Enterprise concatenation 101

Succession planning is a challenge no matter how large or small a business is.   Leaders at SME (Small Medium Enterprise) often think that large companies have the advantage, because they have larger pool of talent to work with.  While it might be true to a degree; the environments are different and there are challenges in organizations of all sizes.  Based on what we are hearing and seeing, there are a lot of companies with the future at stake as the ownership and or partners surpass retirement age.  

In conversations, many of these firms are confident that they can address this challenge by doing what they have always done –  pass the business to the next generation or ride the wave as long as they can.  I’d feel good about these firms if they thought more around the lines of strategic hiring and building a bench of talent that will help sustain and grow the organization into the future.  The demand for these scarce resources far exceeds supply. At best, some of these firms will not succeed, and at worst some will be the source of other firm’s targeting. The future of these companies is at stake. This is a big deal!

As a CxO,  I work with leaders in SME and LE organizations; I’ve seen the good, the bad, and the ugly. One of the most common organizational structures that I encounter involves seasoned CEO’s working past retirement and not willing to pass the control to the next generation or leverage on talent to run the business.  Over the years, those CEOs should have made an effort to hire young talent, especially with a technology focus. As I peer into my crystal ball, I foresee “solving the succession issue” as a market redefining event that will exacerbate the winners/losers phenomenon that we have been writing about for years, because the demand for the needed resources far exceeds the supply AND time marches on.

Organizations of all sizes face obstacles when it comes to developing, executing, and evaluating business succession plans. Many use these obstacles as a reason to avoid the process until it’s too late. With planning and foresight, and a commitment to the idea of succession planning, companies of all sizes can ensure that key positions will be filled even in the event of unforeseen changes.

So how do you the “CEO” avoid getting yourself into this trap?  At the end of the day, you as the CEO should be concerned about creating shareholder value.  Let’s start with some basic steps to keep your primary goal in focus:

1. Start the succession process five years in advance of the event.

2. Explore Loyalty and Entrepreneurship. Find three people who you think have the potential to succeed you. 

3. Do an assessment of what each of these folks does well and not well. 

4. Rotate these potential CEO candidates through a series of jobs of increasing responsibility and complexity. 

Hopefully by the end of this process you will have at least one and possibly two people who you would feel comfortable handing over the reins. It should be clear to both you and the person you select that they are the best person to succeed you and that they have the best chance to be successful.  Taking an active approach to succession planning is necessary to ensure the long-term success of a business. By beginning to plan early, SME CEO’s will not only be prepared to manage unexpected challenges that could jeopardize their succession plans, but they will also be more educated on alternative options, like selling to a strategic or financial buyer.