Choosing a successor for your business doesn't always mean choosing someone like you or even someone you like. It entails choosing someone who is not only ready for the job but has the respect of key team members and the wherewithal to guide your company into the future.
To evaluate who would be the best candidate, you should start by asking yourself some key questions about your business and its direction, according to Leslie Dashew, president of the Human Side of Enterprise and partner at the Aspen Family Business Group in Scottsdale, Ariz. The answers will provide a context in which you can choose a successor that's up to the task.
Where is the business going? CEOs doing succession planning often do one thing terribly wrong, warns Dashew. "People tend to choose people they're comfortable with, people that are like themselves, and that's not always the right person." She suggests that instead of looking for someone who is similar to you, a CEO should do some strategic analysis. Where do you want your company to be in the future? "You don't hire a successor for where you are, you hire a successor for where you want to be in the future," Dashew adds. Departing CEOs have to realize that leading their companies into the future is going to take a different set of skills and perspective than they have, and have to evaluate candidates accordingly.
Who are the stakeholders? Who are the owners? Family members, employees, investors, a key management group? Who will this person report to? The person should engender trust and confidence among the owners of the business. "It's a different scenario for each type of owner. In each scenario, you'd be looking for a different type of successor," Dashew says. For instance, if the company is going to go public, you'll want someone with that experience. If the owners are family members, the successor should be someone with whom they are comfortable. And if it's investors, be warned that those stakeholders will undoubtedly want to have input on whom the successor will be.
What core competencies do you need in leader? As a departing CEO looks at where the company is going, he or she should also look at the leadership talents the business will need to get it there. "Personality should be only one consideration. Other competencies such as strategic thinking ability, probably some kind of financial analysis capability, the ability to manage other executives or other managers should be others," Dashew says. While there are many standard core competencies, like the ability to communicate well, you must also think about those competencies that are specific to your situation or industry.
Can the potential successor work effectively with your management team and with you? Choosing a successor who is good with collaborative management or collaborative leadership is key. "A lot of successions fail because people come in as 'cowboys," says Dashew. "They think they can do it all themselves." If a successor doesn't work well with you, the management team, and/or the other stakeholders, then the successor is doomed to failure. "You even find that from time to time a team will sabotage [ a successor] ," she warns.
How well will the successor work with you, other stakeholders, your bank, your accounting firm, your legal team, your customers, or other external influences? Establishing a sense of continuity during succession is important, and maintaining key relationships is paramount in this sense. If a successor strains or breaks business relationships, it could undermine your business's stability, and ultimately cause employees to leave or put your business at financial risk. "Many times it is helpful to replace accounting or legal, but during periods of succession, it's important to maintain some stability," Dashew adds.
Are you clear about what authority you might give your successor and what authority you might retain yourself? In many cases, a CEO will bring in a successor and then jump into the role of chairman, but it's not clear what decisions the new CEO can make and what power the old CEO will retain. "A big issue is letting go of the power," says Dashew. Make sure that you're ready to give up control, that you know what that means, and that it's clearly communicated to your successor.
What are the values that are most important to you as CEO and that define the culture you've built? You must be sure the successor demonstrates commitment to those same values your company was built on. "It's one thing to say that I believe in a participative leadership style, it's another thing to have done that," Dashew says. The candidate should illustrate that he or she has those values, not just agree with them.
Have you cultivated a team of people who can back this person up and who are prepared for a new successor? To really succeed in the new position, the successor has to be readily accepted by the team. He or she needs support, and without the teams buy in, you risk undermining the succession process and jeopardizing your business's future.