Tag Archives: succession planning

When Your CEO Dies


man-76202_640I’ve been interested in succession planning since my early years in Human Resources—and particularly in succession planning at the top of the house. Perhaps that’s why my novel, Playing the Game, begins with a CEO near death and the impact that has on the corporation. So I read with interest a recent article that dealt with how to cope with the death of a key executive. Of course, the most important point is to be prepared.

“What Would Happen If Your CEO Died?”, by Branigan Robertson and Sean Reis, published on February 2, 2017, on the always excellent TLNT.com, asks what HR should do to minimize the impact of the death of a key executive.

Here are the recommendations the authors make, along with my commentary:

1. Purchasing life insurance on high-ranking managerial employees

For most companies, this is a matter of balancing cost against risk. In my opinion, insurance will only make sense for some companies—typically larger companies, or those in which an executive’s passing could end the organization’s existence. For other companies, particularly where a successor is in place, insurance may not be necessary.

2. Knowing who is next in command for each critical position, including the CEO, to fill immediate leadership gaps

This is critical. Everyone should have a back-up, just as stage actors have stand-ins. In some cases, this will be a deputy or assistant to the executive. In other cases, power will devolve up the corporate ladder, and the deceased executive’s boss may need to act in an emergency. In still other situations, a former executive might be called back into the role. And in the case of the CEO, a Board of Directors member may need to fill in, if there is no executive the Board trusts.

The important point is that stakeholders need to know immediately who acts in place of the deceased (or incapacitated or otherwise unavailable) executive.

3. Having access to all critical information

Arranging for ongoing access to critical information is part of any good crisis management plan—and the loss of a key executive is certainly a crisis. Part of the issue is making sure someone has access to corporate information, such as server passwords, financial records, tax returns and payments, bank account and payroll information, debt instruments, shareholder and Board member information, key contracts and insurance policies, critical vendor and consultant contact information—the list goes on.

And each business will also have critical systems of its own, and all of these need a crisis management plan. What systems in your organization have only one key person with access to the data?

In addition to critical corporate information and documents, it is important to know how to access contact information for employees’ family members—at least one next-of-kin or emergency contact for every employee.

4. Dealing with emotions

The loss of a key employee will impact the morale of the entire organization—the more respected and liked the individual, the more the rest of the employees will grieve. And the more critical the person was to the organization, the more employees will worry about their future.

Other leaders need to recognize, validate, and overcome employees’ sense of loss—often when these leaders knew the deceased the best and are most devastated by the death. It is probably a good idea to bring in grief counselors (usually from the company’s Employee Assistance Program, if one is in place), to help the organization mourn the loss and move on.

5. Having a succession plan in place to speed filling the position on a long-term basis

Beyond the immediate need to deal with the crisis and keep the business running, it is important to get back to “business as usual” as quickly as possible. The only way to do that is if the position is filled or the duties of the deceased executive are otherwise distributed. The more planning done in advance, the easier this will be.

Is your organization prepared to lose a top executive?

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Tips for Succession Planning in a Family Business


business teamI wrote about the topic of succession planning a few months ago, but I continue to find the topic fascinating. Succession planning in any size business is critical, and when family dynamics enter the picture, the risks are greater. After all, the wrong decision can doom not only the business, but also Thanksgiving dinner.

So how should a family business go about determining the founder’s successor?

The first thing to do is to start early. Unless there is a single perfect candidate with ideal background, it will take a few years to ready someone for the CEO role. It’s important to be objective about who the best candidate is—it might not be the oldest son. It might be a younger daughter. It might be a cousin. It might even be someone outside the family.

While the existing CEO in a family business may make the ultimate decision, he or she should get input from others. That input should come from other leaders in the business, both family members and leaders outside the family. And family members who don’t work at the company but who rely on the business for their livelihoods should also be consulted. Input from key customers and other stakeholders is also important. Given the family dynamics involved, it might be important to use an outside consultant or advisor to gather the input.

Family dynamics will be critical in determining the right candidate. Are there sibling rivalries that will resurface? What education and other experiences do various candidates have? Has one person been given the inside track, which might have left gaps in other candidates’ backgrounds? Should those gaps be filled to give more candidates a decent shot at the leadership role?

It is best not to put all your eggs in one basket. Grooming just one candidate for the CEO position might leave you with no one. That is true in any business, but more likely to be true where the bias is to keep the role in the family, meaning there are fewer candidates to begin with. The expected successor may decide to join a monastery or to go live in the Caribbean. Or the successor might die or become disabled. Have a back-up plan.

org chartBy starting well in advance of the need for a successor, it is possible to develop two or three viable candidates and to rotate them through various roles to give them all an opportunity to build the experience and relationships they will need in the role.

And if one or more potential successors is not developing as expected, it is important to have an honest onversation sooner rather than later. It won’t be an easy conversation, but the family member can save face by exiting the company or opting for a sidelined position on his or her terms and timing. That way, he or she is not obviously passed over when the time for succession arrives.

Here are a few excellent articles on managing succession planning in family-owned businesses:

How to Save the Family Business, a 1994 article by Peter Drucker, reprintedi n the Wall Street Journal, September 30, 2015. 

7 ‘Empire’ Lessons On Family Business Succession, by Andrea King Collier, Forbes, April 27, 2015

Leadership Lessons from Great Family Businesses, Claudio Fernández-AráozSonny IqbalJörg Ritter, Harvard Business Review April 2015

How to improve the chances your family business will succeed in the next generation, by Steve Coleman, The Business Journals, Apr 1, 2015

When have you seen succession planning work well?

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Succession Planning: Developing Future CEOs


I’ve been interested in succession planning throughout most of my career. As many readers of this blog know, my novel Playing the Game deals in part with CEO succession in a family-owned business—an issue the organization was not prepared for and had to face as the novel begins. The novel, of course, is fiction, but the topic is real in many businesses.

A National Association of Corporate Directors survey reports that two-thirds of U.S. companies admit they have no formal CEO succession plan in place. See CEO succession starts with developing your leaders, by Asa Bjornberg & Claudio Feser, McKinsey Quarterly, May 2015. And even those corporate boards who have some plan underway are not satisfied with the results of their succession planning.

leadership sign 2The McKinsey article focuses on the need for a long-term plan for developing CEO successors. Succession is not a short-term project that can wait until the current CEO is ready to step down. Any board members, executives, or Human Resources professionals with significant experience have seen situations where illness, death, poor performance, or a significant lapse in judgment has required an immediate change in corporate leadership.

The authors state:

“Ideally, succession planning should be a multiyear structured process tied to leadership development. The CEO succession then becomes the result of initiatives that actively develop potential candidates.”

Developmental tools that companies can use include new assignments (including international and cross-divisional moves), coaching, mentoring, and outside leadership development programs.

Based on my experience, the important components to include when developing executive talent are

  • providing broad knowledge of the world in which the business operates,
  • a deep understanding of the organization’s unique strategies and goals, and
  • the interpersonal competencies needed to motivate and focus large groups of people through a multi-tiered organization.

The authors of the McKinsey article stated and “clumped” these attributes somewhat differently, but the themes are the same:

“. . . three clusters of criteria can help companies evaluate potential candidates: know-how, such as technical knowledge and industry experience; leadership skills, such as the ability to execute strategies, manage change, or inspire others; and personal attributes, such as personality traits and values.”

It is likely that each potential internal candidate for the CEO role will need an individual leadership development plan. The goal of the succession plan as a whole should be to have two or three strong candidates ready when the role needs to be filled.

Even organizations that want to develop a good CEO succession plan face risks. The plan will not work unless the current leaders have some idea of the future needs of the business. Those involved in selecting potential candidates must base the selection on these future requirements rather than on interpersonal factors not related to strategy. For example, sometimes current CEOs want to perpetuate the roles they have played in the organization. Other times, current leaders who plan to remain a while want weaker candidates in the succession plan, so no one is nipping at their heels.

And, of course, the analysis of future strategic needs and of the candidates themselves cannot be static, but must evolve over time. Too often, once someone is the “golden boy” (or girl) that person remains in the line of succession, regardless of performance.

It is also important to constantly compare the internal candidates with potential outsiders. So those involved in succession planning must know other leaders by staying involved with industry associations and community groups.

But the biggest risk is ignoring CEO succession needs altogether. Starting a plan now is better than waiting until the CEO role is suddenly vacant.

Which succession strategies have you seen work in your organization? Which have failed?

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Succession Planning in a Family Business: When No One Is Ready


I’ve mentioned before (see here and here) that one of the conflicts in my novel, Playing the Game, is succession planning behind the CEO who is injured at the beginning of the book. What should a family-owned business do, when none of the family members seems right to lead the organization?

Here’s a scene from Chapter 1 that describes the problem. Rick Players is the CEO of PlayLand Inc., and he is in a coma. His brothers Vince and Kevin are discussing what to do about the business.

 

Late Sunday evening, Kevin Players sat on a plastic chair in ICU beside his brother Vince. Machines beeped rhythmically, monitoring Rick’s heart rate, blood pressure, respiration, and brain waves. He heard the constant patter of voices from the nurses’ station and the squeaks of carts rolling down the hall.

The doctors hadn’t given a definite prognosis. “He has some injuries in the cerebral hemispheres,” the neurologist had said. “His brain is still swelling, though not as rapidly as earlier. If it continues, we may need to surgically extract some of the dead tissue. Or at least relieve the pressure caused by the swelling. All we can do is wait.”

Now Kevin and Vince sat waiting. Kevin leaned back and stretched his arms over his head. They needed to make some plans about the business. Kevin didn’t want an argument, but Vince wouldn’t do a damn thing unless Kevin brought it up.

Kevin squinted at Vince. “We have to decide what to do about tomorrow’s officer meeting.”

Vince grunted.

Vince was forty-six, several years younger than Rick, but eleven years older than Kevin. Vince’s hair was thin on top, Kevin noticed in surprise. Rick hadn’t lost any hair yet. Kevin ran a hand over his own head. Would he go bald like Vince in another ten years? Would he get Vince’s paunch, or Rick’s six-pack abs?

“If we cancel, it’ll seem like no one’s running the show,” Kevin said.

“But you heard the doctor. How can we go on, business as usual?”

“The doctor said anything could happen,” Kevin argued. “We’ve got to think about how people will react. Employees. Customers. Lenders. What’ll they do if they think no one’s in charge?”

“How can we keep going without Rick?” Vince asked.

“I don’t know,” Kevin said. He stretched again. He’d expected some resistance, but Vince wasn’t helping at all. “We have to give the impression things are under control. Starting with the meeting tomorrow. Can you lead it?”

“Me?”

“You’re head of Product Development. You’re next in the family after Rick. People will expect you to do it.”

“Christ!” Vince groaned. “What’s on the agenda?”

“How the hell should I know? Rick keeps his own agendas.”

Vince grimaced. “What should we say? You’re the great communicator.”

Kevin shrugged. “Give the group an update on Rick. Then ask everyone for status reports. It’s mostly for show. So the rest of the company thinks we know what we’re doing. Even without Rick.”

Vince nodded. “Okay. But you back me up.”

“Sure.” Kevin closed his eyes and leaned his head back against the wall. With his eyes still closed, he asked, “What’s on your plate this week?”

“Nothing much Monday. Staff meetings. A couple of new product meetings on Tuesday and Wednesday. Don’t remember after that.”

“Paige gave me Rick’s cell phone,” Kevin said. “I looked at his calendar. There’s a big meeting with Toy Mart sometime this week with our Sales group. One of us should go. I think it’s mostly about marketing programs. I can get up to speed. I’ll go.”

Vince grunted again.

Kevin decided that meant Vince didn’t care who went to Toy Mart. “He was also getting ready for the bank meeting next week,” Kevin said. “It’d look pretty weird for me to go. No reason for Marketing to be there. You’ll have to cover that one. Alex will know the details. Talk to him.”

Vince glared at Kevin. “Hell, you know I hate financial crap.”

“Alex can handle the numbers. Just act like an owner,” Kevin replied. Sometimes he didn’t think Vince cared about the family business. Kevin had been the kid brother all his life, but now he spent half his time pushing Vince.

“All right.” Vince belched. “I’ll call Alex.”

Relieved that he had covered the immediate business issues, Kevin turned to the family problems—the bigger challenge, he thought. “We’re going to have to watch Paige,” he said.

“Why?” Vince asked.

“She was hysterical this evening,” Kevin said. “She’s worried about Rick, obviously. And pissed at him for racing with the boys. She said he must have been drunk. But his blood alcohol was legal.” Kevin shook his head. “I don’t know if she can cope.”

“Christ,” said Vince. “I couldn’t deal with a wife when I was married. How can we handle Paige and PlayLand both?”

Kevin squirmed to get comfortable in the small chair. Paige had always been a handful. Spoiled her whole life, first by her father and then by Rick. She’d freaked out when Jason broke his arm last year. “I don’t know,” he said. “But we’ve got to.”

* * *

To read more, go to Amazon or Barnes & Noble.

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Announcing Playing the Game, a novel by Sara Rickover


PTG front cover all capsMy new novel, Playing the Game, is now available. You can find it on Amazon.com as a paperback and as an ebook for Kindle and Nook.

Playing the Game is a thriller set in the middle of a corporate crisis. PlayLand Inc., a family-owned toy company, careens toward bankruptcy, while its CEO lies comatose. Maura Ramirez, head of Human Resources, battles the egos, incompetence, and backstabbing of her fellow executives as she scrambles to save the company. Meanwhile, a murderer lurks in their midst.

The book could be described as Scott Adams’s Dilbert meets Michael Crichton’s Disclosure meets Arthur Hailey’s Airport. The dialogue and settings portray real-world corporate chaos, similar to what I dealt with for more than two decades navigating business bureaucracies.

For more information check out my Amazon Author page and “like” my author page on Facebook.

If you read and enjoy my novel, please post a review on AmazonBarnes & Noble and/or Goodreads.

And please share this post with everyone you think might want to read Playing the Game.

Thank you for your support.

Playing the Game is a gripping, insightful commentary on the unique challenges inherent in a family-owned business.”

Peg Nichols, author, Mediation Survivor’s Handbook

 

Playing the Game debuted on Amazon at #3 in “Human Resources Thrillers”!

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Why Have an Independent Board of Directors in a Privately Held Corporation?


Formal Corporate Meeting RoomEvery corporation – public or private – legally has to have at least one director. Most state laws on incorporation require three or more directors. Therefore, there is technically a board of directors in almost every corporation, no matter how small the company. The board is elected by the shareholders, and board members elect the officers of the company, approve by-laws, and otherwise govern the corporation.

But in privately held companies, the role of the board of directors, beyond these minimal legal requirements, depends on what the shareholders want. In a family-owned business, the family shareholders may want only family members to serve as directors. In these cases, the board will not be independent of management and may not bring any outside expertise. That is how most small corporations start.

Other closely held businesses – whether owned by a single family, by a small group of unrelated partners, or by a few outside investors – may want independent directors who can offer financial, technical, and/or strategic advice to the operational officers of the company. In these businesses, the owners and managers in the firm have experts to go to on a regular basis, people with some knowledge of the firm’s operations.

Even if the business is not a corporation, but is a partnership or LLP or LLC, it might be a good idea to have an advisory board that serves the same purpose as the board of directors for a corporation.

If you are the owner of a small, privately held business, why should you consider forming an independent board of directors? Because it is unlikely that you and the other managers running your company have the breadth and depth of experience that today’s business environment requires.

Here are a few examples:

  • First, most businesses operate in a heavily regulated environment. Whether it is food safety rules, or environmental impact, or financial disclosures, or labor relations and employment law, or licensing requirements, the law impacts every business. Perhaps the business could benefit from an attorney on the board.
  • The financial and securities industries have come under increasing scrutiny since the recession in 2008. Even if your business isn’t in these industries, you are likely to need financing as you grow, or perhaps you are considering a public offering or other means of raising capital. You might need someone with strong financial acumen or who is familiar with borrowing opportunities in your region or industry.
  • Every successful business suffers growing pains over time. Perhaps your employee base is increasing faster than your existing managers can handle. Perhaps you have ideas on how to expand, but don’t know how to handle the logistics of your growth – IT systems, people systems, sales channels, etc. Maybe you need someone with experience doing what your business is about to do.
  • Or maybe you know you need to grow, but aren’t sure what the best opportunities are. Perhaps it would be helpful to have someone to walk you through a strategic planning exercise, and then figure out how to bring the best growth options to life.
  • And lastly, perhaps the owners or key managers in your business are ready to retire, and there is no good succession plan in place. Again, outside directors could help your company through a selection process and the transition to new management.

In the examples outlined above, it would be possible for a business to hire consultants or contractors for a well-defined assignment. Or perhaps there is an employee with the skills to help the ownership of the business through the issue.

But there is an advantage to having people with an ongoing knowledge of the business available on a regular basis to provide input to management. The challenge is to use these advisors well. Even in large public companies, this is difficult, as a new McKinsey study points out. Directors need to have the time and the skills to provide the right assistance to the corporations which they serve.

The novel I am writing deals with a family-owned business in the throes of change. Its directors have been family members, but the business  is at the point in its growth cycle where it probably needs outside assistance. Its current leadership will have to grapple with this among many other issues.

For more information on the role of directors in privately held businesses, see articles such as:

The Responsibilities of a Board of Directors for Privately Held & Publicly Held Companies, by Derek Dowell, Demand Media

What Are the Responsibilities of a Board of Directors Within an Organization?, by Bonnie Conrad, Demand Media

Should a Private Company Have a Board of Directors?, by Theodore F. di Stefano, E-Commerce Times, February 8, 2008

Why Your Privately Owned Company Needs a Board of Directors , by Janet B. Fierman, Sheehan, Phinney, Bass & Green PA, Thursday, October 28, 2010

Why Privately Held and Family-Owned Businesses Should Have Independent Boards of Directors, by Carl Kampel, Financial Executive, November 2012

Outside Directors: Do You Need Them and Where to Find Them?, by Joe Hadzima, reprinted from Boston Business Journal

Startup Voice: Private Company Board of Directors FAQs, by Inna Efimchik, White Summers Caffee & James LLP

Are there other advantages to having an active, independent board of directors in a private company? What are the disadvantages?

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How to Repurpose Your Life Beyond Your Working Years


??????????????????????????????????????????????I recently attended a discussion group in which high-performing women nearing or at the end of their careers talked about how they wanted to continue with the rest of their lives. This group included CEOs of regional companies, executives from national and international companies, owners of multiple franchises, and professionals in the legal and educational fields – all had earned good incomes and had been successful in their chosen careers. Many had changed professions or careers or companies at least once before.

Yet we all struggled anew at this point in our lives:

  • Who am I if I am not a high-performing professional in my field?
  • What do I want the rest of my life to be about?
  • How do I feel about leaving the working world behind?
  • How will I challenge myself in future years?  How will I learn and grow?
  • What will others think of me when I am no longer powerful in my field?

I don’t think these questions are unique to professional women nearing retirement years. Men who are retiring face similar issues. Women (and men) who quit paying jobs to stay home with children must address these questions as well, as does anyone who switches careers mid-stream.

But what is unique to professional women is that the baby boomer women who are now retiring are the first generation of women who “made it” in large numbers. Across the nation, women may not have reached parity with men in numbers or income levels, but many, many women have had successful careers for the last thirty or forty years and are now leaving the workforce. These women – as much as their male colleagues – have defined themselves by their workplace roles. They have thought to themselves “I am what I do,” and family and friends and colleagues have seen them as what they do also.

?????????????????????????????????????????????????????????????As our group wrestled with questions such as how to decide what we want next in life, how to discuss our choices with spouse and family, how to tell friends and co-workers of our decisions, and even what to call ourselves in the next phase of life (“retiree” does not suit most of us), we came to the following conclusions:

  1. First and foremost, give yourself permission to shift focus. You are not what you do; you are much more than that. Only you can define who you are.
  2. Enlist the support of family and friends – your “tribe” who see you as what you are beyond your job. They can help you determine how to change your life to be more authentically you. Some might need a therapist or coach, if you don’t have personal support. Many have found their own wisdom through journaling.
  3. Find resources to aid in your transition. Among those resources should be financial planners, attorneys if you are selling a business and for estate planning, career advisors, family, doctors to assess health issues, elder care consultants if that is an issue for you, and training to prepare you for your next field of endeavor. You do not need to make this journey in a vacuum.

None of the women in my group questioned the wisdom of leaving the work world at this point in her life. We only questioned how to make the rest of our lives meaningful.

More power to us. We have much left to give.

What other resources would you use to assist in re-purposing your life?

 

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