Many companies have built market dominance and extraordinary market capitalization through the vision and drive of individual leaders. Many of those same companies saw spectacular declines after that leader’s retirement.
There’s no way to overemphasize the importance of succession planning for business. Whether yours is a family business or a publicly held corporation, your business’s future depends on effective succession planning.
Succession Planning Develops a Pipeline
A well-developed succession plan isn’t just about selecting a successor to the incumbent CEO; it’s about developing leadership company-wide.
While co-CEOs aren’t unheard of, typically, only one person can occupy each of the top C-suite positions. But each of those people relies upon a team of leaders and managers who can work with them to implement their vision.
As they do that, future leaders also develop skills of working across the company to integrate and synchronize functions to benefit the business as a whole. This, in turn, prepares several leaders with the skills necessary to take on a more comprehensive role responsible for company-wide decision-making.
Even if only one person can ascend to the top position at a time, the others in the pipeline will have opportunities to learn how to foster the organization’s success while advancing their careers.
Succession Planning Ensures Continuity and Minimizes Risk
When a company views an executive as the human embodiment of the business, it increases the risk to the company should anything happen to the executive. Succession planning ensures that more than one person can take the reins, even temporarily, if the top leader suddenly departs or becomes incapacitated. The company’s business can continue, if not seamlessly, with minimum damage to value and revenue.
Succession Planning Helps Retain Talent
When managers see a path to advancement, they are more likely to stay with the company. They’ll be more eager to pursue new challenges and prove themselves worthy of a place in the pipeline. This is true even if they don’t get a top spot. Instead, they’ll be ready to lead a division or move to a position in another company to develop other experiences that might one day come back around to benefit their original employer.
Succession Planning Helps Secure a Legacy
Both Jack Welch and Robert Iger saw carefully built legacies crumble after their departure. In hindsight, flawed choices emphasized the importance of succession planning for business. A transparent succession plan with input from several parties may have worked better. The outgoing executive must be willing to cooperate with the board and with fellow C-suite executives in identifying potential successors and securing their own legacy.
Sometimes, resignations or retirements blindside a company even if it has an effective succession plan. Although it is an extra expense, hiring an executive recruitment firm becomes necessary to help find a qualified replacement quickly without disrupting a leadership development process that’s in place but not ready to supply the company’s next leader.
