The Challenge of Succession

Succession planning is often a company’s greatest challenge, especially for a founder, CEO, or top executive. Yet, despite its importance, most enterprises need to handle succession better. Even some of the most significant corporations have turned from industry dominance and global acclaim to inconsequence and failure simply because they didn’t have a viable succession strategy.

It’s hard to find a single company in the tech sector with a viable strategy – and you need only follow the news to see the result.

Here’s how it usually works: a key employee announces retirement and a scramble follows to put up a job listing or hire a headhunter. Then, a list of candidates is developed, and weeks or months of interviews follow—all under the pressing countdown of the critical employee’s departure date.

That’s just the beginning. Even as the list of candidates is winnowed down to a few survivors, the current holder of that office is physically and psychologically checking out and going through the usual round of goodbyes and retirement parties.

And then they are gone. Within hours, the chosen replacement arrives at the office, ready to take on the job—but only after a few months of assimilation and on-the-job training.

Between the moment the former employee mentally exits the job, and the replacement is finally comfortable, there are weeks when no one is entirely at the wheel. In addition, when the former employee leaves, they take years, even decades, of institutional experience. At the same time, no matter how talented, the replacement has years to go to duplicate that experience and develop a network—and will likely repeat many of the mistakes of their predecessor’s early career.

If that isn’t enough when that new employee finally reproduces the institutional knowledge of their predecessor, they too will soon disappear, and the cycle will need to start over again. What an enormous loss of intellectual capital. And yet, most firms casually accept this damage as a matter of course. These same companies will count every penny to cut overhead yet lose millions of dollars when a valued employee retires and walks out the door.

I’ve been assessing corporate succession for some time, and it has become more acute in recent years as I face my impending retirement. Why do companies always treat this process as inevitable? I refuse to believe it must be this way – and I am just enough of a non-conformist to take a different path. Although our new succession model is still being developed, I wanted to share it with you in case it can spare you a lot of misery.

First, we have decided to treat succession not as an overnight event but as a multi-year process, a slow-motion transition, and its period directly proportional to the level and importance of the retiring executive or manager to the company. That means that the impending retiree and their replacement meet each other and work together for an extended period.  [Obviously, this functions more smoothly when it is an internal promotion, but it can also succeed with an outsider if the recruiting is done early enough.

This extended period—typically three years—is enough time for the departing and arriving employees to interact closely and share experiences. It also removes much of the politicking and maneuvering for the job by subordinates because the succession is already determined.

 Why three years?  Because this succession has three phases.  

In phase one, as the employee approaches or announces their planned retirement, the company identifies and hires (or promotes) someone to replace the retiree as their acting replacement. Over the next year, the replacement can begin learning about the retiree’s job without actual responsibilities.

In phase two, the replacement is announced, within the company only, as the official acting replacement of the retiree. It begins to assume – under the latter’s tutelage – one after another of the retiree’s jobs. Still, to the outside world, nothing has changed:  the retiree is still in their old job and represents the company in all business matters. This is the most challenging time of the process, requiring considerable patience for everyone concerned, not least the two principals, one who must give up authority and serve as a mentor, and the other who must be a quick study of vast amounts of acquired knowledge.

Finally, in phase three, the replacement publicly assumes the new title (old news to everyone in the company), and the retiree can step down and begin their new retired life. But this may be the most innovative part of the program – the company declares them an “emeritus,” and they are expected to stay with the company one more year in a mentoring/advisory role with their replacement, which they now know well. They are given enough time, salary, and benefits to prepare for retirement – a seamless transition.

Does this three-part succession program work? We’re just beginning to implement it, but so far, so good. Indeed, it is good enough to take it one step further. After all, why lose institutional wisdom at all, even after retirement? We call it the Golden Interns program. This is an invitation-only one-year opportunity offered to valued, retiring employees.  What do they do? They act as mentors and sounding boards, consult – and, we have discovered – they offer trust. Senior managers speak with them openly without fear that their words will be used against them – an immensely invaluable asset. Golden Interns can make their contributions wherever they are in the world.

We speak of a company as a family. What better way to show this than to honor loyal employees and celebrate their wisdom as they leave the company and enter their new lives? It shows them they are still valuable and still a member of the family. It also ensures their institutional knowledge and expertise continue to bring value to the company.

Written by Anil K. Singhal.
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