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.
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:
Understanding your future talent requirements means identifying the future business objectives and designing the organization to get there. From there you need to:
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:
The gap analysis should involve these questions:
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?
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.
©All Rights Reserved. June, 2021. DailyDACTM, LLC d/b/a/ Financial PoiseTM
Bruce Werner is the Managing Director of Kona Advisors LLC, which provides advisory services to owners and investors of private and family-owned companies. With exceptional experience in finance, strategy, M&A, governance, and succession planning, Kona Advisors creates practical solutions to the most challenging corporate problems. Mr. Werner is an experienced Corporate Director, leading businesses through…
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