Succession Planning: How I Almost Turned My Company Over to the Wrong Guy

By Randy Cohen, CEO, Ticketcity, Austin, Texas
I never wanted to retire from Ticketcity, the ticket resale business I started when I was a senior at the University of Texas. But after 25 years of doing something, you want to try other things. I knew I wanted to do a half Ironman competition, and training for that takes time. I also wanted to write a children's book. And when it comes to things like information technology and social networking -- that's not my expertise. To be honest, I'm an old dog and I didn't want to learn new tricks. So around 2006 I started thinking about bringing in a new CEO.

That year I ran an ad in Sports Business Journal for what I described as a top position at a growing sports company. I talked to a number of candidates by phone and flew several to our Austin offices in late 2006 and early 2007. At that time I had full intention of handing over control of the company to the person I hired.

The near miss
One of the people we interviewed was an executive with Comcast. I thought he was terrific. He had a financial and legal background, and he had all the right connections in the sports industry. I offered him the job in April.

It was my first time hiring a high-level executive from outside the company, so I let him draw up the contract. I wouldn't do that again -- I would write up my own document and then make changes from there. The deal was going to be very expensive. He wanted $150,000 in a flat payment toward relocation, $350,000 base salary and a guaranteed bonus of 40% of his base salary in the first year. He wanted a five-year employment agreement. That was a big deal, and I didn't like it. My feeling is if you do a good job you keep the position.

He also wanted 10% of the company's equity over three years. My feeling was you don't get to just come in and own 10% of a company where you haven't built anything yet. And he wanted the corner office -- my office. He worried that if I still had it it would undermine his authority. I understand what he was thinking -- but moving out of my office? That felt a little weird.

Negotiations started to break down toward the end of May. By June we called it off.

Culture clash
I was starting to think that maybe this new hire would need to earn his or her stripes first, not move right into the CEO chair. So I was thinking I'd bring someone in as chief operating officer. I have a buddy in Austin who is a top headhunter. So he sent me a few candidates, but they just didn't work. I would ask whether they played sports or loved sports -- something that the vast majority of our 40 employees share. These guys just weren't showing me that passion.

We are a hip, rah-rah kind of company -- my title is chief energizing officer. I had some candidates for the job who had gone to the Wharton School or had been with McKinsey. I started to wonder, how was the culture going to change with a new guy coming in? And how was I was going to feel being part of a company that no longer reflected my culture?

The perfect fit
Zach Anderson was VP of marketing and, at the time, one of the top guys on my management team. He started as an intern back in 1993 and had led the effort to build online order-taking back in 1998. He had no computer background, but he rolled up his sleeves and ended up essentially acting as chief technology officer. And he was managing a $1 million-plus ad budget.

Around April of 2008 he put his hat in the ring and told me he'd be a great COO. And I started to think that in fact he had earned the position. In June of that year I gave him the job.

He really felt more powerful in the new position and raised his game. I saw him take on a leadership role in management meetings. When the recession hit, times were tough. My top people -- including Zach -- took pay cuts. And we had to lay off a few people.

Since then, Zach has developed a global roadmap that lays out what we need to do in both marketing and IT over the next three and five years. And he is helping build more community on our site, including striking a deal with Bazaarvoice to add reviews to our website. He's also been instrumental in striking sponsorship deals with college football teams from schools like Baylor University, Rice University, Vanderbilt University and Oklahoma State University, as well as the San Francisco 49ers and the St. Louis Rams.

Thanks in part to his leadership, we reached $31 million in revenues last year. If he continues to show he's got what it takes he'll have the chance to become CEO sooner rather than later. When that happens, I'll move up to be chairman of the company.

Finding a successor was one of the toughest decisions I ever had to make. But after a few years -- and a lot of stressful days -- I ended up making the right call. Sometimes the most amazing things are right in front of you.

When Randy Cohen is not energizing the troops at Ticketcity, he's training for triathlons--he completed his first last year. In 2009, he wrote a children's book, "DD and Daddy's Big Night Out."

-- As told to Amy Barrett

Resources

• Get tips on how to hire a CEO for your startup.
• Gain insight on what works and what doesn't in recruiting outsiders.
• Understand why it's critical to match outside hires with your corporate culture.