Why You Should Plan Now for an Effective Leadership Transition
The time to start the succession planning process isn’t when you’re under the gun to find a new leader in a few months, or even weeks—it’s NOW, when you can take the time to be proactive, strategic and thorough. At minimum, this is a two year process, but having a longer term plan in place…3 to 5 years, is even more beneficial in an effective leadership transition.
I’ve found these six tips very helpful in guiding the succession planning process as you look for the right candidate:
- Forecast your company’s future
- Seek out Future-proof candidates.
- Vision: The Plan Within the Plan
- Trial Runs Make Smooth Transitions
- Bench Strength is a Forever Pursuit
- In the Loop = In the Game
One of the most difficult things a business owner will ever have to do is think about passing on their business to the next generation. In my travels on the succession planning keynote speaker circuit, I have found that this is especially true for business owners who started their companies, and built them from the ground up. After years of hard work, they’re at the peak of their powers, enjoying life at the top; the last thing they want to think about is the end of their reign!
However, time does march on, doesn’t it? This is one of the few things we can count on. So, take it from one who knows: Whether your departure is driven by a desire to travel the world, spend more time with your family or shift your business focus or something else entirely, you simply can’t start crafting your succession plan too soon.
1. Forecast Your Company’s Future
In order to identify a viable pool of potential successors for your business, you must first have an intimate understanding of where your company (and your industry) will be going over the next 3–5 years. What are your goals for growth and evolution? What obstacles do you expect to face? How are developing technology and marketplace trends likely to affect your operations? What do you know about the competitive landscape—and are you likely to acquire or be acquired in the near future?
Without knowing the answers to these questions, it will be incredibly difficult to predict the professional background, leadership skill set and personality traits your successor will need in order to successfully usher your business into its next era. That’s why, on the succession planning keynote speaker circuit, I always recommend that the first step in the succession planning process should always be to conduct a detailed business forecast analysis. Assume nothing…and question everything.
2. Seek Out Future-Proof Candidates
This is a fascinating time to be in the succession planning business. As a result of the COVID-19 pandemic, nearly every business spanning just about every industry has had to execute some kind of pivot. Many of these changes, even though they were suddenly forced into action by global necessity, will probably become status quo. Remote working is the best example of this; many businesses are now realizing they can be just as productive and profitable—if not more so—with employees who work flexible schedules from home.
So how does this global sea change affect your succession planning process? Simple: you’re no longer looking for the obvious choice, or the internal leadership candidate who merely mirrors some essential quality of your current CEO. Instead, you must seek out creative, entrepreneurial leaders—people who are wired to look beyond the forecasting you’ve done, and safeguard your enterprise against business challenges you haven’t yet imagined.
You may need to use an executive search firm to assist with this process. I did this when I hired a Managing Director for my car dealership business. We shared an office, so I got to know him and assess his capabilities before he assumed the role. This period of cohabitation (and low-key mentorship) also allowed him to gain a deeper understanding of the culture of our family business before taking charge of the day-to-day operations. This was an essential and very effective leadership transition tactic.
All that said, it’s still possible that your ideal candidate is already in the building! Do you have a leader who has consistently thought outside the box—thinking up new approaches to your business operations, or even creating brand new revenue streams? This is the kind of energy you’ll need at the helm for a smooth transition. Start with innovation, and you can’t go wrong.
3. Vision: The Plan Within the Plan
Once you have a short-list of candidates, it’s critical that you get a sense of their vision for your company over the next 5–10 years. At this point, you should have already gone through the exercise of putting your own forecast to paper—now, gather your Board of Directors and ask your candidates to present their vision to the group. This process will tell you whether or not your candidates have the foresight required to run the organization in the future.
When my own family business was in the midst of this process, we decided to look for an interim CEO to help bridge the gap between my father, who was forced to step down suddenly due to health reasons, and myself, who at the age of 26 was not quite seasoned enough to man the entire ship. At the time, our car dealership business was failing.
While all of the candidates showed us some version of the future, only one presented a short-term turnaround plan—PLUS a strategy to grow and sell the business over the next decade. This set Frank apart; not only did he become our interim CEO, he ultimately became a personal and professional mentor who would guide my entire career from that day on.
4. Trial Runs Make Smooth Transitions
It might seem obvious, but you’d be surprised by how many of my succession planning keynote speaker clients have made this mistake: don’t wait until you retire for your successor to take over some responsibility! I’ve found that it’s much better to have a gradual transition during which you relinquish the day-to-day responsibilities over time, allowing your successor to learn the details of running the business while also showcasing their capabilities. This will give you time to mentor them along the way, as well as identify any additional training and development that might be required to get them fully up to speed before you bow out.
After this trial period—I have found that a full year of side-by-side work is ideal—it is time for your successor to step into the role on a full-time basis. During their first year of solo leadership, it will be essential to have benchmarks by which to measure their success, including clear financial targets as well as other key performance indicators illustrating that they are on track for longer-term success. It’s critical that these KPIs are agreed upon by both incoming and outgoing leadership as well as your Board of Directors before the for an effective leadership transition to take place, so there is no ambiguity about what is expected of the incumbent.
5. Bench Strength is a Forever Pursuit
Just as your own succession planning strategy should include a deep bench, looking beyond the CEO role to cultivate successors for all of your key leadership roles, this idea should also be baked into your incoming CEO’s benchmarks. Make it mandatory for your new leader to work with all their direct reports to identify and develop long-term successors for their roles.
In my family’s car dealership business, I always told my managers that the biggest obstacle to future promotion was the lack of qualified successors for their jobs. This focused their attention on looking for people within their departments who had leadership potential. It also meant that they did not see these people as a threat to their existing job, but more as necessary facilitators to their own career progression! With this mindset, they were more likely to share important information with their successor and help to mentor them.
6. In the Loop = In the Game
If your successors are performing well and you have built up the necessary bench strength, it’s time to give them access to Board members—and to the sensitive information that is discussed at Board meetings. This will allow the successor to step up with full knowledge of where the organization is today and where the Board wants it to be in the future, as well as any specific strategic challenges or constraints that they should be aware of.
Not doing this is akin to asking your successor to fly blind. When I first became CEO, I had no idea how much money our family business was losing; this was a closely guarded secret between my Father and his CFO. While secrecy might have preserved my father’s pride, it did not serve the company well—it meant there was no sense of urgency around improving performance and getting the business back on a sound financial footing. Keep your successors in the loop, and you’ll set them up for success now and in the future.