass on.

[16:57] But only 54% actually have a plan to do soall rightum.

[17:07] And that that reinforces that idea of identity of what what is the purpose why is that entrepreneurial Spirit you know driving everything or many things in life why is it the priority um and for very good reasons again creating a legacy for family or for Community or for whatever is important to you, um and then that 1 out of 2 basically uh ha have a plan and we talked about what that could mean how loose this session plan definition is but the other half have nothing um. And that having a plan and a definition not only allows you as a Founder to be more prepared for a transition or an exit but because of the plan, the company is a lot more attractive to buyersincluding an ESOP trustee, right uh because the goal is you're not always going to be around in this role in this capacity and um we always use the term write off into the sunset or take a world tour or whatever it is that you're going to do in your next chapter, um but recognizing that we are are temporal creatures even in the roles that we inhabit today.

[18:28] Right.

[18:30] And I wouldn't say it's I know we're getting into this um a little later here as well too so I don't want to uncover too much but. In an ESOP transaction you have a little more.

[18:44] I guess forgiveness when it comes to that because typically we see owners staying on they're not their goal isn't to immediately once the ESOP closest soyou do have a little more. Whatever time that is that you you plan to stay on with the company you can use that time to continuedelegating Authority and establishing leadership roles but. I wouldn't say that's a reason to push off the planning until. After the transaction eithervery good point uh very good point. What what we're hovering around here is that. In order to do this at all really not just well or effectively is it it takes courage.

[19:37] Uh we've used even on this podcast uh we the image that you as an owner you as a Founder that your business is your baby. And you have been with it for however many months years decades uh at at the helm ofyour Enterprise. Andyou handle. Your Enterprise with such care and Grace and lovethat it it is like another member of your family. And it is its own creature uh want to use that that term um but it is very very dear to youand.

[20:22] When you consider passing off some of the responsibilities to someone else. To care for your business for your Enterprise for your babyit's an act of trust. Which means that trust needs to be there for those people those people need to earn your your trust. I mean you you don't let your kids talk to strangers so you're not going to just hand off important things to people off the street or that you just bring into your organization yesterdayum without, them having some measure of your trust to do so and inevitably there are going to be parts of your business. And aspects of your business that you will retainuh at a very small tight Circle. Uh for a very long time and not everything needs to be shared with every person um but, at some point you do have to pass off responsibility um uh for for your your business and that's frightening, just as it is the first day that you take your kid to daycare or their first day of kindergarten.

[21:39] And as I was uh reading through um the the materials for today and as always thinking about this when we refer to your company as your baby that parenting parallel, come comes along um and are we 40 years later still treating, uh our our children like babies uh or have we allowed them to grow through the stages of life to become their own individual. And the successful individual and their own arc and to go where they need to and we've placed trust in people and institutions along the way. Because we can't be responsible for every need that they have to be a well-rounded individual and so for those of you that. Um you know I just want to pull those 2 pieces together because when we say your business is your baby we're not we're not being derogatory or or anything like that we're not saying that you're infantilizing your your organization just the amount that you you love the organization is equip. Somewhat equivalent of business sense that that you do your children. And if you put those 2 together then you can see a natural Arc of I have to hand off certain things to certain people at certain times.

[22:55] I really like that analogy and you mentioned trust having trust in.

[23:01] Your leadership team having trust and if you use that same analogy and your kids. That everything you know they'llthey'll be responsible Etc um but it's also having trust in yourself and trust that that you've. Kind of built a team that you've put these processes together um that you've. You knowraised and coached your kids in the in the best way so you're not only trusting them but you're trusting yourself.

[23:35] Founder syndromeuh we're finally getting to kind of the meat of it and uh the this part. Is really as we've been describing it's a term that you can can use for when founders can't adapt their role. As the company growsyou have adapted you've run a very successful organization um things have grown, uh but sometimes the amount of will that it takes for an individual to whether the early storms in vagaries of industry and business to get to a point of success sometimes becomes the biggest constraint to the same organization. And if I let go if I don't have the same level of vigilance over what's happening now and the same level of control that I'm we're not going to be able to or I'm not going to be able to weather the next big storm bigger numbers more people more responsibility I can't let gonow. McKenzie how does that manifest sometimes in the day-to-day operations of the business.

[24:51] I think justmaybeI don't want to say micromanaging but just kind of. Being involved in all the processes if you feel like it if the business is going to essentially like fail without you then it's manifesting and in those ways you feeling like you need to be a part of. Everything um when in reality No 1 really can that just kind of leads to burnoutum it's not sustainablebut. I think I think we hear that a lot umwith our clients especially when they're when they're thinking about ESOP transactions and you think about. The transactions being seller financed well we'll hear that the owners are well I can't leave the company until that debts paid off to me because I need to make sure the companies going to continue to runwell that in itself is something you should probably, think about which is kind of what we're getting at in the theme of of these this um. Foundations of transition butif that's how you really thinkit's going to play out thensome assessment is probably. Necessary.

[26:06] Really listeners if if any of this hits home there's 2 things I want to say the first 1 isyou.

[26:16] You havepermissionto unintelligible.

[26:25] Responsibilitywith maintaining all authority, um how to actually delegate like you can do that without sacrificing who you are the success that you have, or the success that you're looking to uh to to monetize in the future or transition to a leadership team in the future from an ownership perspective. So we were talking about roles and how your role as a founderyou're wearing again the the illustration of so many different hats that that you keep and you you can divide those out.

[27:02] And that that doesn't lessen you that doesn't take away from who you are or what you've done and it isn't an abandonment of responsibility or your legacy. It's really ensuring that your legacy endures um. I I may have said it here I do say it often it's about leaving your fingerprints on the next generation of leadership or ensuring that your culture maintains your the DNA your DNA of of the business um as As you move forward um that an ESOP structure allows for that to happen after the the transaction like McKenzie had saidum but, you you can move from, uh you know I got to be involved in everything to others others can carry this and when others do that success not not failure or a sign of anything making you less than the second thing that I want to say there umis.

[28:04] If we if we look at this on a, a hyperbolic kind of scale we're we're saying oh there's a hundred million dollar Enterprise with 2,000 employees and there's 1 guy who's 90 years old that you know signs every check and walks into every meeting andum I I doubt any of you are there uh if there's 1 of you listening that that describes please call us um we'd be happy to talk with you about uh about what what we can do to helpbut you can break this down into asking the question of that doesn't fit me this isn't me like I I do delegate I do have a leadership team I am investing in in the next generation of of leaders and then the question should be how much more should I be delegating from herein order to and fill in the blank.

[28:59] Because you matter your life matters your next chapter matters and the more efficient or effective that you are at doing this very thing betternot only the sooner do you get there. But likely the more valuable the company is in that transition that allows you to do that for longer or better or more intensely uh whatever it may be that that's your next chapter.

[29:27] Right I think the more you are able to delegate and Empower your leadership teamto make their own decisions without you. You're openingyou're allowing to tap into more more ideas different. Um perspectivesdifferent problem solvingum1 of the quotes that we found in our research that I liked. Was spreading decision authorities like diversifying a portfolio it reduces risk. And it refers to that risk as being burned out forin this case the ownerum.

[30:08] And risk of holding your company back from from growing and scaling andallowing it to. Kind of prospereven without youI like thatum.

[30:24] Irisk is in my bones because I spent so many years as a banker like that's that's all all we ever really consider is what what's the risk hereum and from their perspective it's risk of repayment.

[30:39] But in reality it allows you to to kind of go okay can this continue what's keeping it from continuing what what what are those those risks so the idea of uh diversifying that amongst your your team. Is is a fantastic visualum.

[30:57] I also like the 1 that said that companies that practice shared leadership were 34% more effective than those with traditional top-down leaders, and the idea of empowering uh team members to make decisions, allows you to I I get this umthis image of uh the.

[31:23] Like telepathic brains right like the whole like network of oh we're all firing and and uh at this at the same time in the same way and this is the part that spoke to me about esops uh we talked about employee ownership um as an a Very inclusive of the whole person uh rather than just inclusive in all people get, a financial benefit for being part of it well that is part of an ESOP the the the the greatest benefit um and I'm I'm sure that there will be many companies that embody this and that that would back this is it's it's that network of brains that it's uh everyone's showing up going hey um I thought about this and we should think about implementing that here's what it would do and back to that idea of easing friction and processes but now everyone's contributing because we're not waiting for the leader to go hey that sounds like a great ideaum on my own or I was driving around the countryside and saw a sign that said and now we have to do this, um that that idea of shared responsibility creates a. Uh an environment of better decisions and just frankly better decisions lead to a Better Business.

[32:44] Shall we get into the Practical steps that owners can take toto if if they're not already um. Sharing that decision Authority starting establishing leadership roles and allowing them to.

[33:03] To step away from becoming that or staying that bottleneck I think they've been looking forward to this the whole time uh so yeah let's let's get into let's get into those um so, we've got basically SI 6 steps um McKenzie walk us through these. If you don't mind yeahso I think the first 1 which kind of. Uh I feel like we we briefly touched on on our first episode was. Starting early and with small stepsso. Not burdening yourself with okay here are all these tasks that I can delegate just start with 1and see how that goes. Um and pick something that's. Significant enough that maybe it hurts you a little bit to Let It Go but it's not like critical that if it goes wrongthings are going to blow upum but. Just starting with even just 1 thing will allowed you allow you to start um working on that trust.

[34:14] Another iswe often hear like the owners are. The ones with all of the knowledge and all the processes and maybe they're all kind of just ingrained in their in their head because that's they've done it every day they don't need to reference anything um so maybe start documenting it. Um documenting your processes documenting the why of of um. Decisions you makeand allow it to be something you can share with others so you're not. You're not um taking on the task of oh I have to teach everyone sure yes you you probably need to spend some time coaching people but you also are giving them some sort of resource by having something documentedthat they can reference. I think that's the most important part about processes is not just that they are documented right, that that's the plan you know we see Sops or standard operating procedures and here's here's what happens next and here's the Playbookum.

[35:22] I'm not a football guy um, I know we're we're heading up to you know the Super Bowl very soon um but I if you've ever seen an old playbook in movies or videos it's got X's and O's and arrows and um, yeah I I get it functionally like that's going to play out on the field in in real life when someone calls a play but if I have a Playbook that's X's and O's and arrows, I can't do anything with that.

[35:52] But if I understand the why um why would we use this play why would we uh enact this procedure, when does this process need to take place and what's the desired outcome what what's the whyand that's the investment that leaders make in the Next Generation.

[36:16] Anyone can pick up the Playbook or the SOP and the whatever the process is and lay it out in steps. But we're really transitioning the why so not not just of that continues but then that can be expanded upon in time with their energy and their expertise and their intelligence and their wisdom that they learn from their experiences so that that why is is absolutely key, and that's the Personal Touch the personal investment from leader to the the next leader Beyond this is what you do.

[36:57] The third 1 is identifying a second in command or multiple people to. Um handle critical areas of the businessand maybe even just start withtrial periods. You don't have to immediately or permanently transition something over to someone you can say heyin Q2 I want you to. Start approving majorCapital expenditures or whatever it is um so that you're not the final.

[37:34] Approval and and maybe you're giving them your establishing a threshold like hey you can approve anything. Below this amount if it's above this amount then it comes to me rather than. It all coming to the owner um so I think just starting to identify those people and then.

[37:52] Trying it out withmaybe you maybe you're ready to permanently shift it over or if you're not then just start with the trial period. I love this 1 um so I I also consume uh podcasts and and video material and 1 of the the channels or persons or personalities that I listen to is Dan Martell some of you may be um May Be familiar with Dan Martell what, in this segment um and I'm probably going to get the numbers wrong because his Enterprises are are typically a lot larger but there's multiple levels of um you know executive and then you know senior manager and then managers and then workers but has this thing around um, expenses like it's there's a certain threshold for expenses so anybody anywhere in the organization can spend I think it's fifty dollars if they see a problem, and it needs to be fixed they can just go get it up to fifty dollars submit the expense report and you know kind of no questions asked within within reason, and then managers is like 500 and then Senior managers are like 5,000 and Executives is like 50,000 you've got complete Authority under your budget at your responsibility levelto just do fix fix the problem make the Improvement. Pick whatever it is within that go go do it.

[39:19] Because you're going to know what needs to be done in the timing that it needs to be done in and if the problem can be solved for for that amount of money, it's definitely worth that problem being solved immediately rather than having to go through this chain of authorityum and I I really like that idea um, and it decentralizes Authority. It empowers people to be thinking about oh how how can I fix this problem not with the organization's money but here's something that needs to be done and then I can. If I I I can just fix it and I don't have to worry about anything else and I I love that and it's a a way to. Uh alongside this idea of identifying uh the the next generation of leaders identify ways that you can decentralize broadly to empower your Workforce um and that happens in ESOP companies a lot because everyone is is an owner uh and moving in that same direction they want to participate uh but that's too too different pieces that that came to mind during during this particular step as you you name uh deputies and delegate Authority.

[40:35] So the fourth 1 we briefly mentioned earlier but just practice being out of the business. Practice stepping away temporarily go on vacation completely unplug and see where the gaps are. Um Jason you mentioned earlier that our listeners may be thinking oh I'm I'm already delegating I already have a leadership team. Um if you're looking to see where you can delegate more orkind of what elseyeah what else can be delegated I think this could. Could um uncover uncover that and then of course if you aren't really doing anything at all it'll definitely uncover all the things, which if you're leading a successful Enterprise that's success uh if you are not needed for it to continue um and I I I think that's that's really important to clarify.

[41:30] So the fifth 1 I feel like kind of.

[41:33] Is it is a common thing maybe a little repetitive but just building a real leadership team um start holding regular management team meetings toshare information that you.

[41:46] That you have openly and maybe that's um more than just like all the processes and everything all the knowledge that you have in your head but also um. Letting them in onthe financials of the company um however open you want to be there but um. And then having everyone allowing everyone to strategize and identify the issues and challenges that the company faces just start holding regular meetings to kind of build. Are Empower youryour management team and and leaders. This is a really good segmentum and a really good step.

[42:28] AndformanyFounders many owners many executive teams. Information is is protected at the top for many different reasons. And their whole schools of thought around this um and as it relates to to finances finances are very near and dear to every entrepreneur's heart um and that trust factor that we mentioned earlier you're not just going to grab someone if you're in the restaurant business and hire a server uh and then on that first day uh say here here's here's how we do things here and by the way here here's my books take take take a look at what what's happening monetarily within the entire organization um maybe that happens uh but you don't you don't have to do that however umwe uh.

[43:23] Late last year I think maybe at the end of of Q3 last year um we had on the great game of business our podcast and encourage you to listen to that episode with me and Steve but the great game of business is the idea of uh you know open book management and that there are different layers of open book management from we show some we show uh you know certain elements we show all the elements to all the people, so that they can begin to uh identify the areas where they can tie their role with the financial performance of the business. Uh so I would encourage you to check that out and the great game of business as wellum and there are other you know the entrepreneur operating system EOS and and traction are other ways to uh augment the way that you are interacting with your various layers of leadership uh and and responsibility and so check those out uh if you you haven't already and this is the in this building this leadership team, consider them or not or consider why what you were doing is appropriate for your business it's ultimately you have the say, but there are resources out there for you to um to kind of drill down on on on this particular element of sharing not only the responsibility but the the knowledge of what's supposed to important.

[44:50] The last 1 the sixth 1 um which might be my favorite, is the this is obviously making these changes is a bit of a cultural shift so being able to encourage initiatives and also tolerate mistakes. Um when you start allowing others to do things that you've typically done there's going to inevitably be a learning curve and there may be mistakes and you have to be okay with that and I think. That goes back to the point earlier when you're starting to delegate these tasks you do something that you can tolerate a mistake. Or you'll you'll be able to tolerate a mistake and it's not going to. I don't knowkill the operations of the company or or some catastrophic event happens but um. When you start allowing others tomake decisions when they're not used to being. Able to do that um they're probably going to be a little more timid at first and so I think it's very important to make sure as the owner you're explicitly encouraging, them to take initiativeand praise them for it when they doI think it's a really important pointum.

[46:10] And it it it's just like training a muscle and then muscle memory. Uh and I I I valuepeople bringing themselves to work. And demonstrating their strengths and their way uh and not being clones or copies No No 1 needs a carbon cop then I say that I don't need a carbon copy of me and the world certainly doesn't need a carbon copy of me um. But that idea of allowing people to bring their best selves to work to accomplish that common goal and in next month's episode we're going to talk about what that means in strategic vision and Alignment in in that so little little preview for you but uh McKenzie recap the the 6 steps um 1 1 after another uh to to kind of summarize those and then we can move into uh how to look at this through an ESOP lens.

[47:13] Yeah so number 1 was start early and smallnumber 2 was document and share knowledge. Number 3 is named deputies and delegate Authorityfor practice being out of the business. 5 build a real leadership team and. Encourage initiative and tolerate mistakesamongst the cultural shift.

[47:40] You had said something earlier um that I really liked and the it was around. Kind of the separation of uh, what's being transitioned what's being transferred and we've talked a lot about Authority um and then decision making and then now in an ESOP transaction uh we're we've we're talking about the ownership, so

[48:06] When the transaction occurs if it's 100% sale uh then that's an ownership transition but it can be disconnected from a leadership transition in its entirety if everything gets hoarded again with our our 90 year old very successful individual and and their massive Enterprise um and our our hypothetical. So that's 1 of the ways that the you know our our content and uh what we're talking about today aligned and, we can transfer the ownership but that doesn't immediately mean that someone's going to be there to step in for you you can't just again write off into the sunset after a transaction unless. The structure and framework and people are all there to continue. The the business as at least as successful if not more successfully than you have and that's that other statistic that we pulled out, uh shared Authority creates more successful businessesum and this is that planning period before transaction where this is at least as important if not the most important element of what's going to happen, post ownership transitionrightI think it allows the companies to.

[49:29] To really Thrive if they're preparing and kind of grooming their leaders prior to the transaction rather than.

[49:39] Waitingwhat I like most about the ESOP structure, uh and the idea of you know a company that hasn't had a formal board before is setting up a board that the current owner typically on that board still offering strategic Directionuh if not, still staying in the CEO role and so kind of bifurcating roles much like public companies do between chairman and CEO sometimes they're you know they're the same person sometimes those rules are split that's indicative of secession sometimes there's all kinds of different ways to look at itbut uh an ESOP transaction allows you to continue to serve in a strategic function that doesn't really have a Time clock that's required by law. It's what's best for the companies and the employees and even after a transaction you still can influence how uh broadly leadership and decision Authority gets distributed it doesn't have to be perfect before, you shouldn't wait until after the ownership transition to do the leadership transition um but you can work on them and don't have to feel like it's complete, as you step into the the ESOP transaction because you're going to have time and influence afterwardI like the.

[51:05] You're mention of kind of the owner transitioning from whatever role they're in to being on the board and maybe that's, that's after that that leadership transition um that I think tying back to our first episode with identity and kind of understanding like who you are without the company or after, you sell the company that still allows it's an Avenue to stay to stay in touch with the company and just provide or be in a different role that's more big picture strategy. Umand less in the day-to-day.

[51:42] The my next comment should come as a surprise to know 1 and so I think we mentioned it on every episode and that's. Communication communication communication, and then employee education and culture building are kind of top priorities after an ESOP transitionyou have to be good at communicating and we often talk about the mechanics of the ESOP and like what it is and what it means to you and like this is how we're tying your financial benefit to your Your Blood Sweat and Tearsum.

[52:18] But this kind of pulls those 2 together and that you know employees can only act like owners if they understand how the company runs. And when they have more information, and a stake in the outcome that kind of make better decisions and they become more invested in the outcome of those decisions and I often say that the ESOP itself creates. Structure for for like this ongoing leadership engine of pulling up the Next Generation from wherever they come from in in the company because once they employees realize that they have a stake. They're going to take the same care of that that you did in setting up the company in the first place.

[53:05] They're not taking the same level of risk we have to acknowledge thatuh they didn't have all of the responsibility through all of those ups and downs. But now they are responsible and they are owners and they do take that with a level of, seriousness that just isn't exhibited in companies that are not employee-owned I think or I guess it's exhibited to a different magnitude is the way that I'd Frieza.

[53:34] Yeah I think that's a really good point you just your your brief statement on if they. They can't act like owners if they don't understand how the business operates and if they don't understand how the business operates when you when or if you become employee owned they're likely going to be looking for ways that they can. Umunderstand how the business operates so that they can contribute to. The the value that they're creating in their retirement planabsolutely.

[54:08] So let's sum it upum I I would saythatthis is really instrumental, and I I struggled with whether this should have been the first episode or the second episode but I think this is the right spot for it and in this series for for hearing it now you you have to align yourself first with what what you want uh and then this is the first practical step of well how do I get there um and that made sense to me, andit takes a lot of courage to trust your people with all that you've built. And I want to go back to that kind of parenting metaphor where where where is where is your business today if you had to lay it over the life cycle of an infant through however old that it is today what stage are they in um are are you ready to walk them down the aisle like where where are you in in relation to your business and where is your business in relation to its own life and who are you going to entrust with that future.

[55:18] If you've been doing all the decision making if you're the the hero if every day requires you to show up like a firefighterthat's not sustainable. And the the business needs a teamin order to survive and thrive and keep going so.

[55:42] Strongly consider where in your company at what level again not everybody is is at the peak of everything but where the bottleneck isand I I liked this phrase that came up has as we were were pulling uh stuff for this and think about transitioning from a bottleneck to a beacon.

[56:02] If you're the lighthouse you're giving direction. Right you're not on the ship but you are guiding the ship to safety and to its destination through whatever the waters and the rocks and the reefs are.

[56:20] So instead of being the captain at the helm be the Lighthouse Keeper. And it's not about giving up control it's about creating more leaders and this spoke to me a lot and we have to have. Leaders from the Next Generation to come and take their spot herewithout leadershipnothing happens. Or whatever happens certainly isn't as good of an outcome if there's if there's not a leader in placeso, this week what I want to encourage you to do we're going to have uh another page um on our website for this to help you identify 1 area where you as an owner or you as a leader can step back and Empower someone else.

[57:09] And then whatever that means to you whatever is most appropriate for you. Um that that's what we're going to have encouraged you to write down and add to your workbook as you walk through this journey with usand then in our next 12. Part series and part 3 I keep saying 12 step program it's always going to come up I'm sorry I can't can't not say it um the in the foundation series it's about creating a shared Vision um and, we're going to hear a lot about rowing in the same direction and heading toward the same goal and I'll have a bunch of boat analogies and metaphors I promise maybe a few jokes uh but that's where we're headed next um and so I want to say thank you for taking this step on your journey with us. We're excited about what the rest of this year holds for you individually uh and how we can be a part of that so please reach out to us at journey to an ESOP cam with any questions any comments or if you just need some additional direction or help that's what we're here for uh and we will see you next time on the journey to an ESOP and Beyond podcast.