As generations “age out” of their current roles as CEO’s and other C-suite positions, we know continuity of spirit and drive are essential to futureproofing any company. Whether this is conducted through a liquidity event, management buyout or a variety of other avenues, one thing is for sure, if a succession plan is not specifically articulated and incorporated, no matter how it is communicated it will be seen as nothing more than window dressing and not taken seriously.
Alliance Global Advisors recently penned, “Paving the Path For Succession,” and is an amazingly accurate study on what is needed for both internal and external planning and communication in a proper succession plan.
As quoted in the piece, “Given the industry’s relative youth, the founders of many firms are now nearing retirement age. Additionally, many retirements were accelerated for many public plans in the post-COVID environment. Accordingly, these individuals are now focusing on maintaining a legacy and monetizing the enterprise value created.”
And that’s the where the rubber needs to meet the road as we've seen so often, because as much energy that goes into a succession plan, it’s never really carried out or as it's intended to be. And that makes a lot of sense for a founder of a successful enterprise in any industry, it’s not easy to let go. However, if an executive is serious about setting up a transition, the first thing that needs to be communicated is specifics that includes a timeline. Vagueness nor glittering generalities don't carry the day, and in this industry it never will. Imagine what reaction you'd get from presenting a pitch book that didn't get to the point in terms of projected returns over a period of time?
Contributing to this piece with thoughtful insights, NEPC’s Chris Miers states, “It all starts with candid discussions amongst the executive team with respect to their strengths and weaknesses; once those have been identified, establish a team to develop a plan to retain, develop and attract talent as necessary.”
A great example is Blackstone that executed its succession plan in 2018 and quoted in the Alliance piece, current Executive Vice Chair, Tony James, referred to succession planning as the “Achilles’ heel of any asset management firm.” And this can be applied to any enterprise as well because if you don’t have something definitive in place, you have nothing in place.
Again, this is where communication becomes paramount for both internal and external reasons. We've all seen "announcements" about succession planning that didn't quite make sense, get to the point, or even have a point. Somehow these appeared to be nothing more than press releases sent out to buy time or explain away why there will be no transition in the near future or at all. Many of these "plans" seem to offer new titles and shuffling of responsibilities and nothing more.
“Paving the Path For Succession,” , concludes with research conducted by Deloitte indicating that 86% of business leaders believe succession planning is an “urgent” or “important” priority, although 14% believe they do it well.
“The proverbial ‘hit by a bus’ scenario is no longer the only question asked during due diligence. Adequate succession planning is a strategic initiative that considers building organizational longevity by developing the next generation."
Succession planning takes serious time through thoughtful and deliberate effort and the Alliance team's piece offers a terrific and articulate primer on how to get a real conversation started.