Succession Planning.

Blood is thicker than water. You can pick your friends but you can’t pick your family. That is true unless your family also owns a business that employs your sisters, brothers, nephews, cousins and grandchildren. While family businesses create a sense of pride because the family’s and company’s name is on the door, it also creates a problem because it is not always clear where family ends and the business begin.

Disciplining, giving negative feedback, and termination, which are the ultimate form of discipline, are difficult tasks for any manager. In the case of termination, a “regular” employee leaves the organization and may never be heard from again. If you fire or even discipline a family member you still may have to sit at the same table with them for Thanksgiving dinner.

I worked for a publicly held but family-run business in St. Louis for many years. I watched the CEO’s son join the organization and rise rapidly through the ranks. I also watched the father publicly give negative feedback to the son about his performance. All we “outsiders” were made uncomfortable by this public “dressing down.” In the end, the son rose to the CEO position only to resign in disgrace several years later. So what happened? Did it have to happen?

Here’s my take on the answer to the first question: there was a job/person “fit” problem. The skills and abilities this CEO brought to the position were insufficient. He was being asked to do things that were beyond his skills and abilities.

The answer to the second question, Did it have to happen, is no. There was evidence along the way that this person was not suited to be a CEO. The sitting CEO had decided when his first son was born that he would succeed him. I’m not sure that was anything in the world that would have prevented him choosing his son as his successor.

So how do you avoid this trap? At the end of the day, you as the current CEO should be concerned primarily with creating shareholder value. You need to make decisions that are in the best interest of the shareholders, no matter how few or how many there are. Here are the steps to take to keep your goal in focus.
 
1. Start the succession process five to 10 years in advance of the event.

2. Decide on three to five people who you think have the potential to succeed you. They can be all family members or a mix of family and non-family. The most important criteria are that you have talented people who also have the desire to take on the role of CEO. There is discussion in organizations about whether or not you tell people what you are grooming them for. My opinion is that all they need to know is that you think they have potential. The rest will play itself out.

3. Do an assessment of what each of these folks does well and not well. You can try and do this yourself but you will be better off hiring an Industrial/Organizational psychologist to do the assessments.

4. Rotate these potential CEO candidates through a series of jobs of increasing responsibility and complexity. You and the candidate and the psychologist need to look at each person’s strengths and development needs in relation to the job you put them in. Each candidate needs a development plan that will address his or her development needs. Whether or not that person accomplish the goals in the plan needs to be clear to you and the candidate. The person needs to be in this developmental job for at least two years so he or she can either succeed or fail. Candidates will continue to be in your CEO pool unless they do not succeed in the assignment. If they don’t succeed then they will go into a job that is in line with their abilities or they will leave the organization.
Hopefully by the end of this process you will have at least one and possibly two people who you would feel comfortable handing over the reins. It should be clear to both you and the person you select that they are the best person to succeed you and that they have the best chance to be successful.

EASI•Consult® works with Fortune 500 companies, government agencies, and mid-sized corporations to provide customized Talent Management solutions. EASI Consult’s specialties include individual assessment, online employment testing, survey research, competency modeling, leadership development, executive coaching, 360-degree feedback, online structured interviews, and EEO hiring compliance. The company is a leader in the field of providing accurate information about people through professional assessment. To learn more about EASI Consult, visit www.easiconsult.com, email ContactUs@easiconsult.com or call 800.922.EASI.