Navigating succession. (not the TV series…) our take on what good looks like.
It’s a process not an event…
Succession planning is an essential part of any business’s effective governance. It’s a process that helps ensure the continuity of leadership and the stability of an organisation, no matter what challenges it might face. Leadership succession planning involves anticipating and preparing for changes in leadership by identifying potential successors who possess the skills and experience needed to lead a company successfully into the future.
We recently hosted a panel for the Institute of Directors (IoD) discussing both governance succession and CEO succession planning. This article is the first in a series of two blogs on succession discussing the importance of succession, giving experience insights from the panel, and provides guidance on how to set up a successful succession plan.
What does succession mean?
A business will transition through several stages on its growth journey, and a leader or independent director that has been appropriate for one part of the journey, may not be the best person for the organisation's next phase. A well-structured leadership succession plan at the governance and executive levels can help a business maintain continuity in its operations as current leaders leave, transition, or retire. It also ensures that the company’s future leadership is prepared to meet the challenges that come with running a future business, especially in turbulent times.
What is succession planning?
For business owners, succession planning involves identifying potential successors who possess the skills and experience needed to take on the role of leadership effectively. This involves assessing current employees for their suitability. Or recruiting for the potential to take on such roles and then developing them, as well as at the time of selection looking for potential candidates from outside the company.
Whilst this is a significant opportunity. It is a huge challenge for the leader stepping aside to create the space and opportunity for the successor to lead. They should accept that they will, and should, do it slightly differently. The new incumbent will bring something new to lift the game while still working to maintain the core purpose and the cultural alignment of the organisation.
If the successor isn't going to value add to the business’s journey then they might not be the right person. This is particularly so in family-owned businesses where there may not be a suitable family member capable of leading the business forward. In this case it is time to seek professional leadership to lead the business for future family generations.
When do you start?
A panel consensus was that the most common issue is people leave CEO succession planning too late in the game. People often don’t really appreciate how long it actually takes, panelist Kendall Langston added that “in his experience, it takes at least 3 years to do it well”, and it does require advanced planning and collaboration across all key stakeholders. He went on to add that “it is a massive opportunity that leaders need to confront and lead the way to ensure the business’s continued success under the new leadership”. Abby Foote also noted, "These conversations need to start early and they need to be open, honest, and transparent" This topic should be a regular conversation on the Board agenda which helps take emotion out of the process when it comes time.
Getting your ducks in a row to start succession.
Bruce Matheson’s mantra of “structure follows strategy” means that it is key to get the vision, company culture and strategy in place first. This then creates the centerpiece for the conversation around the need for identifying changes to the structure, business model and capabilities to take the business forward. Key to helping this transition occur in a relatively seamless way was to place an emphasis on clarity of direction, good governance, and delineation of key roles in the new structure. Similarly, Paul Dorrance noted, "Not a couple of days goes by in the business succession space that it doesn't come back to the clarity of purpose and the values of the organisation". He noted that often the shareholders agreements are outdated and that the CEO/Board need to understand key shareholder rights in the process. Organisations should look to seek external professional advisers for key junctures to help navigate the complex process.
This article was contributed by Greg Allnut MNZM, Partner