The prevailing culture of many modern corporate leaders creates a focus almost entirely on the short term: this year, this funding cycle, my tenure, my success.
However, something powerful occurs when any leader genuinely thinks about and starts planning beyond the 20 year mark – the realm that lies beyond them and their direct influence. It is at this stage that the focus of leadership becomes about legacy and the drive for success is replaced by the draw toward significance.
As older generations inch closer to the point of retirement, there is a subtle but profound attitudinal shift occurring. This is an increasing desire amongst many to turn their focus toward making a mark... to set in place a momentum that will ensure the successes they have achieved lives on long after the baton has been passed to the next generation. As the old saying goes... the true test of success is indeed succession. The challenge for managers and leaders is to do this well; to embrace the challenges and opportunities of generational transition.
Unfortunately, it is often only when an explicit crisis or external tragedy strikes that the issues of succession come into focus. However, the corporate world is currently facing an implicit threat in the form the retirement clock of many leaders. While the vast bulk of Baby Boomer managers will start to retire in the next few years, it is estimated that less than 30% of companies have a well-defined succession strategy. The cost of ineffective generational succession planning is probably seen most acutely in the Family Business Sector.
However success for the present and future of you company is achievable if you can follow some key principles that will ensure succession works. While there may be numerous success stories in generational transition, there are many more examples of organisations both big and small who have failed to pass the leadership baton well.
Looking at many of these failure stories, a pattern has emerged highlighting 5 key mistakes that managers make when approaching the issue of leadership succession:
- They pass on ‘how’ but not ‘why’
Research has found the key difference between organisations that endured and those that didn’t has surprisingly little to do with charismatic leadership, detailed strategic plans or a even an inspiring vision statement. Rather, the most significant factor in determining longevity in organisations is an unswerving commitment to core values and purpose coupled with an active willingness to change how things were done as times, markets and needs evolved.
While most business leaders would agree that in order to remain relevant to a changing market they themselves need to be willing to re-invent and change, the reality is that many CEOs do the very opposite when passing on their organisations to the next generation. You look at most business succession plans and the focus tends to be almost exclusively on how things have been done in the past and what needs to happen to ensure the success of yesterday is repeated tomorrow. Over time, these processes become organisational sacred cows - symbols of culture, protocols, policies, dress codes and the list goes on. Of course, processes and practices are not the enemy, rather it is when these things become disconnected for the reason they were created in the first place. The problem here is that many businesses become so focussed on guarding and protecting what they do and how they’ve always done it that they are only a few short steps away from irrelevance.
If a leader is to successfully transition an organisation to the next generation, the focus must be on the why more than the how. It is vital to preserve and pass down the principles, values and core ideology that have led to success in the past but then empower the next generation to change the ‘how’ as circumstances, needs and opportunities evolve. The key message: effectively teach the next generation ‘why’ and they will invariably figure out the ‘how’.
- They focus on commonality not competency
It almost goes without saying that there is a prevailing tendency in many leaders to look for a successor who is just like them. While this might be a very natural thing to do, there is an inherent danger in it also. It can result in leadership cultures that are closed, insular and resistant to change and diversity. Furthermore, it can also mean that ‘out of the box’ but potentially ideal successors are overlooked because they don’t look or sound like the existing leader.
In order to avoid any favouritism or bias in choosing a successor, it is often a good idea to involve a committee, board and even key stakeholders rather than just relying on the leader to make a selection.
- They look outside the organisation for a successor
Over the past 2 decades, consistent research has indicated that internal successors work better than external hires. The reasons for this are many and varied. To some extent, the key reason internal successors are more effective is that they already ‘get’ the organisation: they know it’s culture (and are likely committed to it), have a sense of organisation’s history, and have a network of internal contacts and relationships within the organisation that can make all the difference.
There are of course exceptions to this rule but there are numerous examples over the past decade where external successors were hired and then fired shortly after only to be replaced by internal candidates.
- They start too late
While thinking about and planning for succession is never something you can set in motion too early, it is certainly something you can start too late. The process of succession tends to have a lifespan that cannot be rushed. Any successful handover will take 3-5 years and even longer in a private or family-run company.
The reason for this is that the most significant things to pass on during the succession process are the intangibles. It is often the mentoring, modelling and networking that the successor is exposed to during the handover that matters most. The lessons that will matter most for a successor can’t generally be taught in a classroom or structured program... they happen over time. The significant lessons in business and life are indeed caught, not taught.
- They are reluctant to let go
Passing the baton on to the next generation can be a very difficult process for many leaders. Handing over the reins can mean a loss of identity and control. However, while a reluctance to let go can be a very natural thing for the outgoing leader, it can also be very damaging to the organisation. In particular, it will invariably create enormous tension, resentment and uncertainty for the successor.
Like over-protective parents stifle their children’s development, a leader who is unwilling to let go and allow the next generation to truly take the reins will end up stunting the growth of their successor and even the company.
If you finished your life’s work and left behind a company that would thrive long after you’re gone, would you be satisfied? It’s an interesting perspective isn’t it? If the old saying is true that succession is the true test of success, history may measure your real success not by what you did during your tenure as a leader, but rather by what you enabled and equipped the next generation to do. Will you be remembered as a great leader, or someone who raised great leaders?
Whether you will be remembered and how you will be remembered in the decades and years to come may have less to do with the success you have achieved, and more to do with how well you deal with the critical issue of succession. It can be challenging, difficult and confronting, but it can also represent the greatest opportunity to truly make a mark and leave a legacy.