The Changing of the Guard
Over the past decade, growing outside forces and perceived market value have combined with other factors to influence firms regarding their officers and directors. Regulatory agencies have become increasingly more critical in the wake of failed companies and their leadership. That, along with indications that well-governed companies are simply worth more in the marketplace, has led boards of directors to reassess their effectiveness and their planning for
top management succession.
According to a recent study conducted by Korn/Ferry International, more corporations are developing governance guidelines, board evaluation processes, and formal committees to review corporate performance. Succession planning and management are now seen as important indicators of present stability and future promise.
Nonetheless, many organizations still find themselves in the position of having no formal search plan, no evaluation process, no board buy-in, and no realistic expectations and specifications. Whether the departing executive and principals retire, move on to another position, or must be replaced for the good of the organization, too often those who remain have to respond rapidly. They can do so reactively — moving too quickly and risking poor judgment based upon expediency — or they can proactively turn to a carefully and thoughtfully planned process that allows for a smooth “changing of the guard”.
Elect a lead director
Change is rarely seamless. It is possible, however, to put procedures in place that will help ensure continuation of business without undue interruption. The board should choose to elect a lead director whose responsibilities might include interim management of the vacant position, direction of the search process for a successor, and assurances to stockholders that both corporate governance and their investments are protected.
Although some analysts continue to equate a lead director with crisis management, the concept is gaining currency with a growing number of corporations, particularly mid-sized companies. Establishing a position of lead director before a specific need arises reassures investors and provides continuity of organizational performance.
Continuity is, above all else, the fundamental reason for developing and following a thoughtfully designed plan of succession. Here are some important questions to ask:
1. Who will assume responsibilities until a new person is in place?
2. What will be expected of the person selected to fill the vacancy?
3. What strengths and challenges did the departing person possess?
4. Who will oversee the search?
5. What are the search criteria?
6. What practices associated with the previous office holder will it be best to retain, and what needs to be reevaluated?
7. What is a reasonable time period for a search to be completed?
8. What assets are available to aid in the search?
Gone but not forgotten
Deciding what to do with the outgoing executive is of critical importance. Assuming a reasonably amicable departure, will that person remain with the organization as a paid consultant? Board member? Mentor? Coach in residence? Whatever the title or position, it is important to recognize both the value of the departing executive/principle to the organization and the loss that he or she may feel about leaving.
When passing the baton to a successor, it may be difficult for the departing person to fully let go. A danger when this happens can be his or her tendency to second guess, patronize, or consciously or unconsciously undermine the new face at the table. One way to avoid this is by building into the succession plan carefully delineated areas of responsibility, authority, and latitude.
Start planning today
Succession planning is a never ending process that begins long in advance of the departure of a leader’s decision to step down. The time to begin such preparation is now—before a vacancy occurs and while the planning can be done without the added complication of having to consider the idiosyncrasies of individual persons. Concentrate on the position, not on who is or will be in that position. Plan objectively while keeping the best interests of the organization uppermost in mind.
PSMJ thanks Donna Gaines, President of Gaines International, an executive search firm providing search services and consulting to the A/E/C industries. She can be reached at www.gainesintl.com or 312-654-2900.
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