Why You Need an Executive Succession Plan

Leadership succession in modern business is a serious task. When done right it is carried out with a decisiveness similar to that of a royal family. Otherwise, the business and employees will likely be thrust into a vortex of confusion and uncertainty. Many companies seamlessly transition from one major leader to another, from mom-and-pop firms to companies with billion-dollar budgets. Others may have an owner who won’t face up to the fact that they probably won’t own the business forever or to identify who might be capable of carrying on the operation. 

It is inconsequential whether the position change is a deliberate one previously mandated or a crisis that arose quickly out of a need to augment the bottom line and get some fresh ideas. Business leadership succession is inevitable. To get the succession right, however, is a task that requires planning and a reliance on clear-headed thinking rather than emotion. 

Focus on a vision for the position and not on the person who will fill it. Many companies have struggled with this or ignored succession planning altogether, while some have done it brilliantly. Let’s look at some dos and don’ts that can make an impressive succession story. Before you jot down a list, there is one golden rule to live by when it comes to making a leadership succession plan: Business leaders and stakeholders should be open to change.

How to plan for an executive succession:

• Identify what you want

Companies will have a multitude of roles that may warrant a change. But it is up to the leadership and the stakeholders to identify what they want for the role and not who will fill it. Are you looking for a CEO, or is the CFO position in which the CEO is moonlighting what requires an urgent appointee? Matters like these will pop up in general meetings, and leadership might have to make a decision. For example, maybe the business necessitates a CEO with operations experience, or perhaps a CEO from the consulting side is preferable. Perhaps the successor CFO must hold a CPA degree. The candidate must qualify for the role as defined by the stakeholders, and that is the key thing to be considered by the decision-makers.

• Exhaust all options in the search

When you are on the hunt for an executive  who ticks every box, it is vital to exhaust all the options that are in front of you. Look within the organization, look outside of it, interview people and then meet others. Until there is no other alternative and the person upon whom you have zeroed in is the last person remaining, consider your options still open. If there is lingering doubt, hire a third party to help. Some staffing and head-hunting companies specialize in placing C-suite executives. They offer ample experience and their own checkpoints, which makes them a good option.

• Account for a handholding and transition period

This is by far one of the most important points when it comes to planning and executing a succession. It is critical that the person who is being replaced spend time with their successor so they can learn the ropes.  If the person who is to be replaced has already departed, this training can be done via the help of a team. The key is still to “handhold” the new person and allow them time to adjust. 

High-profile examples of two companies whose succession plans were diametrically opposed: 

The above points will help make executive transitions more efficient. But we can also learn from a few modern-day success stories, such as how Jeff Bezos was able to seamlessly step down from Amazon’s top leadership position. Bezos made sure his departure was announced well in advance, with ample time to both the new CEO, the company’s team and to the public at large. He also made sure his values were embedded in the company and with his successor, and that there were no major doubts and surprises when he eventually did step down. 

On the other end of the spectrum is the company Tata Group, which experienced a major debacle when Cyrus Mistry was named CEO for the 100-year-old-plus company in 2012. While Mistry had long been a board member, he reportedly lacked hands-on job experience and had little knowledge about Tata’s various businesses and the people running them. After an abysmal performance four years into the role, Mistry was replaced by former CEO Ratan Tata.

Recap: Succession planning is hard work, but the risk of not having a plam is too great. Many events can’t be predicted, so it is wise to be prepared. The process also spurs your business’ leaders to think proactively about the company’s future and whether there’s someone to lead in the future. Don’t cripple your next leader by leaving it to chance. Having a succession strategy ensures the departure won’t hurt operations and that successors know what to do once appointed.