Private company succession planningPeter Drucker once said, “The final test of greatness in a CEO is how well he chooses a successor and whether he can step aside and let his successor run the company.”

Jim Collins and Jerry Porras, in their book Built to Last: Successful Habits of Visionary Companies, suggest that successful companies over the long-term are those that have rigorous succession planning initiatives within their companies, and their CEOs play a very proactive role in grooming their successors.

For CEOs, choosing the right successor is typically not a simple task. In family owned businesses, the predetermined choice is often the oldest sibling, or the one who has put the most time into the business, despite obvious shortcomings or insufficient skill sets. Even in non-family owned businesses, seniority can sometimes be an overriding consideration.

For the long-term success of the business, it is critical that far more important factors and considerations than birthrights and longevity be carefully evaluated and considered in the succession decision making process. Competencies, skill sets, past performance and successes, experience, and personal characteristics and values are all key factors that must be considered when finding the right successor. There may be no more important decision a CEO makes than to choose the right successor.

Letting go of the reins can be a very emotional and intellectually difficult process. Especially in the case of a founding business owner, turning over the business to a successor can seem like an almost impossible task. After all, the founder has poured his or her life into the business and no one will ever understand and appreciate the sacrifices that have been made.

A significant part of succession planning is the readiness of the CEO to be succeeded. There is an emotional and mental preparedness which must occur for successful transition. The CEO must be ready to let the successor take over with the understanding that every decision will not be the same that he or she would have made and that there will be mistakes and learning on the part of the new CEO. If the succession planning process has been rigorous and well executed, however, the new CEO will grow in the position, overcome those mistakes, and lead the company to future success.

Contact us at 215.441.4600 or Email if you have questions or would like to discuss how this topic may impact your business.

Does your business have a succession plan in place? Share in the comments.

 Subscribe to the blog