Thanks to the memes inspired by HBO’s “Succession,” you don’t have to watch the popular show to know about the fictional Logan Roy, CEO of a sprawling family business rife with dysfunction. This unforgettable TV character views the question of who will succeed him at the company helm as a mind game, not a decision requiring strategy. Private equity-backed firms don’t have the luxury of being so cavalier about succession planning.
It’s no secret that founder CEOs and/or their legacy team members aren’t always up to the task of scaling companies according to a PE investment strategy. Even if capable, many plan to eventually exit the organization at a recapitalization. Who leads the company and its critical functions then or when more abrupt departures occur? In my experience, organizations that have both proactive and contingency succession plans in place never struggle to answer these fraught questions.
Proactive Succession Planning Affords a Long and Healthy Company Life
The first episode of “Succession” hooked me and scores of other loyal fans as we watched a family business thrust into reactive succession mode after Logan shocks his children by deciding not to retire as previously planned. Hours later, he suffers a debilitating stroke. With company control in limbo, the infighting hits full tilt, leaving the business without a consensus leader. The ensuing chaos makes for great entertainment but not for company stability, not to mention organizational longevity.
Real-world companies can avoid such drama with proactive succession planning. This ongoing strategic initiative continuously prepares an organization to smoothly navigate and fill vacancies that occur in crucial business positions without jeopardizing company continuity or its short- or long-term viability.
There are two sides to proactive succession planning. One is organizational awareness that critical company executives, senior leaders, and key mid-level managers will leave their posts one day. This may seem intuitive since everyone retires at some point, but proactive succession planning consciously and deliberately recognizes this inevitability. The other, equally important side involves advance planning for who will succeed these VIPs when they eventually retire or resign.
Seven Keys to Building a Proactive Succession Plan
Not long after a PE firm acquires a business, I recommend that it collaborates with legacy executives to implement proactive succession planning using these seven steps, which ensure the initiative is comprehensive and sustainable for the long haul:
- Identify roles that require a succession plan: This typically should include all C-suite executive seats, their direct reports’ positions, and other senior and, even, mid-level leadership roles that perform a function that is critical to business success.
- Estimate runways for the current people in these critical roles: Gauge how long you think they will stay in their jobs, considering things like who’s nearing retirement, who’s on the path to being promoted internally, and who’s approaching a career juncture that might lead them to a different organization.
- Document the responsibilities of all critical roles: Don’t assume you know what any of these roles fully entail by their title or relying on existing job descriptions. Starting with the positions whose current occupants have the shortest runways, confirm the scope and detail of their role. This ensures you have an accurate picture of the skillset required for success in it.
- Identify possible internal successors: Assess the talent on hand, looking for natural successors for these critical roles. Evaluate their current skillsets to identify any significant gaps and make a plan for overcoming such weaknesses while also honing their emotional intelligence, a key leadership differentiator.
- Look for high potential employees: A deep leadership bench requires more than one tier. Scouting your ranks for high potentials helps you build an extensive leadership pipeline among the next generation of talent that is most likely to succeed in management positions and ultimately in executives roles.
- Invest in training: Once your up-and-comers are identified, map out career paths that will give them the cross-functional experience and exposure they need, along with opportunities for formal training and informal skill development. The latter can be achieved through mentors, job shadowing, and participation in special projects and problem-solving tasks. In addition to preparing your high potentials to succeed as tomorrow’s leaders, this commitment to career development ensures you don’t lose them to other companies offering such opportunities.
- Be selective with external hires: When senior and mid-level management vacancies can’t be filled by internal candidates, seek and select external ones who further boost your leadership pipeline.
Don’t Forget about Contingency Succession Planning
Despite the best laid plans, unexpected leadership departures still occur for all sorts of reasons, such as a sudden death or medical crisis like Logan Roy’s stroke. In such transitions where a successor hasn’t been previously identified or isn’t quite ready, companies need a contingency succession plan that includes predetermined strategies like the ones below to help limit the damage and maintain critical functions in the interim:
- Stop-gap plans for every C-suite leader: Maintain a current list of capable direct reports who could jointly manage an executive’s responsibilities in the event of their sudden departure.
- Interim executive engagements: In case the above collective can’t meet a particular moment of leadership transition, have a retained search firm on standby to quickly find an interim executive who can immediately step in and smoothly maintain forward progress until a permanent successor is hired.
- Continuous hire-ready mode: For all C-suite executives, senior leaders, and mid-level managers, keep job descriptions current by reviewing them annually to ensure you’re always prepared to launch an external search without delay.
A contingency succession plan can also function as a failsafe while getting your proactive one up and running.
You’re Not Alone
Management mayhem and strife are only fun to watch in fiction. In the real world, it’s worth the time and effort to focus on proactive and contingency succession planning. It ensures everyone from your board, employees, and customers to potential investors and the general market remains confident in your company during periods of leadership transition because calm and continuity prevail.
At Focus Search Partners, we always support your company’s succession planning. Every time we execute a search for an executive, senior VP, or VP for our clients, we carefully consider candidates’ functional skills and their potential runway in order to present professionals who align with where your company is headed, not just where it is today.
Need to expand your leadership pipeline to ensure your succession planning is paving the way for your company’s future? Contact Focus Search Partners today.
By Alesha Herbert, Managing Director at Focus Search Partners