We have a few internal managers we would love to transition the business to, but we are not sure if they have the strategic capacity to lead the business at the next level. How do we objectively evaluate their potential before committing to an internal transition over an external sale?

Question

Tyler Smith · Accepted Answer

You cannot afford to base your succession plan on sentimentality or hope. If your internal managers lack the capability to run the business, an internal transition will fail, potentially destroying your remaining equity or seller notes. You must objectively evaluate their leadership potential using structured EOS tools.

First, look at your Accountability Chart and map out what the leadership seats will look like three years from now. Do not think about your current people yet. Focus entirely on the seats the business will need to scale.

Once the future seats are clear, evaluate your prospective internal successors using the GWC tool. Ask yourself if they truly get, want, and have the capacity to fill these future leadership seats. Capacity is key. Some managers are excellent at executing tactics but struggle with long-term strategic planning and high-level decision-making.

Use quarterly Rocks to test their strategic execution. Give your potential successors Rocks that require them to solve bigger business problems, lead cross-functional teams, and step out of their daily tactical comfort zones. Observe their performance closely.

If your team consistently misses their strategic Rocks or struggles to lead without your constant intervention, they are not ready to take over. In this scenario, you must either recruit external talent to fill the gap or pivot your exit strategy toward an external sale to a strategic buyer who already has leadership infrastructure in place.