Actually choosing the person who will be your successor is the second step in this process. The first step is identifying where the company will be when it’s time for the successor to step into a leadership role. Do you expect the company to be sailing along at an even keel, continuing to do what it already does so well? Or are there rougher waters ahead that will require more creative leadership?
Having a keen idea of where your company will be when you plan to step away from daily leadership is critical to understanding what competencies and skills the new leader will need – and to maximizing the worth of the organization as you convert your ownership interests into cash.
Once you have a good idea of that, it’s time to begin searching for just the right person to lead your company into the future.
And, a side note: Even if your exit strategy is to sell the company, you cannot skip this step! The buyer will want to know that you have made plans for a smooth transfer of leadership.
Identifying Internal Candidates
Chances are there is someone – or several someones – in your leadership team with the potential to step up. Starting the succession planning process years before a transition will happen gives you time to develop those people into the leaders your company will need.
You want to look for people who:
- have demonstrated the leadership skills needed to motivate and inspire others, make decisions, and solve problems.
- are effective communicators who are just as comfortable on the shop floor as they are dining with an important customer, investor, or other stakeholder.
- can work effectively with others, build relationships, and resolve conflict.
- are self-motivated and willing to put in the extra effort to get the job done.
- have strong relationships with customers, suppliers, and other employees.
You may think you already know who these people are within your organization. They may already be serving in key roles. But it never hurts to consult with human resources to see whether there are other high-potential employees who could be ready to lead with a little support – informal mentoring or formal leadership development programs.
Having some bench strength when it comes to identifying potential candidates for future leadership means you have choices. You can move people into critical positions, watch their decision-making skills, and help develop their leadership potential.
You’ll know the successor candidate is ready when he or she has learned about the financial management of the company, understands sales and marketing, and is ready to oversee critical business operations.
When the Future Business Leader is a Family Member
Things can get trickier in family-owned businesses when the choice comes down to one or another member of the next generation. And it can be even tougher when it comes to the third generation and there are a score of grandkids from which to choose.
Said one family business owner preparing to hand the company off to his son: “We’re having the difficult conversations about where we disagree, how to become better communicators. He is helping us to embrace change and we are helping him to understand the value and need for patience.”
We take a deeper dive into the challenges of family business succession in Part 5 of our series.
Identifying External Candidates
The easiest way to identify an external candidate is to hire an executive search firm. But that process can take as long as two years to identify the exact right person.
If you hope to move out of day-to-day leadership in a more timely fashion, or if the process of transferring control to a new outsider on a full-time basis feels too jarring, consider making it a multi-step process.
Start by bringing in an interim CEO with the expertise to run your business and oversee the search for a new full-time leader. In some cases, our interim executives even stay on to mentor the new full-time executive until they are settled into the new job.
Working with Potential Successors
Once you have identified potential successor candidates, it’s time to focus on talent development. The succession planning strategy should include moving candidates into critical roles as senior leaders.
Consider job rotations that move candidates through several senior management positions. This talent management process allows the candidate to learn all aspects of the business. And it allows you to observe how the successor candidates work with direct reports, their vulnerabilities as leaders, and what supports they will need to be fully ready for their future role as a leader of the company.
Give each person in the talent pipeline a particular task with measurable metrics. That could include introducing a new product line or marketing to a new customer segment. Analyzing their performance will help you pare down the list to one person or a shortlist of two or three.
Your leadership development plan should include understanding the career goals of your potential successors and mentoring those people so they understand the business strategy and are ready to step into key roles when vacancies occur.
How InterimExecs Can Help
Do you need help with this critical transition of the business you have built? Contact InterimExecs for a confidential consultation about your plans for the future and what the company you have built needs to smoothly transition to new leadership. InterimExecs RED Team of top executives work with owners to develop and execute a strategic plan for exiting your business. That means providing operational expertise to increase the value of your business and putting structure in place so you can successfully change roles or transition out.