Fresh out of law school, Craig Howse’s first client was an entrepreneur who wanted to pass the family business on to his children. At the time, Howse focused on what he knew best: governance and taxes. He drafted a buy-sell agreement, recommended insurance, structured an estate plan to minimize taxes, and checked off all the legal documents required.
Yet something was missing.
In the years that followed, Howse observed a number of family businesses struggle after transferring hands, even with top-notch legal and financial advice. The difference, he came to realize, was the readiness of the next generation of leaders. Whether they were promoted from within or stepped in as outside buyers, many new leaders seemed to lack the training and coaching needed for their new roles.
So Howse began walking alongside family business owners to help them navigate relational complexities involved in transition planning. In 2019 he founded Conext, LLC to transition leadership from one generation to the next.
“Anyone can sell a company,” Howse said. “The key to succession planning, however, is identifying and coaching the next generation of leaders. Having an outside perspective is helpful and can be a safe space for really sensitive or difficult discussions.”
Transfers of family businesses can be more complex than publicly traded companies, he said. That’s because the business affects the family and the family affects the business. Family businesses tend to have long-term perspectives. Additionally, they’re driven by purposes beyond short-term profits.
“A sale is not a succession plan,” Howse said. “But it is possible to sell to a family member or key employee, structure an ESOP, or have some combination of those and still leave a legacy. The key is to begin planning as early as possible.”
Conext works with privately held companies before, during and after transfer of ownership.
Tucked behind the brick wall of a popular fast food chain is a small, custom-built metal cabinet made by American Midwest Power in Plymouth, Minnesota. Inside are columns of gauges and switches designed to measure the amount of electricity being used by the pop machine, cash registers, lights, drive- through signage, and more.
The company’s products, which include large switchboards, stand discreetly at many popular landmarks, such as CHS Ballpark, the Minnesota Zoo and the state Capitol. Quietly, they monitor and regulate a tremendous amount of electricity through complex switch panels. Each one is custom designed and built.
American Midwest Power is owned by Cindi Dingmann and Tami Reitzner. With their own retirement on the horizon, the sisters began stepping back a few years ago.
In 2018 the shop’s longtime general manager left the company. On the brink of a major expansion, the owners needed to identify someone with a unique set of qualities to step into that role. They reached out to Conext for guidance because they had worked with Howse as their attorney in the past.
Over the next few years, Conext worked to recharge the company’s employees and mission. Their business coach at Conext was Tim Owens, who has a track record of building effective management teams. He collected feedback from every employee, from the janitor to managers, to strengthen the company’s organizational culture. He also helped them clarify their vision and values as part of the strategic planning process.
Ultimately, Owens recommended the creation of a senior leadership team, composed of four individuals, to replace the general manager. Through coaching, leadership assessments and other tools, Owens identified a broad set of leadership qualities that would benefit the company.
All four managers have different areas of strength and knowledge. One is an electrical engineer who is good with numbers. Another has excellent interpersonal skills and is passionate about teamwork. While some have more
experience than others, all received one-on-one coaching, and continue to receive coaching as needed. As a team, they make decisions about hiring, firing, budgeting, purchasing, sales and other major operations.
“We didn’t want just one person making all the decisions any longer,” said Vice President of Operations Kevin Rudek, who was selected to be on the senior leadership team. “The idea is that we would come to a consensus about decisions that were best for the company. That process has been working really well for us.”
Rudek went on to say that he’s been able to apply many of the professional skills he’s learned in his personal life. “I’m a better communicator now,” he said. “Even my family has noticed a difference in the way I handle conflict. I’ve definitely seen an attitude change in others at the company as well. I have nothing but positive things to say about Conext.”
The future looks bright for American Midwest Power. Collectively, the senior leadership team’s ideas and decisions have launched the company into new and emerging markets. As owners, Dingman and Reitzner are gradually stepping away from day to day operations.
“Conext has helped us develop and implement a succession plan that will carry us right into the future,” Rudek said. “Their assessment, senior leadership workshops, and one-on-one management training have been invaluable.”
One of the biggest mistakes companies make, according to Howse, is not carving out enough time for transition planning. That’s because it can take a few years to assess and develop the next generation of leadership.
“Generally, owners should spend years preparing for a major leadership transition,” Howse said. “It takes a lot longer to identify and equip new leaders than it does to handle the legal and financial aspects of a sale. We understand the unique and sometimes complex dynamics of family ownership. And we want to help families and businesses continue to succeed.”