Written by
Dan Guglielmo
Founder & CEO
May 21, 2023

Succession is Much More Than a Plan

Succession might start out as a sketched plan in a document, but in reality, it is a process that is much bigger and more elaborate than that.

Succession is about relationships, performance, and the transfer of responsibilities to the next generation of leadership. Those leaders need to be emotionally prepared and have sufficient technical skills to take the organization into the future.

What does this mean for you, the senior leader? How you handle this will determine the success or failure of your succession. This is not a task to be delegated. Only you have the authority, history, and responsibility to build, lead, and execute the process.

But you’re not alone. We’ve helped dozens of senior leaders, entrepreneurs, and family business owners successfully navigate succession. The following five steps are part of the playbook we use for those clients.

1. Don’t Confuse a Financial Transaction for a Succession Process

It’s common to mix the "succession" process with an "exit" transaction—and that can be a costly mistake both in terms of financial success and the smoothness of the exit. Succession is a leadership transition and, when handled well, is managed as a leadership development opportunity over a long period of time. Succession in these terms is about relationships and how they change over time as people grow, age, and move on.

An exit transaction is about monetizing all or a portion of the value of the organization through a financial event. The sale of the business is the most classic example of a financial or wealth event, but there are plenty of other ways to take money off the table before the big sale.

The common usage of the term “exit” tends to bundle the two concepts together. Understanding how a succession is different from a transaction is an important step to optimize both your succession and the harvesting of the business’ value when it is time to sell. You will also want to pay attention to how they are synergistic and work together. As the senior leader, it is essential to understand both concepts and how they’re different to control the outcome and get what you want. It is essential to your ability to lead both your internal and external teams as you wind your way towards both a succession and your wealth creation event.

Let’s examine one client’s situation and experience.

Eddie was nearly 60—and at the peak of his powers identifying and closing large insurance transactions. For the previous five years, we regularly discussed both succession and the future sale of the business. But recently, Eddie realized he wanted to continue with the element of the business he loved—closing deals—while perfecting a leadership succession plan and temporarily delaying the sale of the business. Harmonizing both of these important tasks has given him enormous energy, and he’s fast tracking the hiring of a COO.

Succession should typically lead the way. Because a succession is about leadership, it should frame whatever monetizing events that may follow. A succession timeline is almost always measured in years, if not decades. There can be many contingencies and forks in the road depending on the trajectory of children and non-family members who show early promise. A financial transaction can happen fast—in months and sometimes weeks. A transaction is heavy in analysis and due diligence and usually light on the human elements.

2. Choose a date

Another client, Bill, had a remarkably orderly succession experience. He was the third generation leader who took over from the CEO who followed the founder. He had witnessed two prior successions and the struggles around them made an impression. Bill understood the importance of an orderly transition and wanted his succession to be a model for future generations and he got off on the right foot by announcing to the board at his first formal board meeting the date he would step down—which was three years in the future to the day. He never wavered, and his board never lost sight of Bill’s succession plan because he regularly discussed it at the meetings, and eventually created a committee to create and oversee his succession process.

A succession never starts in earnest until a date is chosen. In a family-led business, this can sometimes be challenging for the founder, especially when he or she has children who are too young to make a choice or prove themselves. But if the founder is able to pick an age or date for succession, it will galvanize the entire group. I have coached and counseled dozens of business leaders on their succession. Without exception, choosing and announcing an ideal date for the transition has rallied the stakeholders. Once a date is chosen, the succession process begins to gain momentum and take shape.

3. Don't Do it Alone

Although you will remain at the helm and hold others to your succession date, a true succession remains a team effort. Your core task from the internal perspective is leadership development. For the external team, the focus tends to be financial and legal technical concerns. They will naturally be preoccupied with their professional task and often disconnected from your bigger picture. It is up to you to hold them to your agenda, which can be challenging when your experience is limited.

This is where an executive coach can add significant value. I have worked on hundreds of succession and exit plans over the past 25 years. First, I will help you to discover and clarify what you want—for you, your family and the world—from your succession. As this vision crystallizes, we will also get clear about the gaps in your knowledge and experience.

The mission of executive coaching is to help you get what you want. This often means helping you to increase your ability to direct your advisors by clearly articulating what you want from them and steering them back to the path when they diverge—which is inevitable. I will help you to notice when things are off track and discover how to course correct.

Coaching is of particular value with leadership development. Almost nothing is more central to your overall success than mastering the art of helping leaders to develop and grow, and this is where courageous coaching shines. We regularly help our clients to prepare for growth conversations with the leaders who report to them. In essence, we teach them to coach, and ask the types of questions that help these leaders find solutions and get what they want from their work. We have done this so often that we now have a formal curriculum called Power to Coach that trains our clients how to develop leaders around them by learning who to coach.

Your succession conversations should not be confined to your executive coach. You should have ongoing communication with your leadership team and your family. All these conversations will influence and help shape your succession.

4. Commit to Taking Responsibility

Leadership does not have to be complex. In our world, we find it to be fairly simple. This is how we see it:

Leaders choose to take responsibility for creating their world,

and anyone can choose to be a leader.

It's simply about making choices and taking responsibility. However, just like the technical aspects of your business, it is critical to have a growth mindset about leadership and continually learning how to help others take responsibility by increasingly seeing themselves as a leader. To do so requires constant training. The options are endless. You just need to keep it a priority, allocate resources to it and make the time for it.

5. Manage Your Org Chart as a Means of Consolidating Your Vision

For the vast majority of exits, your departure impacts more than just your position. Often, many of the pieces on the board will move around. Some may even be eliminated. In Bill’s case, his succession resulted in the creation of a COO position, as well as finding a new CEO to replace him. This move turned out to be a brilliant advancement for the business.

At its core, succession is the modeling of effective leadership. You’ve created your world, and now you’re making it possible for the leaders around you to take their turn doing the same.

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