Editor's note: The following article ran in the February 1 issue of Bicycle Retailer & Industry News.
BLOOMINGTON, MN—It’s shortly before Christmas, and Steve Flagg is just days away from leaving Minnesota for six weeks of mountain biking in the friendlier winter climes of Sedona, Arizona—an indulgence the founder of Quality Bicycle Products might not have considered just a few years ago.
But Flagg is assured his business, launched more than three decades ago with wife Mary Henrickson, will be in capable hands. “Operationally it will run without skipping a beat. People will not know that I’m gone,” he said.
Flagg didn’t gain that confidence overnight. Rather, it’s a product of the 62-year-old business owner’s concerted effort, begun 10 years ago, to build a trusted bench of management talent from which to draw QBP’s next leader upon his retirement.
“The way I began to work on that is to give more and successive responsibilities and accountabilities in multiple areas of the company and give these people the leadership and management opportunity to really shine—or not to shine, as the case may be,” he said. “It’s a slow process; it isn’t designed to go quick. But I have more than one candidate management-wise within the company who could be effective in an overall leadership role.”
(Although Flagg and Henrickson have two daughters—one of whom, Lauren Flagg Taggart, works for QBP in copywriting and brand management—neither is in line to take the reins of the family business.)
Whoever rises up to the leadership role—likely in five to 10 years, according to Flagg—will have big shoes to fill. QBP is that rare breed of business where company and leader are widely viewed as one and the same. Think Steve Jobs and Apple; Jack Welch and GE; Phil Knight and Nike. Naturally, this presents a difficult challenge in planning for who will be the next face of the company.
But at QBP, succession is additionally complicated by the company’s distinctive culture, one strongly steeped in a spirit of democracy, personal accountability, community involvement, bicycle advocacy, environmental responsibility and service to the IBD—principles that, to Flagg, cannot be compromised for the sake of the almighty dollar.
“When you get into really tough business situations, if you just go for the answer that enhances the bottom line, then maybe you have less of a leadership role than a technician role at QBP. Because maybe you’ll need someone above you to guide you on the values side,” Flagg said.
It’s not an instant fit for everyone, he admits.
“We have slightly more of democratic management style than other companies. What I’ve learned is that when I bring people in from the Best Buys or the Targets or wherever, there is a bit of cultural shock going on, so it takes a while to learn the particular system and style that we have—five to 10 years to be in the running,” Flagg said.
That’s why the next leader must be a longtime insider who is well versed in the culture, and committed to preserving it.
In tandem with stepping away from day-to-day operational duties, 10 years ago Flagg also began the process of transferring company stock away from himself and Henrickson and into a family trust. In addition, 15 QBP employees currently own stock. In coming years, they will be allowed to deepen their holdings, and a limited number of employees will also have the opportunity to acquire shares.
“Ultimately I will produce a sort of board of directors of people with voting stock and create a structure that could even incorporate some family,” Flagg said.
Some of that board is also likely to come from QBP’s current steering team, a group of eight experienced executives who help drive company strategy, after those members retire. All this would help ensure preservation of the company’s closely held values in the longer term.
But for now, Flagg continues to groom potential successors.
“My next goal will be to make sure the people in the running have a lot of industry recognition and exposure. I think there are a lot of people out there who see Quality Bicycle Products and Steve Flagg as one entity, and I do need to change that. So these people need more exposure, more meet-and-greet opportunities. That’s something we’ve begun to make a conscious effort on to get more engaged with our customers,” he said.
Asked if he finds it difficult to detach from a successful business he has built from the ground up over 30 years, Flagg strikes a pragmatic tone.
“From day one, it really is about your unfortunate demise someday. So you have to look at death as a reality. And to some extent so is retirement a reality. That, at times psychologically, has been a bit of challenge for me. But over time, it has become quite easy for me to talk about it because I’m still engaged in the planning of it and the long-term vision.
“I think Quality is already a stronger company not to have me involved at all in any operations,” he added. “Quality is a stronger company because so many people are good and talented, and on the strategic side of things. It really isn’t just me anymore, and that’s what you want to see a company turn into over time if you want it to continue to grow. It’s got to be less dependent on one person.”