Ownership transition can be an eight to 10 year process, so start early, educate yourself, define your goals, and keep an open dialogue with your employees.
Jim Meads, P.E., CEO/Owner of Sain Associates, Inc. I am a third-generation owner and CEO of Sain Associates. Our founder, Charles “Hack” Sain transitioned the company to his son, Randy Sain. In 2010, I became CEO, and we transitioned Randy into his retirement and moved the company forward with two owners. Having the goal of internally transitioning the company and eventually stepping into my retirement, we started identifying yearly tasks, starting at our 2015 Strategic Planning session, to make the next transition happen. We have made quite a bit of progress in the last four and a half years.
Having been through two prior successions, we had learned a lot and knew we needed to prepare our company for the next transition. As leader of the company, my desire has always been to teach our upper-level employees to be entrepreneurial and business-minded. To make this happen, my Executive Committee and I implemented the following:
- Educated our upper-level team leaders. This has been an ongoing process. It started with the basics of “What It Means to Be an Owner.” This included open discussions about prior lessons learned, different corporation types, and how the process works to become an owner.
- Shared our company financial statement with all our upper-level team leaders. Our team leaders were accustomed to reviewing revenue and backlog information for their respective teams. Providing a full financial statement helped them connect the dots to understand how their performance and expenses affect the company’s bottom line. It has also helped them understand the importance of collaborating and sharing workload to the company’s overall health.
- Increased our project managers’ knowledge of company performance. We invited select project managers to our yearly strategic planning session. Through participation, they were exposed to more information which has contributed to their acceptance of the plan.
We started quarterly Performance Metric Meetings in which our CFO provides information on select metrics. Seeing regular performance data and having an opportunity to discuss it has increased their understanding of the company’s performance.
- Updated our shareholder agreement and prepared shareholder performance metrics. Clear definitive goals have been set for our potential owners. These written expectations give us a way to gauge their performance as leaders and provide feedback for improvement.
- Engaged our team leaders and senior managers in discussions about their interests to become owners. One-on-one conversations were conducted with each individual, and an outside consultant was engaged to assess the leadership skills of potential owners. This combined information gave our Executive Committee a better understanding of interest and fit for ownership among the candidates.
Alicia Bailey, P.E., Principal/Owner of Sain Associates, Inc. Ownership transition was a topic at our Strategic Planning session in 2015, and immediately I can recall having feelings of anxiety with questions of who would be our future CEO, how it would affect me, and if I would be asked to be an owner. Under the heading of “Prepare for the Future,” we defined tasks for year one of a multi-year effort to transition ownership and leadership of the firm.
Over the next couple of years, I was asked several times about my desire to become a future owner. I typically responded “I do not know” or “I do not know enough to make that decision.”
Luckily our Executive Committee spent a lot of time with our team leader group educating us on the process and the details of the firm’s financial metrics. Over the years, I gained an understanding of how my team and the company were operating financially on a monthly, quarterly, and yearly basis. It became very apparent how certain activities affect our metrics, especially our profit. Before having this knowledge, I found it easy to approve attendance at certain conferences and training seminars or purchasing of equipment, as I was somewhat blind to how these expenses were affecting us. Now, those approvals are much more informed and can be planned with our workload to maximize our performance. Additionally, attending Zweig Group’s Principals Academy was a large part of my learning process.
Once I was officially offered the opportunity to become an owner, the only information that was new to me was the reading of the company’s shareholder agreement and the cost of the shares. In reflection, saying yes to becoming an owner was not as scary of a process as I had originally perceived years prior.
Jim’s Advice on ownership succession: Ownership transition can be an eight to 10 year process, so start early. Educate yourself and engage with other CEOs on ownership options and issues they have faced with succession planning. Define your goals and keep an open dialogue with your employees. Sain Associates has grown from two to five owners and we hope to add more. We continue to educate our leaders and managers on our financial performance and hope we continue to see success for years to come.
Jim Meads, P.E. is president/CEO of Sain Associates. Jim can be contacted via LinkedIn or at email@example.com. Alicia Bailey, P.E. is a principal/owner at Sain Associates. She can be reached via LinkedIn or at firstname.lastname@example.org.