What Every Startup Needs to Know About Succession Plans
There’s more to it than putting a name on a sticky note.
The Built In article, “What Every Startup Needs to Know About Succession Plans," quoted Russell Reynolds Associates Consultant Margot McShane on the ins and outs of succession planning. The article is excerpted below.
Succession taught us nothing?
The Emmy-winning television show depicts the havoc that can be wrought by a CEO's failure to name a successor. However, a 2016 Harvard Business Review survey showed that more than half of companies don't have a contingency plan in place if their CEO were to suddenly step down.
To understand how successful tech companies plan for the future, we spoke with seasoned executives and consultants across the industry. Their responses have been edited for length and clarity.
CEOs and Boards Should Work Together
McShane: Unless there's already an established culture at the company of succession planning, it could be a very sensitive topic for the CEO and raise all sorts of questions. But all things being equal, the CEO is very much included in that process, and should feel comfortable with it. You don't want them to feel like their job is in jeopardy or they're threatened (that's a separate conversation if that is the case). You want them to feel as in charge of the process as possible, which mainly means that if the board suggests it, the CEO takes charge of the situation themselves, and drives it.
Develop Bench Strength
McShane: If there's an emergency, you want some good options. So let's talk about people on your team who have that potential. Let's assess them. And then let's talk about a development plan to figure out how they could develop and grow to eventually be someone who could run this company.
That's just the best practice anyway. It puts less pressure on the CEO to be all things to all people. And the board likes to have some options that way. If you do this in the right way, it makes the CEO feel fortified and also makes her or him feel like their investment — and when I say investment, I mean a lot of what CEOs at this stage care about are the financials of the company and their legacy.
The best practice is that this isn't a CEO succession process. It's a succession process. And one of the pieces to that is not just identifying immediate successors who might be direct reports to the CEO, but looking below that first level of management to the next level to think about how those individuals, what their potential is, how they could develop and coming up with their plans, so that you've got bench beyond just that immediate CEO succession level.
Determine What Your Company Needs Next
McShane: The main thing to start with is understanding the business context and strategies, how those are evolving, and then creating a success profile — a job spec — for the CEO. The spec of the CEO today often isn't what they're going to need six months, three years, five years from now, because their strategies will evolve, which means the requirements and the skills and experiences might look different.
Review Your Leadership Criteria
McShane: We have a whole methodology from psychometric data, deep dive interviews, references. We have a bunch of data on what makes a good CEO. And we determine where they are in terms of their potential to be a CEO, where they are developmentally from a competency standpoint. Then we talk about it with the client.
It's going to depend on the individual and the company. One of the hardest things to do as a CEO is to be the only one making the decision, and sitting alone with that, but also, to be able to truly lead and manage all functions. Many first-time CEOs may have managed some of the functions, but they haven't had to orchestrate and coordinate all of them. So rounding out their experience set is a key part of all this.
Don't Put it Off
McShane: Usually, for a smaller company that's high growth and disruptive, you have so much on your plate, and your business is changing all the time. The last thing you're thinking about is developing leaders, let alone succession planning. But it's a win-win if you're doing both. It's going to make the business better, and people are going to care more. It's going to show professional maturity on your part. It doesn't even have to be overly formal, but there's no reason not to do it literally from day one. And at the very least, you're going to end up with a better team because of it.
To read the full article, click here.