A growing portion of my work over the past several years has focused on companies grappling with leadership succession. Whether the company is owned by a family office or private equity group, the succession issue seems pervasive. For this reason, I was not surprised to see a 2014 Alternative Board survey found that 56 percent of family business CEOs are either unhappy with their succession plan or don’t have one. Over the years, I have observed that very different companies can have surprisingly similar succession planning struggles. Here are some main lessons.
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Often the biggest bump in the road during a leadership succession is the culture change that follows. In my experience this is inevitable, so rather than fear it, a company needs to anticipate and embrace it. The same management team with the same goals, markets, and processes will be very different under new leadership. Rather than focus on any perceived losses in the culture change, it is crucial for the board and the senior leadership team to understand and capitalize on the positives.
For example, an informal workplace might become more formal, but might also improve the sense of professionalism that customers experience. Or restructuring some reporting relationships and departments might slow some projects down, but the new reporting structure may add scrutiny and accountability that leads to overall improved decision-making and results. It is important for everyone to evaluate the new culture not simply on how it feels at first, but on how it impacts company efficiencies and effectiveness.
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Especially in privately-owned companies, boards and investors must carefully consider the departing CEO’s management style—clearly understanding how the departing CEO does what he or she does. Successful CEOs are surrounded by a culture as well as policies, procedures, and operational tenets that “work for them”. Often, they are scarcely aware of this fact. Under their management style the company has done well, and the incumbent has grown to view their style as essential to future success. But it’s never true.
Just because a certain management style works for one CEO doesn’t mean the next CEO must behave the same way. In fact, it’s rarely the case and examples abound. Steve Jobs’ operating style at Apple would not have worked for Tim Cook because they have different strengths and weaknesses. Similarly, the collaborative leadership style of GE’s Jeff Immelt stands in sharp contrast to the confrontational style of Jack Welch (aka “Neutron Jack”).
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It’s important to anticipate that succession will often lead to changes in corporate direction and strategy. With so much at stake, the investors and board must have an accurate, in-depth understanding of both the current and the future CEO. All this information is readily available through SIMA and the MAP (Motivated Abilities Pattern) it produces. We have used MAPs® for more than 50 years and with hundreds of organizations, both for-profit and nonprofit, to help them make leadership changes and strategic hires, improve organizational effectiveness, align teams, develop up-and-coming leaders, and think through succession planning. The SIMA process is helpful because it is uniquely descriptive of the individual and therefore a highly accurate predictor of future behavior.
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In the case of family owned companies, the board and family members set the tone as to whether differences of opinion, culture and leadership style will be viewed as positive or negative. In my experience, it’s far more productive and healthier to view such differences as potential assets. Openly acknowledging and dealing with differences will breathe new life into your executive team, especially during succession. It’s critical both for family relationships as well as organizational health that when family members disagree it doesn’t mean the love is gone or the relationship is broken.
Look For Common Ground
The tendency in some families is to not bring up issues because it will hurt the family. But the opposite is true. A business is much more likely to continue to succeed and keep decision-makers together if the family members are open with each other and willing to rationally and calmly explore their differences and look for common ground. To do otherwise allows small differences to fester and grow. Several of my clients have mastered the art of sharing their major concerns while openly acknowledging their own strengths and weaknesses, which paved the way to productive discussion, successful succession and greater organizational health.
Don’t Wait for a Crisis
It’s not uncommon for CEOs, particularly those who are founders, to continually delay the succession planning process because their business is doing well and they are having fun. Sadly, it often takes a crisis, a loss of key customers, or a critical recapitalization to set the wheels in motion. Don’t wait for a crisis. Know how you will handle the succession issue long before it looks like you’ll face it.
The transition from one CEO to another is a critical moment in the life of every company. The entire company has to adapt to the strengths and weaknesses of a new person in the corner office. Without a smooth transition you’re probably not going to maintain the confidence of investors, business partners, customers, and employees. A good transition also provides the incoming CEO with a solid platform for moving the company forward. And at the center of any smooth transition you’ll find clear thinking, and in-depth understanding of the strengths and weaknesses of the key players.
SIMA® International is a worldwide group of consultants who use the proprietary assessment technology, SIMA®, to help our clients make the best possible “people decisions.”
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