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 successionSeeking 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 failAs 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 toesThere 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”
- Focus effort internally and map it out
- Always keep an eye open, not to target individuals
- Ensure there is an emergency succession plan
In a fast business world, young blood can be an advantageThere 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.
published on 2018/07/03