I often work with clients as their Interim Chief Financial Officer or Chief Restructuring Officer. In most cases they were struggling financially and their focus was on financial challenges. The owners often didn’t recognize that the financial issues were symptoms and not the actual issues. Therefore, the challenge was to understand what caused the crisis.

For example, in one case it was clear the family owners did not have the required skills to grow the enterprise. We replaced most of the family members, but could not get the President to step down. As a result, they allowed an unsecured supplier to become an equal-equity partner. Within 18 months the unsecured supplier took over the business with no new money and sold this 65-year-old business for over $30 million, with the family getting nothing.

If the family members would have stepped down as managers, taken board positions, and retained their salaries, professional management would have restructured the business and got it back on track. And the family would still own 100% of this family jewel.

It is very difficult for owner/managers to recognize when they are struggling, that maybe the business has outgrown their ability to manage things, and it is time to stand down and let professional management – with more of a structured corporate experience – take over.

In another example, I was the interim CFO and the owner had hired an operations manager, which was the correct thing to do. But the owner just could not let go and take his fingers off the day-to-day operations. To allow the business to succeed, the owner needed to step back into a strategic role, such as Board Chairperson, and allow the hired senior managers to run the day-to-day business.

The owner had been successful at growing the business into a substantial enterprise, but at this point the business was too big for that person to effectively manage. This is why public companies have independent and knowledgeable Boards of Directors.

If the Board feels the CEO is no longer effective, then that person will be asked to step down and allow someone else to take over. However, in owner-managed businesses we don’t have these checks and balances that would allow an independent group to recommend when a change in senior management is required for the health and success of the business.

In such a case the owner-manager feels they have the ability to continue to manage and grow the business, and that extraneous factors are affecting the operating results. I empathize with the owner and there is no clear science that says now is the time to let go. Unfortunately, if the owner doesn’t allow management to take the reins of the company, companies like this will wither and die.