Navigating Succession Planning in Cannabis Businesses
Succession planning is a critical but often overlooked aspect of running a cannabis business. As the industry grows, so does the need for strategic leadership transitions. Businesses can face significant challenges when key players leave, and the lack of proper planning can create “lotto or bust” scenarios, where the future of the company relies on uncertain luck rather than a clear succession plan. Key concerns include dependency on singular leadership, the brain drain from experienced staff, and the inability to backfill key positions effectively.
Generational Dynamics and Employee Engagement
The generational makeup of your workforce plays a significant role in shaping your succession strategy. Baby Boomers tend to have a long tenure mindset and may lack an exit plan or resources to transition. Gen X employees often look for growth opportunities and tend to stay in a business for around 3 to 5 years, while Millennials tend to move quickly, often staying less than a year. Career paths are no longer linear, and employees now seek flexibility, mentorship, and meaningful work. As a result, succession planning must consider these generational differences to ensure a smooth transition.
Developing the Next Generation of Leaders
The next generation of leaders needs to be nurtured and developed with a strategic focus on their knowledge, skills, and abilities (KSAs). It's essential to identify potential successors early and understand their motivators to create pathways for growth. This doesn't always mean climbing up the corporate ladder—sometimes it's about moving sideways into new roles or responsibilities. Transitioning Baby Boomers into mentor roles can also be an effective strategy to pass on institutional knowledge. Developing high-potential individuals (HiPos) through interim promotions and performance evaluations ensures a strong bench of leaders, avoiding “Popos” or seat warmers who lack the drive or capability to step up when needed.
Leadership and Culture: Shaping the Environment
The leadership style within a company has a profound impact on the work climate and ultimately, on performance. Leaders “make weather,” meaning their behavior and actions set the tone for the entire organization. Workplace experiences, productivity, and team cohesion are all shaped by leadership, with approximately 75% of the overall work experience being driven by leadership behavior. Therefore, cultivating compassion, patience, and persistence as core leadership values is essential in fostering a healthy environment for leadership development and organizational growth.
Managing the Business Lifecycle
The business lifecycle is divided into various phases, each of which requires different strategies for a successful transition. The initial plan focuses on identifying leadership gaps and creating a transition strategy. This is followed by leadership coaching and formal transition planning, typically in the first year. Post-transition support ensures that the company adjusts to new leadership while maintaining performance. Finally, when the business reaches its final phase, whether it’s through sale or other exit strategies, it’s crucial to have a solid plan for the CEO role and team realignment.
Performance vs. Behavior
While performance can be measured by results, it’s important to recognize that behavior plays a significant role in driving those results. Underperformance may often be masked by good numbers, making it essential to assess both the performance outcomes and the behaviors that led to them. Ensuring a balance between the two will help identify areas for improvement and development.
Preparing for Exit Strategy & Sale
Only about 30% of businesses make it to the second generation, and even fewer survive into the third generation. Family-owned cannabis businesses, in particular, struggle with creating exit plans due to the emotional attachment to the company and a lack of clear successors. Whether or not you plan to sell, it’s essential to build a structure that supports a potential sale, including a leadership team capable of stepping in when the time comes. The key is to make incremental improvements daily, ensuring the business remains attractive to potential buyers when the time comes to transition ownership.
Development Tactics for Success
Setting SMART goals, conducting regular team meetings, and engaging in 1:1s with employees are all critical tactics for maintaining progress. The “Stop-Start-Continue” approach helps organizations evaluate what’s working, what needs to improve, and what should be eliminated. These tactics ensure ongoing development and provide a clear roadmap for leadership transitions.
Open Questions and Barriers
Several open questions and barriers remain in the process of succession planning, including how to create a nurturing environment for leadership, what to do if the CEO isn’t ready to step away, and what to do if there are no natural successors in the company. Addressing these barriers is key to ensuring that the business remains operational and sustainable through leadership changes.
