Succession: A Difficult Decision

Extract from Breakthrough Business Simplicity Chapter 8

It may be that a group of people, Board of Directors, Board of Directors, Sons, the Family are the "someones" who take the lead. Although, "two heads are better than one" and "collective intelligence" is a real thing, a group of people cannot take the vacant role of the Source of initiative. It must always be a person. How do you know who?

It is the person we turn to implicitly or explicitly, directly or indirectly, to hear their opinion before voting or ourselves to give our opinion. That person is the successor. It is the one who is ready, because it has been prepared intentionally or unintentionally by the one who has just left us. It is the firstborn daughter or son many times. He is the one who has been closest to him. It may be that he does not want to fill the role, but he is the one to whom we hand over the baton so that he does not remain on the ground. If she or he does not pick it up, we must give it to him or her and declare it. He has no choice, at least for the moment.

If there is more than one brother or sister involved in the company. What do we do? Well, to ask who wants it, but not because of the power and money, but because it connects with the vision of the one who left, and intuits the next step. The role of source is given, but it is also taken (and if you don't want to, it is transferred).

If there are co-founders in the organization, the same question is asked, and the same intention and connection is clarified. Who wants to take the baton? Why do you want to take it? What do you want to take it for?

The process requires a work of authentic introspective reflection. It is to connect with our reasons, intentions and visions. We must not project what is not. We should not take what we do not have to take. It is not the time to "do what I have always wanted to do", it is to continue with the original vision, but knowing that we will make adjustments based on our style, life experience and visions of what can be.

If the inevitable and necessary succession is not achieved? Well, it is time to make it survive with the structures and processes already in operation; or it is time to close the initiative (not the company forcibly) to make room for something new.

The businessman died unexpectedly. The founder seems to have never passed the baton to the next generation. The wise sea dog never wanted to let go of the helm. What happens when a founder leaves without having gone through a succession process? A vacuum is created.  That void is filled by something, someone or someone.

The circumstances, context and history of the initiative will define "the something" that will fill the void. If in general the culture created by the founder is good, the uncertainty will be intense, but the collective will know how to overcome it so that someone takes the helm under the role of the successor. Still, there will be work to be done to connect with the vision and feel that this handover has been made and is now recognized. On the other hand, if the culture or conditions are competitive, conflictive or adverse, a power struggle will be created. A low intensity but exhausting struggle over time, or a fulminant violence that will put the entire initiative at risk.

The next steps is about discusses the complexities and challenges of succession planning in a business context, particularly when a founder dies without a clear succession plan.

  • The Succession Void: When a founder departs without having established a succession plan, it creates a vacuum that must be filled by someone or something, leading to either a smooth transition or a power struggle depending on the prevailing culture

  • Identifying the Successor: The successor is usually the person whom others naturally turn to for guidance, often the firstborn child or someone closely aligned with the founder's vision, even if they are initially reluctant to take on the role.

  • Handling Multiple Potential Successors: In cases where multiple siblings or co-founders are involved, it is essential to determine who genuinely connects with the founder's vision and is willing to lead, rather than who seeks power or financial gain

  • Reflective Process: The succession process requires deep introspection to ensure the chosen successor aligns with the founder's original vision, while also incorporating their unique style and experiences.

  • Have you ever felt worried when a key employee announced retirement? If so, chances are you didn’t have a succession plan in place. It pays to remember that no one is irreplaceable, and a smooth transition with succession planning keeps the business going strong. 

    Succession planning is the proactive process of identifying, developing, and preparing talented employees to fill key positions within an organization in the future. 

    It goes beyond simply finding replacements; it’s about cultivating a pipeline of future leaders with the skills, experience, and knowledge required to maintain business continuity and drive the organization forward.

    A strong succession plan offers numerous benefits for organizations: It minimizes disruption caused by employee departures, fosters employee engagement and growth, and ensures institutional knowledge is retained. 

    By planning for the future, you also protect your company’s stability and pave the way for continued success.

    This post dives deep practical strategies to develop a winning succession plan

    What Is Succession Planning?

    Succession planning is a strategic process within an organization that ensures a smooth transition when key employees leave their positions. It focuses on identifying and developing high-potential individuals to fill these critical roles in the future.

    It’s not just about filling empty chairs; it’s about building a bench of strong leaders to keep your company growing.

    Practical applications of succession planning

    A well-oiled succession management plan can

    • Preserve organizational knowledge: When senior folks transition out, their valuable expertise stays within the organization, ensuring a smooth knowledge transfer. A good example is the plan that IBM implemented during the 1980s when the personal computer (PC) revolution started disrupting its mainframe business

    • Boost morale: Employees benefit from a clear path to career advancement. Just as tech giants with well-defined promotion structures keep their talent motivated, a robust succession plan provides clarity and encourages growth

    • Avoid scrambling: No more panicking when someone leaves unexpectedly. With a succession plan in place, qualified individuals are ready to step into key roles, much like when a company promotes a strong internal candidate to fill a CEO vacancy

    5 levels of succession planning

    Succession planning can apply to various organizational levels, from frontline managerial roles to the C-Suite. 

    Imagine your company as a pyramid. At the top, you’ve got the CEO and the C-Suite—the strategic masterminds. However, a strong organization needs a solid foundation, too, with capable leaders at every level.

    That’s where these five levels of succession planning come in:

    • Level 1—Frontline managers: These are the team leads, the first line of leadership, who directly impact day-to-day operations. Successful succession planning here ensures a smooth handover when a manager moves on, minimizing disruption for the team

    • Level 2—Mid-level managers: These oversee project management as a bridge between frontline managers and senior leadership. Identifying high-potential individuals at this level allows you to groom future department heads

    • Level 3—Senior management: This level includes department heads and directors who set departmental goals and oversee line management functions. Succession planning here focuses on developing future executives with the broader vision needed to lead entire divisions

    • Level 4—C-Suite: This is the executive team responsible for the company’s overall direction, goal setting, and success. Succession planning at this level involves identifying and nurturing potential CEOs and other top leaders

    • Level 5—Board of Directors: The board provides guidance and oversight to the C-Suite and isn’t directly involved in day-to-day operations. Succession planning for the board ensures the presence of qualified directors with diverse perspectives to guide the leadership

    Think of these levels as building blocks. A strong plan at each level ensures a smooth leadership transition across your organization, keeping your company stable and thriving for years.

    The Benefits of Effective Succession Planning

    Imagine you’re a tech company that just launched a revolutionary new product. Suddenly, your lead product manager announces they’re taking a dream job elsewhere. 

    Without a succession plan, all that product knowledge and launch momentum could go with them.

    Effective succession planning helps you avoid such situations. Here’s how it benefits your company:

    1. Ensures continuity

    A good succession plan enables a smooth handover when key employees move on. You identify a talent pipeline of individuals and prepare them to step up, minimizing disruption and maintaining a sense of normalcy for the team. 

    This is similar to what happened at beverage giant PepsiCo when CEO Indra Nooyi announced her retirement. A clear succession plan with an identified potential successor ensured a smooth transition and maintained investor confidence.

    2. Prevents loss of knowledge 

    Institutional knowledge is a gold mine for any organization. Effective succession planning process involves knowledge transfer from senior employees to their identified successors. 

    This ensures valuable experience and expertise stay within the company, even with staff turnover. Jack Welch, former CEO of GE, was known for his rigorous succession planning process, which contributed greatly to GE’s long-term success.

    Potential drawbacks and solutions

    While it’s a powerful tool, succession planning has challenges.

    • Internal bias: Sometimes, companies overlook talented external candidates in favor of internal hires. To avoid this, implement a transparent selection process that focuses on skills and experience, not just familiarity

    • Cost of development: Training and development for potential successors can be expensive. However, consider the long-term costs of lost productivity, failed projects, and high recruitment fees when a key position falls vacant without warning

    By acknowledging these drawbacks and implementing solutions, you can ensure your succession plan is a valuable asset for your company’s future.

    Common Challenges in Succession Planning

    So, you’ve decided to implement a succession plan fantastic! But like any good plan, it’s important to anticipate potential roadblocks. Here are a few common challenges to watch out for:

    1. Identifying the right people

    Finding the right talent to fill future roles can be tricky. Maybe your competitor, a retail giant, just promoted many young leaders; it can be tempting to follow suit. 

    But remember, every company has unique needs. The key is identifying individuals with the skills, experience, and cultural fit for your specific roles and goals.

    2. Keeping up with change

    The world of business operations moves fast. What was a perfect fit for a future leader five years ago might not be ideal today.  

    Think about how video rental chain Blockbuster likely had a great succession plan for store managers until the entire market shifted to streaming services.

    Regularly review your plan and adjust based on industry changes and your company’s evolving needs.

    3. Getting buy-in from all levels

    Imagine a scenario where upper management pushes a succession plan without employee input. Morale might plummet, and talented individuals could leave for companies with clearer paths to advancement.  

    The solution? Open communication! Involve employees in the process, explain the program’s benefits, and encourage them to express their career aspirations. When everyone’s on the same page, your succession plan has better chances of success.

    The Role of HR in Succession Planning

    So, you’ve decided to build a future leadership pipeline for your company. At this point, Human Resources (HR) will guide you through the process and partner with you in creating a successful succession plan.

    A strong HR department brings a wealth of expertise to the table. They understand the organization’s culture, talent development needs, and future goals.  

    By partnering with HR, you can ensure your succession plan is not just a theoretical exercise but a practical roadmap for building a future-proof leadership team for your company. HR templates are also a great way to optimize HR productivity when succession planning and streamline the process from start to finish. 

    1. Finding the right talent

    With a robust HR program, companies can identify promising employees to fill key positions early on. 

    As such, HR software plays a central role in helping HR managers identify, nurture, and develop future leaders. It can analyze performance data to pinpoint high-potential employees and utilize talent management tools to track their development.  

    By implementing well-thought-out strategies to achieve HR goals, HR can ensure a pool of talented individuals ready to step up when needed.

    2. Investing in people

    But finding talent is just the first step. HR also plays a crucial role in employee retention. 

    They can develop leadership development programs to equip future leaders with the necessary skills and work ethic and create clear career paths that motivate employees to stay and grow within the company.  

    Think about how pharmaceutical giant Merck collaborated with Wharton to strengthen its succession funnel. This ensured a steady flow of qualified leaders and boosted employee morale and engagement.

    3. Shaping company culture

    HR fosters a culture of growth, engagement, and professional development. HR attracts and retains top talent by promoting career growth and improving job prospects.

    4. Ensuring continuity

    Succession planning ensures business continuity by proactively addressing talent gaps. HR minimizes disruptions caused by leadership transitions through effective planning.

    5. Eliminating risks

    HR helps build a strong bench of leaders, reducing risks associated with leadership changes. Internal promotions based on HR’s assessment lead to better-informed hiring decisions.

    6. Cultivating a leadership pipeline

    HR ensures a pipeline of future leaders ready to step into critical roles. Effective succession planning enhances organizational agility and adaptability.

    7. Retaining employees

    HR retains top talent by valuing employee growth and career progression. A solid succession planning framework motivates employees with clear paths for advancement.oes here

By Guillermo Reyes & Claus Eckerman