This is a very common situation in private and/or family-owned organizations led by their CEO/founder. However, it is striking how despite all the teachings about succession plans, these types of organizations still show a certain level of reluctance to address the issue of CEO succession. In this case, we will focus on private companies in general, not necessarily family-owned companies.
On the one hand, the legacy and recognition that the CEO/founder deserves is clear and undeniable, as thanks to his/her leadership the organization is what it is today. But on the other hand, it is also logical to ask: What other skills and strategies should the organization consider ensuring its continuity in the coming years? Or perhaps some of the strategies that worked during their tenure need to be reviewed or adjusted? And is the organization prepared for a sudden change in direction that, like any organization, can occur at any moment?
Our experience indicates that CEOs/founders are aware of these points; however, it’s difficult to admit that it’s time to start considering other options for his/her succession even more when they know that they have a say along with the board of directors on the decision.
What strategies should be used then?
Our approach includes:
From an emotional perspective
- Supporting the CEO/founder in reflecting on their legacy (the company itself) and how a succession plan can significantly help to preserve it (Moving a Family Business Beyond the Founder’s Vision – 2022, Harvard Business Review).
- Encouraging the CEO/founder to view his/herself solely as the chairman of the board (if intended to remain involved with the organization) so that their experience and contributions continue at service more as a “mentor” but now in a more strategic role and less involved in the daily operations. The goal is to elevate their role from “CEO/founder” to “Provider/mentor of a legacy,” something that sounds easier than it seems but will happen sooner or later.
From an organizational perspective
- That the CEO/founder, together with the board of directors:
- Initiate a formal succession plan well in advance, usually 3–10 years. This will allow for the identification of potential internal candidates and the initiation of their development and/or academic training plan.
- Actively participate in the succession plan (planning, defining the expected profile, internal and/or external candidates, with or without the support of an independent advisor, timing and duration of the plan’s development, among others). In companies where the CEO is not the founder, this responsibility usually falls entirely on the board of directors or the designated committee among other recommendations according to How the Best Boards Approach CEO Succession Planning – 2021, Harvard Law School on Corporate Governance.
- Choose his/her successor considering all the elements and under no circumstances delegate or being pushed away of this decision and responsibility.
- Once the successor is selected, a transition process must begin with the CEO/founder that allows for an understanding of the values to be conveyed, ensuring continuity in the key points.
- That the organization:
- Adapts to the new reality with adjustments to its organizational structure, moving from the typical “Hub-and-Spokes” scheme (very common at this organizational stage) to a “Pyramidal” model, more adjusted to the growth of the organization and the new leadership style, surely different from that of its CEO/founder.
- Adjusts its decision-making processes so that decisions are not centralized in a single person (as is usual in the case of the CEO/founder) and can be delegated.
- Updates the corporate governance model shifting from a more informal and centralized model (in the CEO/founder stage) to a more formal, structured, and distributed model, as in the Principles of Founder Succession, Cambridge Family Enterprise Group.
- Promotes a change in the organizational culture so that everyone in the organization can best assimilate the change of the CEO/founder, leveraging the established shared vision and values.
How can we support you?
Based on an understanding of the current and future role of the CEO/founder in the organization, our team can structure tailor-made support throughout the entire succession plan, from initial discussions to post-succession stage. This support typically includes:
- Understanding the need (scope, feelings, fears, etc.)
- Analyze the current context and challenges of the organization
- Support in defining and structuring the succession plan
- Advice for developing the required profile for the new CEO
- Support in the search, evaluation, and recommendation of potential candidates
- Support for the CEO/founder and the new CEO in their new roles, ensuring the appropriate ownership and development of both roles
- Advice to review and adjust the corporate governance model, ensuring its formality and fit with the new stage (new CEO, founder as chair)
- Post-succession support to ensure that both the new CEO and the chair are clear about their roles and decision-making levels for the benefit of the organization and that the adjusted corporate governance is safeguarded.
- Support in the development of the succession plan for the executive team (C-level).
