Why Developing a Succession Process is Important?
Developing a succession process is paramount for the long-term viability and success of any organization. By systematically identifying and grooming potential successors for key leadership roles, businesses ensure continuity in leadership, mitigating the risks associated with unexpected departures and talent shortages. Moreover, succession planning fosters a culture of talent development and employee engagement, bolstering retention rates and organizational resilience. It facilitates the seamless transfer of institutional knowledge, aligns leadership with strategic objectives, and builds a robust pipeline of future leaders, enhancing organizational agility and stakeholder confidence. Ultimately, a well-executed succession process is instrumental in sustaining organizational performance, fostering innovation, and positioning the company for continued growth and success in a dynamic and competitive landscape.
Succession in family businesses is time of both crisis and opportunity. Succession is certainly a crisis in family businesses; only one third make it to the second generation. Successful families in business take advantage of this transition time as an opportunity to develop an objective process that creates an atmosphere of collaboration, lowers the emotionality in the system, and establishes benchmarks for the company, the board, as well as the management. As one of my clients said, as we drafted the succession plan, “I get it; it’s first about the process and then the people.” And, if the process is fair and transparent, the right people will be selected and the chances for buy-in by all are increased.
The following is an example of a succession process (As you review it, consider how your company is planning or has accomplished succession):
1. The board initiates the succession planning process.
2. The board will activate the Search Committee whose membership will represent the board, the family, the advisors, owners, and business management:
3. The Search Committee then implements the executive selection process, including the following:
a. Agreeing on key competencies and selection criteria for next leader
i. Experience
ii. Skills and abilities
iii. Competencies
iv. Motivationb. Selecting potential candidates
c. Candidates should not sit on the Search Committee
d. Interviewing candidates
e. Reviewing of data, including Leadership Assessments, candidate’s vision for business, and work history.
f. Organizing data and make recommendation to the Board or the nominating committee of the board.
4. The Board makes the final decision and plans for the support of the new CEO and resources for a smooth transition process.
Different leadership styles are appropriate for different stages of a company. Too often first generation family business leaders seek clones of themselves without considering what the company needs going forward. Leaders should be able to take the company where it needs to go and the choice of a leader should parallel a strategic initiative of the company, which answers the following:
- Where do we need to go in the next 5- 10 years?
- What kind of a leader can take us there?
- What are the important skill sets of our next leader or leaders?
- If we are objective, is the best leader for the company in the family or do we look outside the family?
- Who in the next generation has the skills of the best leader to take us where we need to go?
- What is our road map for the succession process?