Mick Jagger’s 74th birthday this summer was yet another reminder that we Baby Boomers are heading over the cliff. As Boomers retire and die, there will be an enormous transfer of wealth, not just in dollars but in productivity and innovation.
Humans are not known for growing old and relinquishing control gracefully. No matter who initiates it, talking about succession is an uncomfortable conversation. But if you are a founder who wants your business to be your legacy, then you need to have a succession plan in place long before it’s needed.
Unfortunately, when leaders postpone this conversation, a lot of decisions just don’t get made. When my grandfather died suddenly, my father was prepared to take over his construction equipment business. But then my father died at a very young age. Although I had worked there off and on, I was not groomed to take over. The extent of the company’s succession plan was notifying next of kin, making funeral arrangements—we were really scrambling. There was no strategic plan about how to keep the company going, much less relevant.
Succession planning is a deliberate, active, living plan to ensure that the company is sustainable beyond the departure of the CEO or other valuable leaders within the organization. But it’s much more than that.
Point A is where the business is and point B is where business needs to go. If we assume that everything is changing all the time, what is necessary for our business to be successful in the future? Can the business survive a transfer of power? How do we get to point B?
The aging leader often believes that what has worked in the past will work in the future. These leaders typically lose at least some of their risk tolerance because they don’t feel the need to take as many risks as they once did. They might surround themselves with people who think like they do. And if the emperor doesn’t have anyone around who can safely point out the boss’s nakedness, the business is likely to die along with the leader.
A lens that I think is useful, not just for succession planning but for business in general, is WWBTMRN: Who Would Buy This Mess Right Now? A potential buyer will know when there’s a concentration of power and decision-making in one person (who most likely will not stay on after the purchase). They’ll know what kind of potential leaders already exist in the organization. They’ll know if the CEO is in a glide pattern—when, as Warren Buffett says, it looks like there are only a few puffs left on the cigar. So if your business isn’t ready for the scrutiny of this hypothetical buyer, then it’s not ready to lose you.
There are two times that you have to pay attention to succession planning:
- The last five years.
- Every other moment before that.
One of the most important considerations for business today is being competitive in recruiting and retaining the very best talent. Gen X—the next in line—is a comparatively small cohort. It’s getting increasingly difficult in a full employment market for a company to find the bench strength that makes it attractive to a potential buyer. The advantage goes to the business offering more leadership development opportunities.
If you want a vital and viable business, you must be constantly focused on having strong leaders coming up, and incentivize those leaders to develop leadership in their own teams.
Send me an email at Scott@doubledareyou.us if you’d like to talk about succession planning in your company. It’s never too soon.
photo credit: mharrsch Two ushabtis depicting King Tutankhamun New Kingdom 18th Dynasty Egypt 1332-1323 BCE via photopin (license)