When more than one potential successor is identified, a new layer of complexity is added to the succession planning process. The consequences of naming one individual over another can cause severe damage to the business and must be managed with care. An owner should select the most qualified candidate and insulate the decision from their own feelings of loyalty, acceptance, and friendship. In many cases, an executive with the most tenure may feel that he or she is the right choice because it is “their turn”, not because they are the most qualified.
To do what is truly best for the firm, an owner must separate personal feelings from business issues when deciding upon a successor. To assist in this, the firm may appoint an outside, unrelated advisory board to consider various candidates, monitor progress, and keep the owner appraised of developments. Another option is the use of an impartial outside consultant (e.g., a business coach) in developing and monitoring management grooming and incentive compensation plans. A functioning Advisory Board can also assist with helping an owner separate personal from business issues, by acting as both a sounding board and a “checks and balances” referee.
Consolation Prize
Despite best efforts to the contrary, a successor candidate may feel deprived if not appointed. When this happens, it is important to quickly evaluate possible alternatives (e.g., elevated title, role, or responsibilities; increased compensation or synthetic stock) suitable for the disgruntled employee.
Success in the management succession process often hinges on keeping communication open and available to all stakeholders; honest communication and adequate feedback must also be provided to the successor(s). The management development program must be coordinated with all other elements of the succession plan (e.g., the share transfer program, the estate plan, or the retirement-plan timetable) to be responsive and successful.
Successor Vetting Considerations
It’s not enough to choose a suitable candidate when naming a successor. Instead, consider what you, the successor, and the company all need from each other in order to make the best decision for all involved.
What do you/the company need from your future leaders?
- Strategic thinking
- Consistent drive for results
- Ability to lead and build talent
- Entrepreneurial edge
- Commitment to the company’s mission and values
What do your future leaders need from you/the company?
- To make an impact
- The opportunity to grow
- Competitive compensation
- Rewards and recognition that acknowledge value of contribution
