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Inside Retail & ELR Executive

How succession plans minimise disruption when company founders move on

(Source: Supplied.)

Business founders are tightly enmeshed with the fabric and purpose of their companies. Not only have they created the organisations they lead, but they have also shaped their corporate culture and influenced their people. Their relationships with these built-from-scratch organisations are deeply personal.

All good things – as well as rough rides – do eventually come to an end. The emerging “great resignation” of our time applies equally to burnt-out executives coming out of the pandemic firestorm as it does to staff, and we can expect to see many top-tier leaders closing their reign this year. This will potentially leave many organisations exposed at the top levels.

According to ELR Executive founder/director John Elliott – whose experience in executive search and recruitment spans more than a quarter of a century, bolstered by his hands-on role as CEO of a multi-million-dollar FMCG business – the transition of leadership marks a significant change for those who have worked with or around a founder.

“Often founders have a significant influence over the brand, external business relationships and staff across all levels,” says Elliott. “These are significant changes; new operating models, new business processes and often the restructuring of teams. If these processes aren’t properly managed, it can cause significant disruption and create factions within the business that can impact the company culture.”

Given the profound change to a business when the founder steps down, succession planning is a priority for any organisation. Statistics do show that most organisations fail to adequately prepare for the transition in a founder-led organisation, risking additional turnover at the top and destroying a significant amount of company value.

Proper succession planning should put the needs of a business and its people first, especially when it involves a business founder. In these cases, succession should represent a decoupling from the legacy of the organisation while creating a clear lens to the future.

“When a founder or leader leaves a business, change is inevitable,” says Elliott. “Having a succession plan not only gives you visibility of the impending skills gap but also provides a chance to reflect on the available talent pool and structure business decisions around what the new-look leadership team will be and what skills can be brought into the business to capitalise on the opportunity. With so much riding on the success of business transformation, bringing new skills can be a great way to ensure new ideas, operating models or processes can be implemented without additional disruption.”

The sad fact is that nearly half of all leadership transitions fail – which goes to show that CEO succession planning can be critical to company stability. Developing a strong plan needs to be an ongoing process rather than a contingency issue, given that talent pools and internal candidates can often be headhunted or resign unexpectedly, rendering interim transition plans useless.

By nature, poorly-managed succession planning can be destabilising, especially when involving high-profile company founders. Successful plans are an important function of board responsibility, safeguarding the future of an organisation while still respecting its heritage. Such plans can only emerge from ongoing discussions, development and strategising to ensure that whatever decisions boards make regarding future executive leadership comes as no surprise.

Succession plans ultimately pivot on the appointment of the right successor, and identifying that individual is of the utmost importance. Whilst the use of executive search firms can be costly, organisations need to consider the costs associated with making a poor hire. Sound executive appointments only come about from an investment in time and resources to what can be a lengthy, complicated process.

“Successful succession programs should be part of wider leadership development and talent management plans,” explains Elliott. “Treating succession as a short-term need rather than a long-standing, structured process denies organisations the opportunity to start developing future leaders early in their employment.”

According to Elliott, talent assessments and leadership development plans are key steps in developing potential future leadership talent from an early stage. Exploring the competencies of existing employees through talent assessments and benchmarking can help identify high-potential candidates for future leadership roles. Career development plans can then be created with a view to easing the company’s transition to a new era while still providing proper continuity.

Given the immense significance of executive selection on business performance, extensive review of internal and external candidates, independent advice and a wider search of domestic and international candidates must be vital steps in securing the right leadership for the future whilst still respecting the past.

Decades of expertise and insights derived from numerous executive search assignments has enabled ELR Executive to craft flexible, forward-thinking succession plans that identify the most suitable talent for a myriad of executive positions in the FMCG sector. For more information, click here.