Family Business Succession: Interview with John Parmentier, President of Paragon Laboratories

Family businesses comprise 80%-90% of businesses in the US. More than 70% of these businesses are going to “change hands.” Are you going out on your terms?

This insightful interview with a 37 year old son, who is now President of his family owned business will share with you his lessons learned in succession planning.

Briefly describe the services your company provide.

I am the owner and President of Paragon Laboratories, Inc., a contract laboratory that specializes in the physical, chemical, and biological testing of various substances from drinking water to jet fuel. I employ mostly chemists and biologist and we have 45 employees on staff.

I understand your dad started the company many years ago, and he has been fully retired for the last four years. Describe how your role in the company has evolved with his retirement.

Although my father has been retired for four years, my role started to evolve in the years leading up to his retirement.

My father did not plan for his retirement and he held onto the belief that he could work for as long as he wanted and still function at the highest of levels. The reality was that as he got older his stamina and drive declined, and so did his performance in his role. He was in denial of this reality, and as such, did not invest energy into training me, coaching me, or mentoring me for higher level work – believing that the day I would take over was still many years away.

On the other side of this dynamic, my father’s declining performance and denial of it was frustrating for me and some of the staff. He has a strong personality and was proud of the company he started, but he was not keeping up with the times, putting all of our futures at risk. Further, he was not actively training and developing the future leaders of our growing business, creating a potential leadership vacuum that could hamper us in and after a succession event.

To overcome this challenging dynamic, I took a course of defining processes and systematizing many of our business tasks. The thought being, if we can take business tasks, some of which were performed by him, define the process, and train others against the process, we could institutionalize much of his knowledge from years of working in the industry and position ourselves to smoothly go through a succession event.

When he had some unexpected health issues four years ago, I took the opportunity to grab the remaining tasks he still ‘owned’, audit our position on the tasks, define new processes, and systematize the work much like I had done for other tasks in prior years. By the time he recovered, I was able to present to him the audit findings from these tasks and in that moment he was able to clearly see for the first time that he had been in a state of denial about his performance. With his newfound view on his performance, he was able to choose for himself that the best option for his company was for him to retire and let new leadership take over. And, with many business tasks already systematized, we were able to proceed through a succession event without creating a leadership or knowledge vacuum.

What was your initial focus of year one of being President?

Simply, don’t screw up! I was taking full responsibility for an organization that had successfully operated for 16 years and grown revenues each year with the exception of 2009. More specifically, my focus for year one was two-fold: accounting and finance – becoming intimately familiar with the lifeblood of any business, our cash flows and all of the associated functions; and promoting confidence that despite the succession event not being planned, we were in a very strong position as an organization and our future was bright.

After the first two years you decided to hire John Lankford as your Business Advisor/ coach, why did you want to hire a Certified Business Advisor?

After two years of being fully responsible for the organization, creating a sense of confidence and optimism about our future, and becoming intimately familiar with our cash flows, I wanted to get back to the business of growing our business. I recognized that to do so, I was moving into unchartered territory – our business was now larger than we had ever been and there was nobody in the organization that had been to where we were headed, including me. That recognition naturally led me to look outside the organization for guidance – instead of reinventing the wheel with our future challenges, let us learn from someone who has seen the challenges before and more quickly develop solutions suitable for our business.

Your company’s results over the last 4 years are impressive with Revenue up 44%, Debt down 75%, Receivables up 35%, and Cash up 50%. Beyond improving these metrics, what have been your top 2-3 challenges in your role as a young Owner/President in your mid-30s?

Paragon Laboratories family businessThe biggest challenge has been giving up control of different aspects of the business. As we have grown, I became the bottleneck with too many decisions and functions funneling through my office. Having only recently taken over full responsibility for the organization, to hire specialized staff to accommodate our growth and turn over entire business functions to them was uncomfortable. I had not yet felt as though I was an expert in the areas I had recently acquired, and already I was giving the work away to someone else.

The second biggest challenge has been acquiring and retaining high potential talent. There is a lot of discussion about the challenges of hiring and retaining millennials – we have not experienced unique troubles with that demographic. We find that hiring and retaining high potential talent is challenging independent of demographics – Millennial, Gen-Xer, or Baby Boomer, to hire and retain high potential talent we have to be competitive with some of the largest companies in the world despite our small business status.

Recently, because of discussions we have had, I suggested you read the book The Leadership Pipeline by Ram Charan. How has this book helped you better understand your role?

This book describes the passages managers must go through as they get promoted through levels of leadership and explains the impact of not fully going through any such passage, the effect it has on the leader and the effect it has on the organization. I could see where I skipped some of the passages, the mental and emotional perspective and behavioral changes that must be adopted when moving from level to level. It was somewhat shocking in how it described the challenges I have faced moving towards my current leadership role as Owner / President – How did they know I had these exact challenges? For me, there were two big takeaways from this book.

First, my experience moving from level to level in my organization was not perfect. It was premature at times. It was not supported by training, development, coaching, or mentoring. It was trial by fire. Said more plainly, it was consistent with what happens in organizations worldwide. With all of that, the challenges I faced, although often self-inflicted, were often the result of not knowing what I could not possibly know. At the end of the day, I am responsible for everything that happens with my organization. This book, however, provides context for the enormity of the task at hand, and with it, it provides context for reframing failure and challenge from an experience of “I’m not good at this,” to an experience of “Failure will occur, no matter how capable I am.”

Secondly, the book reinforced for me the importance of not ‘going at it alone’. Organization and commerce are mature institutions. As young leaders, there is much to be gained from standing on the shoulders of those who played in these arenas before us. They want to share their experiences with us, and in many cases, as with Ram Charan’s The Leadership Pipeline, their experiences are codified with strong research that reveals best practices. Whether it be the utilization of a Certified Business Coach, attending seminars on specific topics, or reading books and articles that address immediate challenges, the task of being fully responsible for an organization requires one to constantly learn and apply their learnings to reduce the frequency and degree of future failures.

Also, how has reading this great book helped you think differently about developing your leadership team?

As someone fully responsible for an organization, I must constantly learn and constantly teach. If I stop engaging in either activity, I put my organization at risk. There are, however, mindsets and behaviors that can get in the way of these activities and unless we take the time to understand the human element in our training and development processes, these mindsets and behaviors are certain to derail or stall our progress. An open dialogue must be fostered. An environment of self-awareness must be cultivated. A culture of humility must be developed. The learnings and teachings must take into account the uniqueness of each person in the pipeline. Although two individuals may share the same gap, the reasons for why the gap exists or persists may be wildly different. Until you can tap into the underlying causes, the gap will persist indefinitely. The Leadership Pipeline by Ram Charan has provided organizations with an excellent common language and a strong structure to have conversations around the topic, the rest is up to us – to humanize the best practices presented and help our people overcome their own challenges.

For any first-time President or CEO, why would you recommend this book since hundreds of thousands of Baby Boomer CEO’s are going to retire and transition in the next 5-10 years?

For any President or CEO, first-time or veteran, regardless of their own demographic identity, be it Millennial to Greatest Generation, I would recommend this book. I would actually go one step further – I would recommend this book for anyone in or considering a leadership role, even front-line roles, in any organization. Organization and commerce are mature institutions and this book adds to any prospective or current leaders’ maturation. It is one of many books I would and do recommend to others.

Transiting to second generation of any business is often difficult, in fact many sons and daughters do not succeed, what are some of your key learnings and what advice would you give any parent considering handing off the business to their children for exit planning?

My advice is simple and twofold: start the process today; and create a comprehensive plan with input from many parties.

Developing the maturity to lead an organization takes time and there is no way to predict when the future leader(s) may be asked to step into their roles. Delaying this process is high-risk and usually ends in organizations disappearing.

As for what it takes to develop the maturity, that is highly specific to each organization but rest assured, ‘letting Billy sit in on meetings from time to time’ is insufficient for the enormity of the task. Organization and commerce are more complex and move faster today than at any other time in history. As such, there has been an expansion in the range of knowledge and skills needed to be fully responsible for an organization. What your family or non-family successor(s) will need to be proficient in to succeed tomorrow is beyond what you know today. Take what you know, combine it with what others know, and include all of that in a comprehensive plan for the training and development of the current and future leaders of your organization.

If you do not plan for your eventual departure from your organization, your organization will bear the full cost for years after the succession event. Further, if you do not plan for it and your competitors do, that may open a window for them to outperform you in the market and turn your legacy into a ‘remember that company’ footnote. I have been fully responsible for my company for four years, I am only 37, and I am already two years into building the capacity for my organization to thrive though another succession event. Life favors the prepared, especially in organization and commerce.

To contact John Parmentier visit www.Paragonlaboratories.com or call (734) 462-3900.

 

John Lankford

John Lankford was recognized as the 2007-2010 Associate Business Advisor of the Year in North America and brings proven executive experience and best practices to select companies every year. He served 18 years at the Executive Education Center at Ford Motor Company and is former Senior Director of Ascension Health Learning Institute. John has developed top leaders around the world in partnership with the University of Michigan Business School, the Center for Creative Leadership, Comcast University and GE University, to name a few. His business expertise has been tapped by prominent business media such as the New York Times, CBS and Dbusiness magazine and has been a syndicated business columnist. He is the author of The Answer is Leadership and Superstar for life…Career Transitions. John’s keynote speaking has landed him on the elite team that trains and certifies the new Executive Coaches joining the worldwide coaching community. John is also former Chief Executive Officer of the Innisbrook Leadership Institute. Lankford can be reached at john@premierexecutiveforums.com or call (888) 730-1950

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Comments

  1. Great Interview John, thanks for so much content.

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