Here is a scenario I see time and time again…. The owner has been running the company successfully for 20+ years and is now thinking about exiting. They share with the prospective buyers that they want to exit shortly after the sale. Buyer response……. Who is your 2iC and can they run the business?
And the owner says to themself, “Well I don’t have one of those.”
Trust me when I say I needed one before I sold my last company, as I was really the glue holding everything together. Don’t misunderstand me, I had a great team of players, some great leaders, but no one that I would call a 2iC. No one that was willing and able to have the hard conversations with customers or employees. No one who could step up permanently if I left. And I knew that would affect my ability to exit, and my potential valuation if I did. But there was no one internally who wanted the job, so I had to look outside my organization.
Word of caution: just because someone is a partner/shareholder (and has the title) doesn’t mean they would be a good 2iC. If you don’t feel confident that you can walk out the door and have your 2ic execute on your two-year earnout, then you don’t have the right person in that role.
After an exhaustive look on Monster (ok, I am dating myself), I thought I found the right person; he understood my business, he was good with customers, he had some great ideas, but it turned out he could NOT gain the respect of my team. Within less than a year, I let him go, and spent the next 6 months cleaning up the mess and hard feelings he left on my employees. I failed miserably, so I was a little gun shy, or dare I say it “scared” to make the wrong decision again. But, as I stated above, I knew I needed to find this person and I knew they needed to be in the role at least a year for the prospective buyer to be comfortable with that person taking over, should I want to exit immediately after the sale.
Alas, I did find someone when I wasn’t actually looking – or should I say, he found me. Here is my advice to find, hire and act once you find your 2iC.
- Look internally first. Sometimes we miss the obvious, but it is the best place to start, as internal candidates know the business and don’t need the ramp-up time. If you do pick from an internal pool, make sure the candidates that were passed over don’t feel slighted. I highly suggest you go out of your way to spend time with them and make sure it is clear how much you value them and what they bring to the organization, and get them involved in other aspects of the business (if appropriate) to show that you believe in their strengths.
- Look to your customer base for candidates. You have to be careful here, as you don’t want to violate any written non-solicit agreements. Be sure to also look at people who you may have had a great working relationship with who left your customer; they of course would not be subject to a non-solicit. This is actually how I found my 2iC. Or should I say, he contacted me after he left one of my long-time customers and took a different job that didn’t work out. It was great, as we already had a healthy respect for one another and he intimately knew the products and services we sold.
- Use personality profiles to help “see” that prospective person’s strengths. I write about this in the chapter on Management Muscle in Get Acquired for Millions. I never made a hire without using Caliper to screen for strengths and weaknesses. The Caliper Profile is an objective assessment that accurately measures an individual’s personality characteristics and individual motivations in order to predict on-the-job behaviors and potential. This tool helped me validate my hiring decisions. And a 2ic role is too important to base it on your gut feeling.
- Have your management team or key reports be part of the hiring decision. You don’t want to surprise everyone with an outside pick, as people will feel that someone has been thrust upon them. Usually not a good way to start a relationship. Get your team to buy into the hire based upon your company’s mission statement and core values. Even if not everyone agrees, at least they feel heard.
- Start with a project. The first day on the job for my 2iC (which we didn’t call him that just yet – I will get into that next), we gave him a fairly detailed project that needed to be done and would show the team his value and leadership skills early on. It was also a project that was long overdue, and having it completed would have a positive effect on everyone and make the organization run smoother.
- Shift yourself to a coach. There is no question that in the early days of your company, you need to lead via a command-and-control style. But now is the time to back-off of this and let your 2iC begin taking on that role. Resist the urge to do it yourself, and instead ask questions and spend more time listening and less time talking and doing.
- Step back from internal and customer meetings. This allows the new person to begin a relationship with your team and customers, and also shows the rest of the organization that you have confidence in the person you hired to take control.
- Transfer hiring to your 2iC. As your organization grows, let your 2iC manage the hiring process (assuming you don’t have an HR department that does this task). This allows your 2iC to start building a team of people he or she is comfortable with and who people know they will be reporting to in the future.
- Plan ahead for an exit. If you know that you want to exit immediately or shortly after a sale, it is imperative that you give your 2iC enough time to acclimate themselves into your business and be able to show prospective buyers that they can run the business once you depart. This cannot be done if you hire them 6 – 9 months before you put your company up for sale. I would suggest a minimum of 18 months before you can truly see if this person can make sure your earn-out is achieved. After all, that is the test.
- Take a sabbatical. Nothing demonstrates your comfort level with your 2iC more than by taking an extended vacation or sabbatical. By extended, I mean a minimum of 4 – 6 weeks. And it’s critical that you check out and not just manage from afar. Be sure you share the sabbatical with your prospective buyers as well, so they know your 2iC has had to step in the role of CEO for a period of time.
Hiring a 2iC can be a scary but necessary step in the evolution of your company. It can take the organization a step back if you make the wrong decision. Therefore, you need to plan for a sufficient amount of time if the first hire doesn’t quite fit the bill. Even if you don’t plan on selling anytime soon, it is great to have someone who you can share and execute your collective vision with. I also found that my team was more comfortable going to my 2iC with new ideas as well as challenges. That way, they could vet their thoughts before voicing them to a CEO, which can be intimidating for some.
Some owners are uncomfortable announcing a 2iC immediately upon hire. You may instead call them a COO or other title for a period of time, but let that person know that 2iC title will be theirs either after a certain amount of time (say 6 months) or upon successful completion of a significant project demonstrating their leadership skills.
Even for a ten-person business, a second-in-command can balance the demands of running your company. A 2iC who has been clearly anointed can go a long way toward making you redundant, which should be the objective of anyone wanting to build a company that can one day be sold.