Time for that grim moment. Every now and again it happens. An executive is done, time to move on. How will this affect business? Can a new person keep up the same corporate spirit? Should it even be kept or is it time for renewal? A solid succession planning will ease this transition and work in favor of boards, shareholders, and companies.
The process of having an executive leave is happening in boardrooms all over the world, all the time. To have a plan is, to say the least, important. Safe to even say that succession planning is one of a corporate board’s most vital oversight responsibilities.
Many boardroom executives agree on this. But still, it is not uncommon that boards stand with no options for new C-suite executives. Some companies even rely on an “ease-out”-period for up to three years to get out with the old and in with the new. So, what if there is an emergency succession in need? A company can suffer major losses if it is not governed appropriately.
Growth in line with succession
Seeking new leadership can be tricky, especially if the board already has the perfect composition. But when it is time, the importance lies in staying on top of maintaining a stable company. Furthermore, when planned and executed in a thoughtful way, a succession of executives can enable corporations to find new opportunities for growth, improve the development of senior management and their strategic needs, and ultimately ensure the continued drive of the company.
An article by Forbes explains that CEO turnover at many companies averages about once every three years. This number is slightly more sustainable within other executive roles, but it is still a present issue for boards. Succession planning is a way of having the right people with the right skills in the right place at the right time. That, if something, can be complicated. It is, however, also something that plenty of shareholders find a pressing issue.
Failing to prepare, is preparing to fail
As written in an article on the site Ethical Boardrooms, a regularly reviewed, timely, transparent, and structured succession plan is essential for success. The cost of a poor succession process can be damaging to a company’s financial stability and reputation.
Though, a smooth process requires an absolute focus from the board members, and should be considered a top priority on the agenda!
Succession planning is like creating a safety net, protecting the board from critical leadership gaps. As the board, first and foremost, has a fiduciary duty to stay objective while considering what is best for the shareholders and the company, it should be a number 1 priority to keep the business stable.
effective succession planning – stay on your toes
There is probably nothing like an ideal process when it comes to succession. As with most things, everyone has their own way of making it work. As for pointers on how to think in order to stay on your toes and be effective in planning for tomorrow’s succession, here are a few:
- Have a “succession culture”
Keep a culture where the importance of a demanding succession process is considered the backbone of your board. This will enable one to start thinking about a successor from the first day of a new executive, without there being momentum about it. A type of succession culture that allows for transparency will also benefit shareholder communication.
- Focus effort internally and map it out
A thought to keep in mind is that mentoring employees and creating a succession map, even on lower levels, within a company can make for great next-generation leaders. They will be groomed and taught the knowledge of where the company is going, where it has been, the core principles, attitude, skills, experience, and personality necessary to prosper in an executive role.
- Always keep an eye open, not to target individuals
It never hurts to keep a good network. And at that, one should keep an open mind. Looking at the impact of broad trends can help find the type of successor that is necessary. But rather than targeting an individual, aim for future necessary skill. Focuses could include how businesses will be affected by challenges such as continuing globalization, the needs of investors, or the risks and opportunities brought by a changing digital climate.
- Ensure there is an emergency succession plan
In order to have a smooth transition, having an emergency plan until the long-term solution can be put in place is necessary. For example, having a non-executive board member/senior management, who understands the tasks and importance of an executive role, be ready to step in and maintain stability can be a decent emergency plan.
In a fast business world, young blood can be an advantage
There are many things to consider when planning for succession, such as determine which skills are lacking on the board. Therefore, it is crucial not to overlook the younger candidates.
The current business environment requires boards to manage challenges emerging from rapidly evolving issues including cybersecurity, sustainable development, and technology. Responding to these matters has become something businesses must address daily. A lack of proper skills to handle these issues can be disastrous to an organization. Therefore, the integration of young directors in the boardroom should be considered a priority.