It's not a pleasant thought, but one day you'll be gone. When that day comes, who's going to run your business and how will they do it?
Giving away your business to a successor is hard. In my experience studying hundreds of successions, I see one common roadblock: nobody really wants to admit that the day will come.
Recently, a friend of mine told me, “The day I never thought would come is here. My daughter got engaged.” He went on to tell me about the night before when his daughter’s fiancée came to see my friend and ask for his blessing.
The young man said, “Sir, I’d like to talk to you about something really important. I’d really like to spend the rest of my life with your daughter.” My friend looked at the young man and responded, “How long are you planning on living?”
Giving away a daughter is hard. My friend didn’t like giving his girl away but was ready, and happy to see her flourish. Smart leaders will follow that lead and be ready for the day their succession comes.
Here are three ways to prepare.
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Look in the Mirror
The beginning of any succession conversation is with the current head of the organization. And most leaders don’t want to admit they will one day be gone. The truth is, every leader is an interim leader.
If you run a business, then I see only three possible endings.
- You could run your business into the ground; - not cool.
- You could be so successful that another company buys you out for a whole lot of money; - cool, but difficult to plan for and not always the best outcome.
- The only other possible ending is that you will have a successor that follows you at the helm of your company.
David Larcker of Stanford Graduate School, co-author of the 2014 Report on Senior Executive Succession Planning and Talent Development, stated, “The corporate leaders we interviewed all believe that succession is vitally important today, just as it has been in the past. Still, the majority do not think that their organizations are doing enough to prepare for eventual changes in leadership at the CEO and C-suite levels, nor are they confident that they have the right practices in place to be sure of identifying the best leaders for tomorrow.”
Only 54% of the corporate leaders interviewed for the report say they are grooming a specific executive to be the successor, and only 39% say that the internal talent is ready now to be the successor if needed.
Goal: make preparing for your succession your number one goal. Name a date when you will have a board meeting about the topic.
Prepare an Emergency Envelope
Planning for an emergency is the easiest way to begin a long-term plan. What would happen if your plane went down tomorrow and the company was left with no leader?
According to a 2013 report by The Conference Board, nearly one-third of S&P 500 companies may not have been prepared for an emergency CEO succession as of 2011. The report goes on to say, “Emergency succession planning is important, as seven to 15 U.S. publicly traded companies experience the unexpected death of the CEO in any given year and many more grapple with an unexpected departure of their CEO”
These statistics are staggering and should make any business leader understand the significance of an emergency succession plan.
Here are four easy steps to get started:
- List the things you do for your business right now that only you can do.
- Name the person or people currently in your organization that can fulfill these tasks.
- Have a focused conversation with those individuals asking them to take on these roles if you should have a leave of absence or death.
- Memorialize your plan in written form and notify your board.
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As a CEO, you should be building a business around systems that last, and not your personality (which won’t last). My annual review is built around one question: “Was I able to make myself less essential to the operation and growth of our company this year?”
My friend Dave Ramsey told me in a recent interview, “All I focus on now are new things and broken things.” He’s no longer in the day-to-day running of his company, which now employs over 500 people).
Intentionally planning your succession could be the most significant leadership decision you’ll ever make in your career. Ignoring its significance could be the worst decision of your career and set yourself and your company up for failure long-term.
Set your business up for continued success today by acting on these three steps and intentionally revisiting them with your board on a regular basis.