There comes a point in the life of a successful company when the person who built it has to answer an uncomfortable question: Can this business function without me?
For Pamela Potts, that question isn’t theoretical. It is one she has encountered from both sides of the desk. Potts, founder of Leader Coach Approach, spent 25 years in high technology before turning her attention to executive coaching and leadership development. Her career includes six founder experiences and four exits, giving her a close view of what happens when entrepreneurs build successful companies—and what can happen when those companies become too dependent upon the people who created them.
It is an easy dependency to understand. The founder knows the customers. The founder remembers why certain decisions were made ten years ago. When an important client calls, the founder takes the call. When an employee doesn’t know what to do, the founder has the answer. For a long time, those things are considered evidence of good leadership.
Potts sees the problem that can come later.
Entrepreneurs are accustomed to solving problems. In many cases, that’s how they became entrepreneurs in the first place. Something needs to be done, so they do it. A customer needs attention, so they handle it. A difficult decision reaches the conference room and everyone eventually turns toward the founder.
Potts calls it the “Chief Problem Solver” trap.
The more capable the person at the top becomes at answering every question, the easier it becomes for an organization to depend upon those answers. Employees learn where decisions are made. Managers become reluctant to move without approval. Important relationships remain concentrated at the top. Knowledge accumulates in one office.
Then, after 20 or 30 years, the owner decides it may be time to sell.
Suddenly, being indispensable doesn’t look quite as attractive.
A prospective buyer isn’t simply purchasing last year’s revenue. The buyer is purchasing the expectation of tomorrow’s company. If tomorrow’s company still requires yesterday’s owner to remain in the building, that dependency becomes part of the equation.
That is the territory where Potts now spends much of her time. Through Leader Coach Approach, she works with founders and executives on developing leadership throughout their organizations, particularly as owners begin thinking about succession, transition or an eventual sale.
Her premise is straightforward: if the company is going to survive the founder, somebody has to learn how to lead without the founder.
That requires a change that sounds easier than it is. Leaders have to stop providing every answer and begin developing people capable of finding those answers themselves.
For executives who have spent their careers being rewarded because they knew what to do, stepping away from that role can be difficult. Potts’ work asks them to resist the instinct to immediately solve every problem. Instead, ask the employee how he sees it. Find out what the manager would do. Allow people to exercise judgment while the founder is still available to help them learn from the consequences.
It is the difference between directing people and developing them.
Potts explored that idea in her book, Every Leader Is a Coach, and it remains central to her work today. Her Leader Coach Approach is built around the belief that coaching shouldn’t be reserved for annual reviews, struggling employees or executives facing a problem. It should become part of the ordinary work of leadership. She has also developed what she calls the OMO Method—Observe, Map, Optimize—as part of that process.
There is methodology behind it, but the larger objective is simple.
Potts wants leaders to create more leaders.
What Is the Company Worth Without You?
There is a significant business question underneath all of this.
Imagine two companies with similar revenue and similar profits. At the first company, the owner knows every major customer. Important contracts depend heavily upon his relationships. Department heads regularly seek his approval. He knows things about the business that have never been written down. Employees trust him because he has been there from the beginning.
At the second company, customers have relationships with several executives. Department heads have authority and use it. Institutional knowledge is shared. Managers understand not only their individual jobs, but how the business works.
On paper, the two companies may look remarkably similar. To a prospective buyer, however, they may represent very different propositions.
The difference is risk.
Take the founder away from the first company and the buyer has to wonder what else might disappear with him. Customers? Employees? Knowledge? Judgment? Culture?
That is why succession cannot realistically begin six months before a sale. The people who will eventually run a business need time to become the people capable of running it. A title can be changed overnight. Judgment cannot.
Potts’ work with founders is concerned with that period before the transaction—the years when an owner still has enough time to build an organization that doesn’t require his or her constant presence. It is considerably less dramatic than negotiating the final sale of a company. It may be every bit as important.
There is another side of selling a business, however, and it receives considerably less attention.
What happens to the founder?
An entrepreneur may spend 30 years introducing herself as the owner of a company. She built it when there were three employees. She signed the first customer. She survived the difficult years. She made payroll when making payroll wasn’t easy. She hired people who eventually bought homes, raised families and built careers because the company existed.
Then somebody buys it.
The transaction closes.
And one morning, for the first time in decades, she wakes up and isn’t the owner anymore.
Potts believes founders need to prepare for that transition as well.
The financial side of an exit receives plenty of attention, as it should. Attorneys handle agreements. Accountants examine tax consequences. Advisors work through valuation and negotiations. But selling a company can also mean surrendering an identity.
The question becomes more personal than what the business will do without its founder.
What will the founder do without the business?
Potts encourages owners to confront that question before the papers are signed. A company may have provided an entrepreneur with purpose for decades. That doesn’t necessarily mean it was the only purpose available. Finding what comes next can be just as important as preparing the organization for what comes next.
Potts brings personal experience to that conversation. Before establishing Leader Coach Approach, she spent a quarter-century in high technology. Her career includes six founder experiences and four exits. Today she is an ICF Professional Certified Coach, author and speaker whose leadership work has reached people associated with organizations including Amazon Web Services, Denver Health, UCHealth, H&R Block, Quest Diagnostics and Noodles & Company.
But résumés only explain so much about the appeal of her work.
The more interesting part is the question she asks experienced leaders to consider.
For much of an entrepreneur’s career, success is measured by how important that person becomes to the company. Potts asks what happens when the measurement changes.
Perhaps the mature company shouldn’t need its founder to approve every important decision. Perhaps the strongest manager isn’t the one whose employees constantly need her. Perhaps institutional knowledge shouldn’t remain institutional memory residing inside one person’s head. And perhaps one of the final responsibilities of a founder is making certain everybody else is ready for the day when the founder is no longer there.
Business owners spend years building tangible things: customers, revenue, offices, products, brands and systems. Leadership is harder to see.
You see it when an employee who once needed an answer begins making sound decisions alone. You see it when a manager stops bringing problems upstairs and starts bringing solutions. You see it when important customers know and trust people besides the founder.
Eventually, you see it when the founder can leave for a week and nothing falls apart.
Then a month.
And, ultimately, for good.
There is an irony in that. The entrepreneur spends the early years making herself indispensable. If the company succeeds, she may spend the later years undoing some of that dependence.
Pamela Potts has made a practice out of helping leaders navigate that transition. Her message isn’t that founders matter less. It is that a founder’s work may ultimately be measured by something other than how badly the organization needs them.
Build the company. Build the people. And when the time comes, leave behind something capable of standing on its own.
Pamela Potts is the founder of Leader Coach Approach, an executive coach, author of Every Leader Is a Coach, speaker and creator of the OMO Method.
Learn more about Pamela Potts and Leader Coach Approach
