Succeeding at Succession: Bring in Humanity, Build Relationships, Have a Process
Change is the law of life. And those who look only to the past or the present are certain to miss the future. ―John F. Kennedy
Recently we called the CEO of a mid-sized company who had been in his position for a while. He had a recent health scare but he wasn’t dwelling on himself. When asked, “how is business”, the CEO responded, “I don’t know, I quit.” This story often gets a “rise” because we have such high standards for our CEOs and boards. We do not expect human idiosyncrasies from those with such serious jobs.
We worked with a retiring hospital system CEO who did “victory lap” meetings with departments to introduce the new successor. The CEO wanted to transition but found himself fighting the change and undermining his successor, unaware of his own behavior. We also worked with a board who couldn’t wait for a founder CEO to say, “I am really leaving.” While the rest of the management team loved this CEO, they were also ready for a change. In these cases, identifying and respecting the human needs of the key parties minimized negative interactions and ensured continuity without a dip in results.
Succession — Opportunities and Pitfalls
Succession is not an event; it is a process subject to human dynamics. It is also a time of great opportunity that can be distorted and dramatized by competition, poor execution or acting out. We have seen how working relationships can lead to great (and sometimes not so great) decisions. Watch-out for early problems signs:
Competition or unease in the top team with lack of collaboration cascading into the organization that can lead to a loss of talent and decreased morale
Declines in working relationships between boards and CEOs
Subtle undermining of the successor
Relationships play a key role in succession and can lead to great (and sometimes not so great) decisions. A decision process that builds relationships supports success of the organization for the long run. Such a process will also capture the collective intelligence of those tasked with the decision and lay the groundwork for a smooth transition.
CEOs and top leaders have spent a full career honing skills, developing vision and executing. Stepping back is a big transition. Sometimes the CEO has an agenda that consciously or unconsciously sabotages the process. Many times, the Board, and top team, have agendas, spoken and unspoken. None of this is bad, but a better decision can be had with open, mature and trusting dialog.
The key is to pay attention to human needs, relationships and the decision. It may help to engage other stakeholders, for example a few trusted members of the management team or an outside advisor. At a minimum, we recommend establishing a dedicated board/CEO team that:
Works together honestly and transparently. Committed to discussing tough topics, pointing out potential problems and maintaining effective relationships
Develops a future-oriented job profile that clearly articulates the metrics, outputs, leadership capabilities and cultural attributes that a successor will need to be successful
Develops a consistent message about the change – what is and is not said to other stakeholders
Systematically assesses potential successors against the job profile. Understanding the natural strengths, development gaps, blind spots, and challenges that could propel or inhibit success
Establishes an on-boarding and development plan based on the assessment and collective wisdom that provides the successor with opportunities to gain skills as well as legitimacy and support from stakeholders
Pulling It Together
Founder-led, family, privately held and small/mid-sized businesses face unique organizational dynamics at the time of succession. In these companies the change of leadership is hard for several reasons. The CEO position is often broad due to founder mindset or the need to wear multiple hats. There often is no viable internal successor, since there are few multi-function GM positions that are training grounds for future CEOs. CEO tenure is longer, on average, so succession is more unusual. Despite the propensity for dynamics, we find these companies least likely to engage in a methodical relationship building process during times of succession.
Much of the research and theory of succession is for large conglomerate businesses. It is not relevant to other sorts of businesses. It is true that internal successors are more likely to succeed than external. Horseraces (where a few viable successors compete based on metrics) can drive performance during the succession process. It is better to develop pools of potential successors and groom them throughout a career. But, at the time of succession, most founder-led, privately held and small/mid -sizedcompanies do not benefit from these tactics.