When it’s time to bring outside leadership into the business

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There comes a point in the life cycle of a small to medium-sized business when its founder (assuming he or she is still in charge) needs to make a difficult, yet critical decision: whether to bring in outside leadership to help run the business.

It’s not a decision to be taken lightly. Entrepreneurs give their all to build profitable organizations, to build wealth and to leave behind a meaningful professional legacy. They are builders in every sense of the word. They also tend to tightly hold the managerial reins—and for good reasons. The business is their ‘baby.’ Seeing it shift in the wrong direction at the hands of an outsider would deal a fatal blow to their life-long professional ambitions. But what happens when the owner-operator is the one limiting the success of the organization?

In many cases, the person who built the business isn’t always the one best equipped to take it to the next level—or to manage complex new challenges. Hiring one or more professional executives (perhaps even building an entirely new leadership team) could be the most prudent approach to inject needed experience and expertise into the business. Knowing when to make that call requires a deft combination of self-awareness, discipline, humility and vision.

It’s at that point that introducing new leadership to a small to medium-size business—which could include senior leaders such as a CEO to guide strategic decision-making, or a new CFO to better manage the company’s finances—can play an important role in driving new ideas, operational strategies and growth. Timing is critical and, along with the current state of the business, should be based on internal and external factors combined with future goals.

New leadership to drive your company’s performance

A key factor in determining that timing is company performance. If the business has reached a plateau in terms of breaking into new markets or spurring new innovation, fresh blood with executive-level expertise in these areas can be invaluable in spurring growth through expansion, acquisition, new financing or diversification. Conversely, if revenues are declining, growth is stagnant, or there are other indicators that the current executive team is struggling to manage, experienced leadership can help navigate these challenges and drive change.

Industry dynamics and market trends are additional considerations. If the sector is experiencing rapid technology changes or shifts in consumer preferences, a savvy, proactive new leader can help adapt to this new and fluid landscape.

Embarking on a seismic shift in terms of strategy, such as expanding globally, diversifying a product line, or embarking on a merger, may also spur the need for leadership change. Professional managers with experience in these areas can ensure successful execution of dynamic strategies and be instrumental in delivering a seamless transition as the business evolves.

Corporate culture, including employee morale, also plays a significant role. New leadership can help build a positive and inclusive company that will improve overall performance.

Choosing the right leaders for your organization

The company founder may also want to hand over the reins prior to retirement, to pursue other business interests or to simply take a step back from the business, perhaps taking on a chairperson’s role without daily involvement in the business. Whatever the case, the founder should be part of the process of seeking new leadership. Their experience, knowledge, and customer relationships will be valuable assets as the company moves forward.

This could mean including loved ones in that succession plan, but as we noted in a recent blog, family ties can complicate business matters and should be managed delicately.

When bringing in professional leadership, be mindful that it’s not driven solely by challenges or crises, and not done in a vacuum. Proactively seeking a new CEO/CFO or other senior executives during times of stability—and in alignment with the founder’s strategic goals—is nearly always the more advisable approach.

Choosing the right leadership is equally important. To ensure a smooth transition, it’s critical that each new executive hire aligns with the company’s mission, values, and long-term vision; is adaptable and resilient; and is an effective communicator both inside and outside of the organization.

When it’s time to upgrade your advisors (and your accounting firm)

While many executive duties can be managed in-house, outsourcing to third-party professional service firms can fill gaps and supplement leadership expertise to help navigate complex challenges. Doing so can introduce fresh perspectives, proven strategies and innovative perspectives that can help accelerate growth. For example, legal and accounting firms can help manage the complexities of compliance, risk management, tax optimization, mergers, acquisitions, and financing. Marketing professionals can help expand brand reach, research and market analysis, while outside IT expertise delivers data security and up-to-date technology and operations systems.

As with bringing in professional leadership to help manage the company’s shifting operational needs, many organizations come to understand the need to upgrade to more sophisticated professional service providers. They may move from a small to a mid-sized accounting firm, for example—one with a larger team that can better cater to their increasingly complex tax, audit or strategic financial management needs.

Migrating to a more sophisticated professional service firm is not only an operational issue. It can also be tied to credibility, such as hiring a reputable law firm when looking to close a business deal, or a larger accounting firm to help secure financing for growth. Ultimately, professional service firms empower SMEs to make informed decisions, streamline operations, and seize growth opportunities in a competitive marketplace.

Deciding when to bring in new leadership and professional help to run a business is complex and requires thoughtful consideration. While challenging circumstances may prompt change, proactive transitions can help capture new opportunities and maintain an organization’s competitive advantage. The goal is to ensure that the chosen leadership and professional services teams work together and are well-equipped in terms of knowledge, expertise, and foresight—navigating the company through challenges on the path toward future success.

Tony Sokic, Managing Partner

Contact a partner in our Strategic Advisory practice today to learn more about how Adams + Miles can help drive your organization’s growth.