When is the best time to begin planning for succession; today and yesterday. Why the rush? Succession planning is not only of critical importance, it can be a long process when it is done correctly.
There are several highly challenging steps in the succession planning process. Few, if any, can be done quickly, and part of the process needs to be regularly redone. The good news is succession planning does not need to be costly, although it will occupy a portion of senior management’s time.
Effective succession planning starts by defining the ideal capabilities and talents of the CEO or any other position to be filled. The resulting portrait of a desired candidate will not necessarily look like the current CEO, thanks to the changing requirements of evolving industries, markets, competitors, products and other factors. This is an element of succession planning that should be routinely revisited.
Once the board has decided what it wants in a successor, selection begins. This step should not begin and end by simply anointing the oldest son. The most qualified and experienced candidates should be considered. All heirs, including daughters, nephews, nieces, and non-family candidates should be in the mix. Business leadership skills are not genetic and do not necessarily pass from one generation to the next. Be open to finding talent in other ways.
Preparing the candidate can take years. Successors have to be exposed to corporate and family culture, as well as, job requirements. They should be given time to assimilate. They’ll need to accept and own the board’s vision for the company and their role. Candidates have to be educated, formally, and on-the-job. They will be required to perform in a variety of challenges with escalating difficulty to gain confidence and to learn. Projects, perhaps requiring months or years, must be completed and evaluated. Ideally, candidates will work for significant periods of time at jobs outside the family firm and develop at least budding careers that don’t depend on family ties.
Finally, the time arrives to transition the new leader or leaders into place. In a perfect world, the date can be scheduled to conform to the current leaders’ retirement vision. In this world, it may arrive unexpectedly and inconveniently. For instance, sudden illness may make the current leader unable or unwilling to continue without warning. Having no viable, well-prepared succession candidate in this circumstance can be profoundly disrupting and potentially the demise of the family business.
Another common scenario is the current leader proves unwilling to step down when the scheduled date arrives. This risk can also be moderated by planning. The more advance preparation that goes into a transition, the easier it will be for a leader to relinquish control when the time comes.
Succession planning, unfortunately, tends to be given little attention until the need for succession is rapidly approaching or even at hand. It can be a serious mistake to assume that all is well and the oldest son or some other natural-seeming candidate will be able to slip easily into leadership at the critical juncture. Planning ahead and starting to work on succession today is not just sensible. It’s essential.