May 26, 2004
Have a plan when it’s time to pass
It is time for me to pass the senior management role
of my company to a high-potential colleague. She has been
with me for 20 years, doing a good job. I like and trust
her and have confidence that she will take the new position
seriously. Her integrity is not in question. But my concern
is this: How can I minimize the risk of either disruption
to long-term business relationships or loss of revenue
when she takes over the firm?
Giving up control in larger corporations is generally
a structured process, often related to age or financial
success. At age 62 or 65, the boss is required to retire.
Boards of directors identify the successor, and the new
regime is introduced. In circumstances where performance
is less than stellar, this process can happen precipitously.
Sometimes dramatic decisions by boards, driven by noisy
investors, can have the appearance of an axe-wielding
gorilla. Even so, the formula for transition must be clear.
Private companies, however, may have various plans for
succession and sometimes no plan at all.
In closely held organizations, including family firms,
the process can get mixed up with interpersonal connections,
marriage, stock ownership and a whole host of emotional
issues. Sometimes performance runs a distant second to
other relationship dimensions. Even so, for the stakeholders
(employees, suppliers and certainly customers), the issues
are always about productivity and consistency in standards
(even if the heir-apparent did marry the boss’s
son or daughter). Successful succession is about the economic
viability of the institution and it is driven by effective
teams which are to be guided by competent leaders –
by whatever route they took to reach the top.
The fact that you have worked closely and confidently
with your likely successor is important. But there are
other issues to consider. Below are six questions for
which you need clear and positive answers before any final
succession decisions are made: