Who’s up next?
Most organisations forget to look at succession planning for a variety of reasons
Most organisations forget to look at succession planning for a variety of reasons, including things are ok as they are, no one is planning to quit (that we know of) and the CEO isn’t going anywhere. How can you be sure of some of those statements, unless succession planning is on the agenda for the board and on the To Do list of the CEO?
For any organisation with a team of senior managers, or a company with a board, succession planning is something you absolutely have to consider and discuss on a regular basis. At least every six (6) months the management and the board should review - which directors are thinking of stepping down? Which director’s tenure is almost up? What skills are we missing on the board that we might find with a new director? Who is going to take over from the CEO if he/she decides to move or retire?
I advocate three key aspects of succession planning that should be monitored on a regular basis – Diversity, Equity and Tenure. Let’s have a quick dive into each one of these.
Diversity
Have you ever done a Diversity Matrix for your board or management team? The diversity we are seeking here in particular relates to skills, education, gender and age in your team. What skills are currently available amongst the directors on the board – legal, financial, strategy, risk, human resources, logistics, marketing etc.? The more diverse the skill set of your board, the better the analysis of projects, tasks and information, which will lead to better decisions.
Conduct a Diversity Matrix review, to identify the range of skills, experience and knowledge the directors currently represent on the board. Identify any gaps that need addressing and then decide if training is required, or if recruiting the next director(s) for the missing skills, education or experience, is the better option.
The senior management team, that work closely with the business owner or CEO, are also better served if there is diversity of skill sets and opinions. We do not want a team of sycophants, who echo the boss’s thoughts and don’t challenge, where a challenge may be beneficial.
A similar Diversity Matrix can be applied to the management team, and below, to identify the best talent to develop and nurture for future senior management roles (career path planning). This will assist in identifying a potential successor to the CEO/manager’s role, when they decide to move on.
Equity
In this context, equity is about considering succession aspects that cover age, gender, ability, ethnicity and culture, to ensure your board and management team reflect the demographics of your community. Equity contributes to the diversity we seek by bringing to the table the diverse views of young, middle aged and older participants; different views of both genders (and any gender fluid people); the critical input of those with varying levels of ability – mental and physical challenges that might include cerebral palsy, mobility (those in a wheelchair or challenged by missing limbs etc.), hearing or vision impairment – people of different ethnic origins and those with differing cultural or religious backgrounds.
The important point to understand here is that the mix of management or your board, should reflect the mix within your community. That said, if your community is a homogenous one, with little or no ethnic or cultural diversity, then you need to focus on the other areas of diversity. In some areas, demographics have swung in a dramatic fashion away from white Anglo-Saxon populations to a dominance of a specific ethnic group or cultural group. This must be embraced in your business as best you can. Remembering that succession is not a popularity contest, rather a forum for identifying the best qualified individual(s) for the role(s) available, whether on your board, or as an integral part of the management team.
Tenure
This is probably one of the most controversial aspects of succession planning, especially where it relates to directors and their term of service for a board. In NSW clubs, I have previously mentioned a delightful director (who has since gone to the big boardroom in the sky), who was a foundation director of his club and served for well over 50 years – continuously. A few years ago, globally there was a push to limit director terms of service to around nine (9) to ten (10) years on any particular board (calculated from three terms of service on a board under the Triennial Election Cycle).
Many companies updated their constitutions and churned through some of their longstanding directors, to make way for fresh faces and reduce the tenure to the desirable 9 years. Sadly, in some circumstances the corporate history and knowledge left with the directors, much to the detriment of the replacement board and the company operations.
My personal philosophy has changed a little over the past few years. Tenure should be driven by contribution. I don’t care how young or old a director is, nor how long they have been on a board. So long as they actively contribute in discussions and decision making, rather than sitting passively waiting to go get a drink and a meal, I have no qualms about them being on a board for an extended period.
I am on some boards where a couple of director colleagues have been on the boards for some time, but they are active contributors, always asking great questions and looking at how we can do things better. They may eventually reach a point where they feel they can no longer contribute effectively and step down, and they would be supported in that decision.
A good way to manage this type of succession, is for director(s) to identify their own replacement and work with the Chair, CEO and other directors to manage the smooth transition of succession.
Similarly for CEOs, tenure in the top job has been known to create stale, jaded individuals who have lost the drive to tackle the challenges and can be comfortable just ticking the boxes to grab their pay check. Even with KPIs to drive performance, a CEO can have a great team around them, delivering the goods, but they are not working hard to drive the organisation to maximise potential anymore. So, the conversation needs to be had regularly with the CEO around their possible end date and the succession plan that is in place.
Options include mentoring an internal successor for the role, or starting a search for an external candidate, who may bring fresh perspective and a different skill set to the table, as well as the vigour the incumbent CEO/Manager may have lost.
A key point here is that your organisation needs to put into place a policy and procedure to ensure you commence succession planning, before you need to replace a CEO or director as a result of a sudden departure. For Boards, it should be an agenda item at least twice per annum, and the same frequency of enquiry with the CEO. And with succession planning in place, you should be able to develop a strong pipeline of future directors who will add diversity, expertise and energy to your board and contribute for a good term of engagement. You might also turn up your next CEO, well before you need one.
For assistance with a Diversity Matrix or succession planning for your board or CEO, contact Ron Browne, Managing Consultant ron@extrapreneurservices.com.au or 0414 633 423.
