There will be a time when an integral member of an organization decides to step down. Various reasons behind the decision can involve retirement, health reasons, or other unforeseen circumstances. Whatever the reason might be, one thing is for sure: the departure of a board member leaves a huge impact.
When a board member, executive, or CEO resigns, the organization can expect several changes. From establishing new rules, having different expectations to many adjustments as the remaining members endure the significant loss. A comprehensive board of directors must carry out succession planning to prepare organizations for such massive changes. Not only can succession planning keep the company afloat, but it also maintains the performance of the entire team.
Succession Planning: Why is it Vital?
Succession planning is among the best practices observed by board members and executives to ensure that organizations overcome any transition they may face. The sophisticated planning of board succession promotes resilience and ensures continued success.
Here are the key benefits to establishing a solid director’s succession planning:
Maintaining Quality Leadership
The members of the board of directors serve as the backbone of the organization. Board of Director members are the main reasons behind the success and profitability of the business. Thus, an organization gets crippled without them. Therefore, it is integral that organizations maintain the high performance of board members by expediting the recruitment of their successors shortly after a member steps down.
Not only does succession planning fill in board members that resigned, but it also maintains productivity within the organization. A clear sign that the executives need a new demographic is when board meetings become stagnant and bleak. Managing the board succession aims to yield growth inviting new members who bring a breath of fresh air. This new perspective can provide the team with fresh ideas that add value to the organization.
The foundation of the organization can get tested when it faces a severe threat or sudden change. When unprecedented circumstances such as a current CEO, executive director, or a board member stepping down or passing away arrive, companies need a succession plan to recover. These positions offer big shoes to fill, which businesses cannot accomplish on such short notice. For this reason, it is fundamental that organizations have a board succession plan prepared in case a sudden change of leadership is needed. This board reduces as much impact to the business as possible by preparing the firm with the adjustments they need to endure.
Best Practices for Board of Directors Succession Planning
Organizations need to observe the following practices to ensure that board succession is prepared for when a member steps down:
Maintaining a Diverse Board
One best practice of board succession planning is maintaining the diversity of its members. Organizations must carry out appointments of their members periodically to sustain quality performance and leadership. Having new board members opens doors for diverse perspectives while replacing incumbent directors who may no longer align with the company’s strategic direction and continuing plans. Additionally, this helps organizations stay afloat despite board members stepping down for their retirement. Diverse boards are less likely to fall prey to “group think” and are more likely to adopt innovative ways of thinking to address potential challenges and embrace new opportunities.
Involvement of Shareholders
It is fundamental for organizations to have their shareholders involved with the significant changes within the company. When provided with transparency, shareholders become aware of the board representatives behind the invested organization. Making board succession planning more inclusive would also promote consultations from key shareholders. Consultations of this nature are much more critical for businesses with “vocal” shareholders on their books. In this context, detailed, timely preparation and execution of shareholder consultations may help avoid animosity. Looping them in on the board selection process can also prevent substantial financial waste, likely at the shareholders’ cost.
Fair Selection Process
A significant portion of board member succession planning should go into maintaining fairness during the selection process. Executives must set a clear policy detailing the standards that can help them with their search. On top of that, it ensures consistency and rigor in choosing a member that has big shoes to fill.
The board members must create a profile of the candidate they are looking for, which involves skills, competencies, and other qualifications needed. More often than not, organizations look for individuals that are different from the board’s current composition. It helps them welcome new perspectives and addresses previous shortcomings. In addition, matching their candidate with their current and future needs can help them draft a concise job description for their vacancy.
Furthermore, many boards will hire independent, reputable recruitment consultants to find possible nominees after determining their needs and identifying the type of talent they require. While consultants may be beneficial to the process, they should not solely be in control. Although these consultants serve as the initial screeners that go through a vast pool of candidates, the board should take control of the process and ensure that interviews and other means thoroughly vet the shortlisted applicants.
Understanding their Long-term Goals
Before getting a new member involved within the organization, it is best to ensure that their plans align with the other mission of the organization. Unfortunately, there are circumstances when companies have a plethora of opportunities in-store for employees only to find out that the employee does not plan to be with the company for the long term. Therefore, it is integral to talk with the potential candidate for succession development regarding their career plans in the next five to ten years. If their objectives and goals do not involve working within the organization, it is best to turn them down early.
Keep in mind that succession planning entails more than just choosing a successor. It necessitates that businesses consider their long-term objectives, the people who can comply with that vision, and the significant training and expertise that successors need to accomplish those objectives.