Pitfalls of a Less Engaged Owner

By Tom Zucker, Founder and President

Business is a highly intellectual sport which requires engaged leadership to succeed.

Leverage of time is an elusive concept for owners. “Delegate and elevate” is a mantra that pervades every business consultant’s messaging. Delegation is essential to scaling your company. Balancing engaged ownership during the scaling and delegation process is an art.

Our decades of serving private business owners’ M&A advisory needs have provided a unique view of engaged ownership. The engaged owner promotes a culture that attracts top talent while driving outcomes that come from accountability. The ability to build a team with shared vision and accountability is not an easy task.

Of course, our journey has produced many stories of disengaged owners and their unfavorable outcomes. Unfortunately, these owners did not understand the distinction between building an effective team with a culture of accountability from simply delegating tasks to the next in line.

The following are a few signs of ineffective delegation and the associated pitfalls.

Rudderless Organization: An owner of a $70 million revenue distribution company decided he wanted to disengage and spend time in warmer climates and travel. He hired a new President who had extensive business management expertise but limited industry experience and no prior connection to the company or its team members. Two years after empowering the new President and adopting a hands-off approach to running the company, he received a call from his long-time banking relationships. His business was being placed in workout. One year later, the business was bankrupt and the overextended line of credit balances we being settled with the owner’s personal guaranty.

Absolute Power Corrupts Absolutely: A successful professional service firm desired to disengage from day-to-day leadership of the company that she founded 15 years ago. Two tenured employees stepped up to effectively lead the business. A clear long-term succession schedule was prepared that enabled the managers to fully acquire the business over time. The successful transition was applauded by their employees and peers.

The disengaged owner was happy with her new endeavors and her ability to direct her efforts away from the business. The managers enjoyed the power of being in control and their ability to scale the business. They became greedy and impatient. They wanted more control and a bigger share of the profits. They approached the owner with an ultimatum. The disengaged owner, shocked by the lack of gratitude and respect, was forced to resume day-to-day leadership and terminate the ungrateful managers. The transition caused significant disruption to the business, resulting in a negative impact on their value.

Unfulfilled Potential: The most common pitfall of a disengaged owner is the unfulfilled potential of a business. Businesses require engaged leadership and deep thinking to navigate the challenging business issues and opportunities. A few notable examples of unfulfilled potential are:

• The company that fails to take advantage of new technology or capability. A notable example was when Xerox failed to see the potential in digital photography and its impact on the image industry.
• The company that promotes family to leadership levels beyond their competency while overlooking more talented employees. Waystar Royco is a fictional conglomerate featured in the HBO television series “Succession.” Logan Roy, as the founder and CEO, painfully promotes his less skilled children to levels of leadership who eventually destroy the business.

Engaged leaders can avoid common pitfalls by actively leading and delegating responsibly. These examples illustrate the potential challenges and consequences that can occur when business owners disengage. By balancing delegation with engagement, long-term business success with a culture of accountability is achievable.

© Copyrighted by Tom Zucker, President of EdgePoint Capital Advisors, merger & acquisition advisors. Tom can be reached at 216-342-5858 or on the web at www.edgepoint.com.

Sharing the Wealth

By Tom Zucker, President

There are so many ways to measure success. In a world where success is often measured by material wealth, many business owners recognize the importance of teaching their children about the deeper values of giving, kindness, and social responsibility.

One of the most powerful and meaningful ways to instill these values is through gifting and philanthropy. Some families have encouraged or should I say “push” our kids at an early age to get involved with giving back by volunteering their time – i.e. working at a soup kitchen, etc. By involving children in the process of giving, business owners not only promote a sense of generosity but also nurture important qualities such as empathy, gratitude, and an understanding of the broader impact of their actions on the world.

Gifting is so much broader than giving presents. Business ownership gifting can be about sharing knowledge, resources, and opportunities with others. For children, learning about the power of a thoughtful gift — whether it’s time, mentorship, money, or skills — can help them develop a sense of responsibility. Children learn by watching their parents. When parents take part in charitable endeavors, such as donating to causes, offering mentorship, or funding educational programs, children learn that wealth and success carry with them the great opportunity to make a positive difference in the world.

Philanthropy, the act of donating to causes that benefit society, is an essential component of a well-rounded upbringing. Business owners who make philanthropy a family affair provide their children with firsthand experiences of helping others. This may include volunteering together at a local shelter, organizing a fundraiser for a cause they care about, or even launching their own charity. These activities teach children the importance of empathy and how giving back is a positive way to impact the community through engagement.

Another key lesson children learn through philanthropy is the importance of collaboration. Business owners who involve their children in decision-making processes when selecting charities or causes to support, allow them to have a voice in how they can contribute. This helps children understand that philanthropy isn’t just about individual efforts, but it is also about working together to create meaningful change.

As business owners pass down their knowledge and passion for giving, they instill in their children an enduring appreciation for the impact they can have on others’ lives. It also teaches the next generation that wealth is not just about accumulation but about using resources to uplift communities and create a better world.

Teaching children about gifting and philanthropy is an invaluable lesson that shapes their character and worldview. For business owners, it’s a powerful way to create a legacy that transcends financial success, fostering a legacy of kindness and social impact. By establishing a family culture rooted in charity and generosity, business owners can teach their children to cultivate empathy, gratitude, and social responsibility — lessons that will stay with them for a lifetime.

© Copyrighted by Paul Stefunek, Managing Director, EdgePoint Capital Advisors, merger & acquisition advisors. Paul can be reached at 216-342-5855 or on the web at www.edgepoint.com.