Financial Poise
Management Succession Planning

How to Plan for Management Succession

Identify Your Business Objectives to Determine Management Succession Needs

One of the primary responsibilities of a Board of Directors is to provide management continuity. Emergencies tend to resolve themselves since decisions can’t wait. Proactive management succession planning is the hallmark of a well-run organization and is more demanding than just pondering who the next CEO will be.

The Business Strategy

It all starts with having a clear business strategy and then understanding the future leadership requirements. Then, work backwards to build the succession plan. If you don’t know where you are going, how do you know how to get there?

This chart maps out the overall process:

Business Objectives Drive Talent Needs

Understanding your future talent requirements means identifying the future business objectives and designing the organization to get there. From there you need to:

  • Consider the skills and experiences needed to achieve those goals. Success is usually determined by cultural fit, style, and experience.
  • Realize that filling positions is often a trade-off between ‘must haves’ and ‘wanna haves’. The pivot is typically made when you decide what you can and can’t live without.
  • Assess the current staff needs to include their interpersonal skills and cultural fit regardless of the past. Do they align with the business vision? Can you quantify past performance with data or is it just a collection of biased opinions? Were the past performance appraisals thorough and fair?
  • Understand that the Skill/Will matrix is a quick and simple tool to assess your current talent. Developed in the 1970s, it segments people by their expertise and their desire to be successful. Each quadrant requires different types of supervision and development.

Figuring Out What You Need

In your future organization, there are likely new positions to be created; new job descriptions need to be written and rated for compensation purposes. For your current staff, what development do they need to acquire the skills and experience to fill those roles? If you lack the internal talent needed to staff the future organization, then you need to go outside.

You need to complete a gap analysis once you’ve:

  1. Decided where you are headed;
  2. Discovered the skills and experiences leaders must possess to achieve your business objectives; and
  3. Evaluated your current staff.

The gap analysis should involve these questions:

  • What is the difference between what you need and what you have?
  • With development, can the internal candidates meet future expectations? If not, then you need to go outside to fill the gaps.

Management Succession Timelines

Transition timelines should be developed, in detail, since at this point, management succession tends to mean applying thorough project management skills. If you don’t identify the details, assign duties and deadlines, and track it religiously, time will slip and a smooth succession may not happen or happen on time.

Developing the timelines often means working backwards from an immovable deadline, such as a planned retirement. When does the candidate need to be in the new job and fully up to speed? How long will it take to train them and backfill their current position? How long will it take to recruit and onboard the backfilled positions? When do you have to start this chain of events?

Thoughtful Communication

It is important to start with an honest assessment of your business, its governance and yourself.

Dealing with potential conflicts early and directly, is usually best, as these things do not get better on their own.

Since this impacts people’s careers and livelihoods, thoughtful communication is critical. Who needs to know what and when, without creating a rumor mill? Certainly, the future leaders need to be brought along early. But people who are likely to be disappointed with the results need to be treated with dignity and respect.

Management succession is both a process and a project to be managed. It takes time and energy and should not be rushed. Give yourself enough time to figure it out and likely 3-5 years to execute.


[Editors’ Note: To learn more about this and related topics, you may want to attend the following webinars: Structuring and Planning the M&A Transaction 2020 and Business Breakups.]

©All Rights Reserved. June, 2021.  DailyDACTM, LLC d/b/a/ Financial PoiseTM

About Bruce Werner

Bruce Werner is the Managing Director of Kona Advisors LLC and served as an outside director on private company boards for the last three decades. Kona Advisors LLC provides advisory services to the owners, investors and CEOs of private and family-owned businesses. With deep experience in governance, succession planning, finance, strategy and management issues, Kona…

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