Secure the future of your business: Select the right successor
As hard as you’ve worked to build your business, wouldn’t it be tragic if it crumbled the moment you walk away?
Yet that’s precisely the risk many business leaders face by failing to maintain a clear and current succession plan. In a recent survey of small business owners, less than 30 percent had a written succession plan. The potential consequences of not having a well-considered plan for succession include:
- Jeopardizing business stability
- Upsetting key clients/customers
- Alienating and losing internal successor candidates to competitors
- Losing long-term financing options, if lenders perceive a continuity risk
- Naming a successor who lacks the qualities and credentials for the role
- Not realizing the full value of the business when exiting
You can help prevent any of the above by conceiving and maintaining a basic succession plan. It does not need to take considerable time. Consider the following five incremental steps.
Step 1: Engage key stakeholders, particularly the board
Too often, succession planning is led solely by the CEO or human resources. While the CEO and other employees have key roles in the process, ultimately, succession planning should be led by the board or key company leadership, which oversees company governance.
Ideally, the board and CEO should have an established level of trust to work together effectively on succession planning (if not, the company has other issues). The board and CEO can approach the plan as an ongoing process, informed and updated by the company’s strategic business plan and input from key executives.
Step 2: Think what and why, not who and when
The term “succession” often leads to narrow thinking focused on who and when, as in: “Who will our successor be, and when?” Instead, think broadly about the qualities the company will want and need in the future. Thus, the dialogue revolves around questions like: “What will our business look like in the future? What type of leader will we need to succeed in that future, and why?”
Step 3: Begin immediately
Succession planning should ideally start on the first day of the current CEO’s job. Instead, companies often wait too long, perhaps due to a belief that succession planning will somehow upset the current CEO. However, the reality is that no CEO is permanent.
By starting the process early and discussing succession regularly, the topic becomes part of the normal routine of an organization. It also allows board members to familiarize themselves with viable internal candidates.
Step 4: Support internal candidate development
There is no single, magical time when a CEO candidate is truly “ready” for the role. That’s why forward-looking organizations encourage internal succession candidates to gain as much executive-level development as possible, to help ensure they’re better prepared for the top role, if selected.
This is where the current CEO can play a vital role: by providing leadership development opportunities to potential successors, and knowing when to back off to give these candidates room to grow.
Step 5: Choose, and provide ongoing support
Selecting a new CEO is just one step. It’s also important to proactively ensure that the new CEO has the resources to succeed, such as by offering the CEO transition coaching counsel. Don’t assume a new CEO will ask for help.
The board or key leaders should also be sure the exiting CEO leaves on positive terms and is engaged as much as possible in the transition. A workplace adage: how you say goodbye to valued employees often says more about your culture than how you welcome them.
Count on us
During times of succession and transition, it’s important to have a steady source of external support. California Bank & Trust serves as a trusted consultant to businesses of all types. Please let us know how we can assist.