If you’ve ever seen the HBO original series Succession or have heard of the Murdoch family’s succession drama, you might already know that succession planning can get messy. A succession plan needs a lot to succeed, and gaining the support of key stakeholders, such as the board of directors or investors, is essential.
When developing a leadership pipeline, be it the CEO position or other major role, securing the support of these integral members of your company will ensure your plan runs smoothly. And while the ideal scenario would be for your stakeholders to embrace your plan with open arms, unfortunately, this is often not the case. To help facilitate an easier transition for your company, we spoke to experts to understand how to gain buy-in from investors and the board on a succession plan.
3 tips to ensure a succession plan goes over smoothly
To develop a succession plan that stakeholders will support, experts agree that it comes down to clear communication, identifying the right talent and preparing them for the role early on.
1. Focus on Communication
The most important action a leader can take to ensure a trouble-free transition is to communicate clearly and often with the investors and the board of directors about the plan, says Marissa Rodriguez, the founder and CEO of Through Experience, a platform that helps CEOs grow their e-commerce business.
“Uncertainty can often breed confusion and chaos,” she says. “This is why it’s so important that leaders overcommunicate, have clear intentions and can give others a sense of direction.”
To provide clarity on the process, Rodriguez advises developing a plan with key milestones and dates that everyone can reference, from identifying and training potential successors to their eventual assumption of the role.
2. Create a culture of succession planning
Raising a succession plan to your investors and board of directors might cause concern, but if your company is always planning for leaders’ replacements, it will feel like the norm to key stakeholders.
Mary Josephs, founder and CEO of Verit Advisors, an investment banking advisory firm, recommends giving “constant attention to succession for all major roles across the organization. This means early talent identification, coaching and training, exposure, and support.”
To build a company accustomed to succession planning, Christine Edwards, principal at The Red Bee Group, a business consulting firm, recommends that the CEO and CHRO identify potential leaders who are two to four levels down on the organizational chart and begin orienting them early on. “A process by which directors can meet with those leaders earlier on in their careers is helpful, as is bringing those leaders to the board or committees to discuss issues,” she explains.
For potential leaders outside of the organization, Edwards says, “benchmarking external candidates with a smaller group of directors is also healthy and provides the ability to compare skills and accomplishments.”
3. Invest in potential talent
Once potential leaders are identified, it’s critical to invest in them to ensure they are ready to fulfill the role when it’s time. Having talent pinpointed and already familiarized with the role prior to their transition will help investors and board members feel confident in your plan.
To prepare a successor for the job, Josephs recommends giving them time to shadow the exiting leader before they assume the position.
“This is expensive, as it often includes the next executive shadowing the previous executive for six months to a year. However, it is well worth the investment. It provides time for transitioning key relationships and trust (investors, team, clients, industry, COIs, etc.), understanding client and team nuances to be effective, [and a] safe space to practice decisions,” Josephs says.
Getting key stakeholders’ buy-in
To gain your investors’ and board members’ support, you’ll need to have plenty of discussions about the plan in order for everyone to feel comfortable moving forward.
According to Edwards, the leader or CEO should begin the conversation by discussing any upcoming leadership shifts before they happen and delving into why they are happening. “Repeating those discussions a few times before the changes are made provides ample time for the board to reflect, ask questions and signal agreement with the changes,” she says.
Josephs recommends the CEO share their vision on what strengths and capabilities will best serve the organization. “It [might] paint the picture on why we would look outside the organization, or why there are strong internal candidates,” she says.
To gain buy-in from your investors and board of directors on your succession plan, Rodriguez says you’ll need to be aligned on these five issues:
- Why are we doing this succession plan?
- What does success look like at the end of the transition?
- What does success look like long term?
- What could go wrong? How are we going to mitigate those possibilities?
- What benefits emerge from this transition to the overall business?
Challenges to succession planning
When succession planning, roadblocks are inevitable. Here are some challenges that might arise during the process and ways to navigate them.
1. Conflict of interest
Be wary of conflicts of interest when doing succession planning. For example, if the incumbent has shares in the company, this could lead to bias in their decision-making during the process, such as supporting a potential successor who would increase or maintain their financial interests rather than choosing a candidate that is best for the company’s long-term success.
To navigate these issues, Henry Penix, CEO and executive chairman of Soaak Technologies, which specializes in sound frequency composition therapy, says to look to your company’s bylaws or operating agreement to locate what your business has decided when it comes to succession.
“These documents will also mention what happens with shares in a company owned by a majority or significant shareholder. Typically, things like voting control, the purchase of shares outstanding and management are clearly and legally defined,” Penix says.
The board of directors will use these internal rules to ensure that the succession planning process is fair and unbiased.
“Conflicts of interest should always be monitored,” Josephs says. “One should not stay in a position if they are no longer the best leader to drive shareholder value. But it can be enticing to stay if stock prices are growing, increasing personal wealth. The culture needs to be about the organization’s overall growth.”
2. Lack of buy-in from the board of directors or investors
Even if you have spent months developing a concrete succession plan, there’s always the possibility that the board of directors and investors won’t give their support.
“If the investors/board of directors do not align with the initial intention of the succession plan, it will be a challenge for the leader,” Rodriguez says. “If they do not want the leader to leave and are not receptive to this intention and idea, then the leader might have to sell them on the reasons why it is to their advantage to bring in a new leader.”
3 Personnel issues
It can get sticky when someone who’s seen as a natural choice to succeed a leader is not picked for the job.
“Perhaps the obvious internal candidate has been your right and left hand as you led the company. Perhaps the company has a history of promoting from within. Yet you know this No. 2 is not the right leader to hold the CEO spot. These are tough decisions,” Josephs says.
“All stakeholders and candidates need to understand this is not personal; it’s business,” she adds. “Those not chosen are not inferior candidates. They’re just not the best choice now.”
Having these difficult conversations upfront can mitigate potential upset later. “Clarity always wins,” Rodriguez says. “The more clear one is about the intention and what is required in order to achieve success (and the desired outcome) the better for everyone involved.”
Photo from NYCKellyWilliams/Shutterstock.com
